Upping the game: how better practice can boost outsourcing’s standing in the UK…
Outsourcing has experienced a bad press recently, with unwelcome headlines and much greater public scepticism about whether it delivers improved results. In these debates, particularly in the public sector, facts are often in short supply, and emotion plays a powerful role. Supporters of outsourcing need to get better at communicating their case, and must do so over and over again to win their arguments.
One useful source of data is a regular study carried out by KPMG into satisfaction with ICT outsourced service providers. (UK ICT Outsourcing Provider Performance and Satisfaction Study). Its authors recently looked at 490 contracts held by 210 spending clients across all sectors in the UK, with an annual value of over £10 billion. While this can only ever be a study of perceptions, it provides an important starting point for any analysis.
For instance, it is interesting that, while customers still say that “cost savings” is the most significant motivation for the decision to outsource ICT, other factors are rising in importance. Buyers increasingly mention “access to skills” and “quality improvement” as well. It is clear that providers need to be able to do more than just make savings; customers also want to know what they will do to improve the service.
It is also evident from the study that service providers need to improve their record and reputation for providing innovation and managing risk. This is an area where customer expectations are not being met. It is often thought difficult to contract for innovation, and each party may have different understandings of what innovation actually is, but there is clearly still significant room for improvement here.
The MCA regularly collects data from our member firms on their advisory work on outsourcing. We have seen some encouraging growth in the last few years. As buyers push themselves to be more sophisticated and strategic, and as disruptive technologies raise the bar for performance and flexibility, it becomes ever more important to be on top of all the contractual, management and governance issues.
Part of the solution to the “crisis of public confidence” in outsourcing (not my words but those of the Financial Times leader writer) is to make sure that the practice and performance of outsourcing is as good as it can be.
As the British economy starts to grow again, the demands on providers are likely to grow. One area where we can confidently expect renewed interest is in the environmental performance of providers, particularly when improved sustainability can be married with reduced costs and greater efficiency.
To take just one example I have been looking at recently, the global greenhouse gas emissions of ICT, including data centres, mobiles, desktops and telecommunication networks, is reckoned to contribute close to 2% of the total. The carbon footprint of data centres could rise exponentially over the next few years.
So green IT is set to become a major issue over the next few years, and that puts the providers of outsourced services right in the spotlight. Best of all, good practice here could probably save significantly on costs.
An improved record on sustainable good practice, as well as a focus on innovation and risk management, could help to transform the reputation of ICT providers. With that will come a rising tide of approval for outsourcing itself.