With the current need to cut costs across all central government departments, it is surprising to find that the opportunities to bid for the outsourcing of non-contentious back-office, white-collar processes is at an all-time low.
Despite the good work of the CBI’s Public Services Strategy Board, the industry has not won the intellectual debate of the power of outsourcing. For many ministers and senior civil servants, it still represents an unreasonable risk to take, and it is this that needs to be addressed if outsourcers are ever to become true partners.
For me, there are two major barriers that need to be addressed if the industry I was so closely associated with for some time is to reach its true potential.
First, the industry needs to move on from the present conventional outsourcing contracts, to contacts that treat both parties as true partners and therefore share the risk and reward. A special purpose vehicle could be formed for the larger contracts, with the majority ownership probably, though not necessarily, being with the private sector, but in which the public sector client also has an equity stake.
Secondly, there are currently insufficient companies of a size for those letting contracts to believe they have a real choice. Unfortunately, government is not good at developing markets. They do not communicate well about their plans for likely bidding opportunities, making it difficult to plan resources to bid for contracts or to deliver them if successful.
Nevertheless, the fact is that over the past ten years the few large organisations in the market have got even larger, but the medium-sized companies have not developed sufficiently to be able to compete successfully against them in a bid process. So we now have a plethora of smaller to medium-sized companies that don’t have the scale and infrastructure to compete for the large contracts that government needs to let.
There is now a real need for new sizeable entrants into this market to stimulate its growth, and this could well lead to a number of mergers and acquisitions taking place.
By developing a more inclusive approach, I believe the resistance to outsourcing will reduce which, in turn, will create more bidding opportunities. In this way, the market will grow faster, releasing the enormous skills and infrastructure that exists within business processing organisations to transform services faster and produce the reduction in the cost of delivering public services that is so urgently required.
