March 22, 2002—New research predicts that outsourcing by European governments will grow at 17% annually through to 2004, with the UK demonstrating the most mature approach in the world. In the US government outsourcing is expected to double over the next five years.
The study by Accenture, Outsourcing in Government: The Path to Transformation shows that governments can reduce costs by 20-40% over the life of an outsourcing contract, which typically runs from three to 10 years. However, 70% of the 50 senior-level government executives and 11 policy advisers participating in the survey, claimed that cost saving was only one of numerous benefits.
Other advantages listed by the executives from the UK, Australia, Canada, New Zealand, Singapore, South Africa, Spain and the US, included strengthening capabilities, enhancing executive focus on priority issues and improving service to constituents.
Although government executives were generally in favor of outsourcing only 20% assess their outsourcing experiences as resoundingly successful. Outsourcing isnt without difficulties. The study reveals that executives main problems are resolving labor concerns, identifying ways to measure progress as baselines change, internal resistance to change and managements fear of losing control.
Other challenges posed are the process constraints which inhibit flexibility, tracking the benefits and the increased complexity of the outsourced processes. The executives surveyed also claimed that some governments incentive structures inhibit risk-taking and that the price of failure is often significantly higher than the reward for success.
Approximately 12% of the participants had used outsourcing to achieve dramatic results. Either they started buying services rather than the capacity (i.e. infrastructure and personnel) to provide the services themselves, or they transformed the value equation, by reevaluating their organizational structure and operations to ensure they were as streamlined and efficient as possible. This would mean outsourcing critical processes, creating new sources of revenue and driving economic development.
Looking to the future, many realize that advanced technologies are going to be necessary and governments are unlikely to afford these on their own. This creates opportunities for technology focused outsourcing firms.
Although the research reveals that improvements are essential, the executives remain optimistic, ranking the future potential of outsourcing higher than the effectiveness of current projects.
—Jessica Jarlvi
Reprinted with permission; copyright 2002 i-FM
