As a middle-class English male, one of my secret and deepest fears is that I am no good at DIY. I fretfully hammer, saw, plumb and paint my house dreading the opprobrium of my older brother, father in law or the surly bloke next door.
This, of course, is silly. I could give myself more free time and far less stress by employing a better qualified and cheaper Eastern European chap to do minor jobs round the house. But I don’t because I crave the fix of my brother’s approval. On a much larger scale I think the UK public sector is stuck in a similar myopia.
One of the ideological distinctions between the private and public sector over the last ten years has been their approach to outsourcing back-office services particularly overseas. Newly qualified Indian or Chinese graduates cost about a third to a fifth of their equivalent in the West and what’s more they are super keen, work six-day weeks and think a ‘Bob Crowe’ is a type of bird.
The private sector has been quick to spot this potential and train them up to the point where total spend by the West on buying business process outsourcing from India is now north of $1bn per annum. However, only a tiny proportion of this is spent by the UK public sector. This has created the situation where all of the software for Windows XP was written in Mumbai, but my local council still employs its own back-office staff. And the council up the road does the same and so does the local hospital.
So why is there this reluctance to swim with the tide of globalisation? I think it is rooted in the belief that a public sector entity is fundamentally different to anything in the private sector and that this difference permeates the whole DNA of the organisation. I am sorry but the second half of that sentence is just plain wrong. Payroll is payroll. Credit control is credit control. There is nothing in the back office of your organisation that is so hard or unique you cannot train an overseas graduate to do it. Lets keep what most of the public sector actually does in proportion at this point. If the Indians can develop nuclear weapons and launch a space programme, I am pretty sure they could have a decent stab at housing benefits processing.
So how do you catch up with the private sector and take advantage of this enormous cost difference? For once, this is a subject I am reasonably well qualified to comment on. I have spent the last few years outsourcing parts of our organisation to India and although we have had our ups and downs, the whole process is now working pretty well. Believe you me, managing 25 staff 6,500 miles away in Jaipuir is a lot easier than babysitting three newly qualified accountants in London.
Firstly, start small and simple. This is a big step and it won’t be easy. It took evolution millions of years to get from blindly crawling about on the sea floor to flying, so try to be equally patient. In the first year you will do really well to get just one process up and running so manage your expectations accordingly.
Secondly, avoid the temptation to rush over there setting up call centres. They are very hard to get right and bad ones tend to alienate your public. However, every time we moan about foreign call centres, it is worth remembering that English is much harder to speak than it is to read. Our language is littered with silent consonants, the four-letter sequence ‘ough’ can be pronounced eight different ways and we have the most regional accents anywhere in the world. Bear this in mind the next time you ask why oh why a Hindi speaker cannot understand a good old fashioned Brummie accent. Making a call centre work takes a long time, costs a fortune and really is a big boys game to be played on a global scale. For your first venture, I suggest you focus on services where the amount of spoken interaction with the public is limited.
Thirdly, rethink your work processes from basic principles. The key here is to focus on the information flows not the paper trail or the people. The thing you are looking for is the critical point at which information is either written down or entered electronically. Because of the wonders of technology, everything after that point can be done so much cheaper overseas. So take a cold-eyed look around your office and ask yourself how many of your colleagues are coming in every day to work solely on processing information. If they have not put their coat on and left the office to actually talk to a member of the public in the last six months then they should not be there. You may snort and splutter at this point but its true. Write in big letters on the office wall, ‘if your job does not require you to interact regularly with the public, then you don’t need to be here, you could be somewhere cheaper’.
Finally, if you remain unconvinced about the merits of overseas outsourcing then at least be honest with yourself about the root of your objections. I don’t employ Jarek the Polish builder because I am stuck with misguided notions about what it is to be a man in the 21st century. You may not want to outsource business processes to people who can do them better and at about one third of the cost because you have fixed notions about what constitutes public sector values. There is no denying that when we talk outsourcing we are actually talking about shipping British jobs overseas. You may legitimately think this is a bad thing to do to the nice people in payroll and finance but thanks to the bankers, we live in austere times and the public sector has to make difficult choices.
Cutting the cost of your back-office processing by at least two thirds will save an awful lot of front line services, and, if they were given the facts, I am pretty sure your local electorate would know which option they would prefer.
Michael Ware is a corporate finance partner at BDO
