Outsourcing sector prepares for emergency budget results

There has been much speculation around the emergency budget announcement due today and it is already raising concerns among the general public. Further spending cuts are likely to affect social programmes and the unemployment rate. 

The repeated call for more effective use of resources has led to increased talk about efficiencies and cost-savings being achieved through outsourcing.

To add to the fear already present among public sector employees, some media sources have taken to publish reports of millions of private sector jobs which would also be at risk. These would be outsourced jobs serving the public sector. Such speculations often lack substantiation and may suffer from inflated figures.

Indeed, exactly what impact the emergency budget will have on the country’s unemployment rate remains to be seen.

Outsourcing is not new to the government; it has been outsourcing various functions and services for some 20 years. Although as an experienced user, it could do with improving how it manages its outsourcing relationships.

“The bad press that surrounds the cost-effectiveness of some past public outsourcing projects not withstanding, I would expect a well thought through outsourcing contract to provide effective and cost-effective delivery of services,” observes Danny Jones, partner in charge of UK public sector at advisory firm TPI.

It may be that more outsourcing contracts are awarded in which can result in the creation of new (on-shore) jobs among the outsourcing community.

Equally, it may be that the outsourcing industry is negatively affected. Indeed, we have seen how proactive luxury contracts are put on hold or scrapped altogether (like the National ID). And while essential money saving projects will continue to go through, the impending budget cuts will impact existing relationships, as evidenced by recent budget cuts.

“Suppliers are already feeling the squeeze particularly when it comes to negotiating contract extensions; and they expect this to continue”, notes Jones.

This is confirmed by findings from a recent report published by KPMG. It discovered that outsourcing appears to have fallen off the CIO agenda. Indeed, more than two-thirds of CIOs surveyed indicated that they now expect to pay more attention to the price to quality ratio they currently experience.

Industry players still maintain there are more opportunities than drawbacks to expect from today’s announcement. The government needs solutions that will not just deliver savings but it also needs solutions that deliver results quickly; this is often a key benefit of outsourcing.

However, when it comes to how quickly outsourcing can deliver solutions a word of warning is necessary; fast deliverability could come down to a matter of semantics. Certainly, it usually takes 18 months to two years for an outsourcing project to begin delivering following the signing of the contract. This could be a problem unless the government changes its outsourcing model to resemble that of the private sector.

“Typically, the government has awarded large contracts to a single supplier, but we will see a shift to a model where government breaks large projects into manageable blocks which are then awarded to suppliers according to expertise/service required. This will increase the effectiveness of delivery if it is well managed” says Jones.

There are pros and cons to everything but despite the many opportunities that may arise from the necessary measures announced today, economic policy is often a bitter pill to swallow.


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