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UK Outsourcing Facing Budget Issues

by: Admin

Wednesday, June 23, 2010 | Outsourcing Events |

Cost Savings through Offshore Outsourcing

Following the demand for more effective use of resources, increased talk is being seen in the UK about the efficiencies and cost savings that can be achieved through offshoring and outsourcing.

While there was already a lot of tension over jobs being lost among employees in the public sector in the UK, media sources have published reports that millions of private sector jobs are also at risk to offshoring. However, such predictions are likely formed from a lack of substantiation and from inflated figures. The emergency budget’s direct impact on the UK’s unemployment rate remains to be seen.

Outsourcing has been in practice in the country’s government for about 20 years. Although it is effective in many areas with the legal process offshoring industry experiencing increased growth, it has been troubled in terms of managing offshoring relationships.

“The bad press that surrounds the cost-effectiveness of some past public outsourcing projects notwithstanding, I would expect a well thought through outsourcing contract to provide effective and cost-effective delivery of services,” said Danny Jones, partner in charge of UK public sector at advisory firm TPI.

This may be due to the increase in outsourcing contracts that have been given, causing a host of new jobs in the outsourcing community. However, according to Jones, the outsourcing industry could also be negatively impacted: “Suppliers are already feeling the squeeze particularly when it comes to negotiating contract extensions; and they expect this to continue.”

The recent report by KPMG confirms this as it discovered that outsourcing is not as high on the CIO agenda as some may have anticipated.

Although this may look bleak to proponents of offshoring and outsourcing, industry players will maintain that there are still more opportunities than there are drawbacks to be had regarding the announcement. Although the government is in need of cost-saving solutions, it also needs solutions that produce results fast. This is something that offshoring industry is proven capable of doing.

It now comes down to just how fast outsourcing will deliver such solutions while still paying regard to semantics. After all, it will typically take 18 months and sometimes two years for an outsourcing project to being producing significant earnings from the time of signing. This could prove to be a significant issue unless the government changes its outsourcing model to resemble that of the private sector.

“Typically, the government has awarded large contracts to a single supplier, but we will see a shift to a model where government breaks large projects into manageable blocks which are then awarded to suppliers according to expertise/service required. This will increase the effectiveness of delivery if it is well managed,” says Jones.

 

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