Why the public sector must embrace offshoring

We need the expertise and savings offered by global outsourcers

Should government be sending IT work overseas? Mark Kobayashi-Hillary says yes - here's why.

silicon.com's CIO Jury recently weighed in on whether the public sector should embrace offshore outsourcing.

The verdict was close but came out in favour of not supporting government plans to offshore more back office and IT services. It is perhaps an understandable response, given concerns about data security and large-scale government failures in the past.

But is this constant fear over security just a hangover from the past? The offshoring data disasters that still worry managers today were all in the early days of offshore outsourcing. Every industry has a learning curve and it would be unfair to tarnish the present batch of suppliers with a few data disasters from years ago.

And is the very concept of trying to repel the tide of international IT services dated? Government CIO John Suffolk has openly stated that there is no pro- or anti-offshoring agenda inside government; projects are assessed and suppliers compared on a case-by-case basis.

So in theory, as the offshore suppliers mature and are more able to compete with the legacy partners of government, it's fair to expect more offshoring.

The fear of offshoring - especially when paid for by tax money - is that jobs and skills will vanish from our shores, but the debate we really need to have is over the changing nature of global enterprise itself.

The government needs to understand how big businesses operate nowadays, where work is being done and value being created. It needs to work out how the UK fits into this mix and how its education strategy caters for what is needed. It needs to work out exactly where the UK will create value, and hence, employment, for its people in both the public and private sectors.

There are already precedents in place demonstrating that if a supplier offers the best mix of price and expertise, it can win major public sector contracts.

Should the government be embracing offshoring?
Photo credit: Paul Kehrer via Flickr under the following Creative Commons Licence

For example, IT services company Steria has been delivering finance and accounting services to the NHS for almost five years now, using resource in India. The project is structured as a joint venture with the Department of Health so the government directly benefits when the joint service company achieves greater efficiencies.

Another Indian company Tata Consultancy Services recently won a £600m 10-year contract from the Personal Accounts Delivery Authority to run the technology and back office of the new UK national pension scheme, the National Employment Savings Trust, (Nest). Even though some of this project will be delivered in the UK, it will also involve resource in India.

The NOA has said it before - and will say it again - outsourcing will have an important part to play in government and public sector services in the future.

The mounting public debt will necessitate further private-sector involvement to get processes in order and to slash overheads. It's no longer thinking the unthinkable to consider that outsourcing is going to be a part of the answer - regardless of who occupies Number 10 later this year...

Prime Minister Gordon Brown emphasised the new thought processes sweeping the public sector when he gave a speech last week focused on the government's Digital Britain plans. He said that the various government departments in Whitehall must follow the example of the Department for Work and Pensions - a move to shared services sourcing. They all need to join with third-party delivery partners to push delivery from the government further into the hands of the private sector.

In his speech, the PM said: "Take the back office. The government is committed to achieving £4bn of savings from back office functions by 2012-13. To drive this ambitious programme forward, we intend to establish a number of business service companies that will handle the routine back office functions of Whitehall departments."

But if the future of the public sector involves shared services, outsourcing and even offshoring, how will future generations of civil servants get any work experience?

A recent survey by the Chartered Institute of Personnel and Development opened up an important debate for the outsourcing industry, and industry in general. The research, conducted by KPMG, found a continued increase in foreign workers filling British jobs overseas as well as at home.

This reopens an age-old can of worms in terms of supply, demand and training in the UK. The write-up of the research in the Telegraph highlighted that one in 10 respondents planned to outsource work but also that "employers are continuing to struggle to fill skilled vacancies".

The main skills deficiencies are in engineers and medical staff. I'm sure IT positions will have also made their top 10. This applies mainly to the private sector but the public sector is no different, and their skills requirements may even be more acute given the scale of the task ahead if the Prime Minister's vision for a complete privatisation of the Whitehall back office is realised.

It's fair to say that many government initiatives such as the shared business service companies, the G-Cloud, and the mooted app store for government services, won't involve much offshoring. However, these plans are founded on the principles of outsourcing and government CIO Suffolk's case-by-case approach means that some suppliers will include offshoring as one component of future solutions.

The search for skills is now global
Photo credit: Shutterstock

Government CIOs should not approach these upcoming challenges with an inbuilt prejudice toward offshoring. They need to recognise that the search for skills is now a global game. The government has long promoted globalisation and needing to source skills and develop partnerships from around the world is just one result of this.

Mark Kobayashi-Hillary is offshoring director of the National Outsourcing Association and author of the book, Who Moved my Job?