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Government and private sector must make the most of outsourcing opportunities

01-Aug-2013

Government and the private sector have still only scratched the surface of the true potential efficiencies and cost savings to be made by outsourcing key services.

The Confederation of British Industry (CBI) claimed recently that government organisations could save more than £20 billion without loss of performance, following research carried out by Oxford Economics.

At a time of austerity, and enormous pressure on public spending, that is a very enticing figure. It stems from an assumption that current rates of outsourcing of services such as asset management, waste recycling, security, cleaning and areas like clinical services could be increased.

It assumes also that average savings of 11 per cent can be made by outsourcing such services to the private sector providers.

The devil, as always, is in the detail. For every outsourcing success story there are negatives about failing contracts like IT contracts with unaffordable locked-in costs, and poor-quality service outputs.

In a political sense, “outsourcing” is also confused frequently with the continued trend towards “off shoring” of manufacturing and service jobs to lower-cost centres like China and India. People confuse the two and assume they are both “bad” for the economy because of an apparent threat to local jobs, for example.

The negative publicity does not mean that outsourcing is a bad idea. But it does underline the fact that the key to successful outsourcing is planning, structured management, and the adoption of a coherent strategy.

“The truth is that a great deal of change is happening in the UK built asset environment. Both the public and private sectors, including larger corporations, often find themselves with a business strategy and change management plan that has a significant impact on their assets. They must have an eye on improving efficiency and achieving projects that provide future proofing,” comments Andrew Loudon, UK director of Currie & Brown, the leading global asset management consultancy.

“All of these issues involve people, equipment and processes. This invariably results in consolidation and rationalisation of the facilities and locations they are using.

“The reasons are many. Apart from the impact of the economy, many companies are having to cope with significant debt acquired during the boom years, often to fund expansion and investment in assets.

“At the same time, technology – particularly mobile technology – is having a significant impact on work patterns. There is more flexible working, including work-from-home, as companies and local authorities, for example, discover that they can use new technology to deliver services much closer to their customers and clients.”

Throughout the UK, as public bodies such as police and emergency services, the NHS and local authorities battle to reduce operating costs, invariably their attention turns to their property portfolio: are they making the most of their assets? Could they sell some assets while consolidating operations elsewhere? Or adopt a “shared services” model?

In Glasgow, Currie & Brown has supported Serco and the city council – who formed a joint venture company, ACCESS – as they set out to reduce a long-standing dependence on physical property by exploiting available desktop and mobile technology.

The council, one of the UK’s biggest with a budget of around £2 billion and 40,000 staff, agreed a 10-year £265 million contract with ACCESS that guarantees £50 million of savings over its lifetime. During the transition phase, ACCESS delivered more than £15 million of technology projects while managing 20,000 desktops and 640 properties.

The project merged five council helpdesks into one and brought together 1,700 computer applications into one operating platform. The organisation also delivered a major council property rationalisation project – “Tomorrow’s Office” – with floor space currently used by around 3,000 council staff reduced by 65 per cent.

The ACCESS experience is a great example of outsourcing done well. Overall, savings of 20 per cent are being achieved. It has achieved this by taking a joined-up approach to the task, making sure that the reasons for change were communicated clearly, and that all staff, clients and other stakeholders were aware of what the project was intended to do.

“There are five key elements of any public or private sector project which sets out to achieve real efficiencies and improve operational reach or service provision,” believes Andrew Loudon.

“These are: planning, finance, governance, IT investment and performance review. Companies must ensure that they have the appropriate expertise, either in house or through consultants, The models on which significant outsourcing of property are planned, for example, must be coherent and flexible, and people must ensure that they can actually achieve their targets.

“In the private sector we have been engaged in some major cross-border rationalisation programmes to support implementation of a new business strategy.

“In the pharmaceutical industry we have been engaged by several clients to rationalise their portfolio and investment programmes in the UK and Europe.”

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