Can the government offshore with confidence?

Opinion: And will it be palatable to the public sector?

The government can see the attractions of offshoring IT but has yet to decide whether to push these services for the public sector. So what's stopping it, asks Georgina O'Toole of analyst Ovum.

The government's attitude to offshore IT services has fascinated me for some time. In my conversations with government CIO John Suffolk, he has always highlighted the importance of delivering value for money for the citizen.

Suffolk is keen to portray the government as a fully signed-up supporter of offshore IT or business services "as and when appropriate". His biggest stipulation is that security implications must be considered first and foremost.

On the ground, it's a different story. Suffolk's stance is common in the upper echelons of the government and based on the premise that suppliers would not have created centres in low-cost locations if they didn't think they could create value for their clients.

But this view has yet to penetrate to the ranks of the front-line decision makers.

Those who make the decisions on a contract-by-contract basis remain nervous. Only a handful of departmental CIOs have displayed the confidence to take the offshore route, choosing to navigate the political minefield associated with UK plc using resources in, for example, India or China.

Without a common policy within government, it is unsurprising that IT services companies are unsure of the right approach to take.

There are those departments that have made it clear they have no plans to migrate any services or jobs offshore. For example, the Cabinet Office has prevented Fujitsu Services from using offshore resources without prior consent. But there are departments and agencies that have chosen to let suppliers decide on the best approach.

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For example, as far as Joe Harley, CIO of the Department for Work & Pensions (DWP), is concerned, it is up to suppliers to decide how to deliver services and value to the client.

He says: "DWP's job is to serve its customers and ensure that the right standards are applied, for example in adherence to stringent data protection and security requirements."

When a new contract is let, a department's lack of commitment to an offshore approach leaves prospective suppliers unsure which way to turn.

In leaving any mention of offshore service delivery out of an invitation to tender and providing little or no guidance, departments and agencies push the decision firmly into the hands of the supplier, which must tender the solution it believes offers the best value for money, using offshore if appropriate.

But without an understanding of the client's attitude to offshore, the procurement process is unnecessarily distorted.

There is no denying there are political sensitivities around the offshore issue, driven predominantly by a fear of job losses, a concern about the impact on the UK economy and a lack of confidence in the quality of service delivered from low-cost locations.

These barriers remain - but I am seeing signs that sensitivities about these issues are diminishing. On the supply side it is becoming harder to distinguish between onshore and offshore providers as both sets of players look to operate a global delivery model.

More importantly, on the demand side, departments and agencies will be left with little choice but to consider offshore with a need to deliver more for less due to reducing or limited budgets.

In addition, there are an increasing number of reference sites - at National Savings & Investments, for example - where once impenetrable barriers related to onshore job security have been overcome.

Increasing budgetary pressures over the next few years will only lead to more departments and agencies working with suppliers to find offshore options that bypass political, cultural and economic obstacles.

As the use of offshore service delivery becomes more acceptable in the public sector, albeit using onshore suppliers with an offshore capability as a starting point, it is even more important that suppliers aren't left to work in the dark when it comes to understanding UK Government's approach.

A shared understanding is essential to ensure a fair competition when tendering for new contract opportunities. It would also allow client and supplier to enter into a dialogue with trade unions, local representatives, opposition parties and the electorate that addresses their issues clearly and consistently.

While the emergence of a single common policy for the public sector is highly unlikely, it is essential that the Office for Government Commerce develops a set of guidelines for departments and agencies.

This would ensure that perceived but unfounded obstacles can be quickly removed while issues, such as data security or the impact on the local economy, can be openly debated.

Georgina O'Toole is a senior analyst in Ovum's government practice