New briefing highlights outsourcing risks
Wednesday 4th May 2011
Local authorities face many risks in outsourcing ICT, and those that follow this route without a full appreciation of them may pay a heavy price, both financially and in loss of flexibilty.
This view, recently expressed in Socitm's evidence to the House of Commons' Public Administration Select Committee, is developed in Costs of outsourcing - uncovering the real risks, the latest monthly briefing from Socitm Insight.
The briefing agrees that there are good reasons for outsourcing, especially for smaller organisations that may lack scope for economies of scale and the capacity to keep abreast of relevant developments in the complex and rapidly developing worlds of information and technology. Outsourcing infrastructure can also be a good way to reduce risk exposure as technology changes.
However, outsourcing a major component of the ICT service, or even the whole service, is a major commitment and fraught with risk. Costs of outsourcing also points out that Socitm's Benchmarking the ICT service, which has compared costs and user satisfaction over a decade, shows that, when comparing the costs for any service, most elements will be more expensive if outsourced.
As well as describing the risks, the briefing sets out ways that an organisation that has resolved to outsource its ICT can get the best outcome, including:
- identifying the potential savings to be expected from an outsourcing deal by benchmarking in advance the cost and satisfaction with the existing service against the best performing ICT services and writing the difference into the specification
- getting professional advice around framing and negotiating the contact
- adopting 'strategic outsourcing'- as recommended by Socitm - in which the organisation identifies components of the entire ICT operation, and offers them to the market individually rather than as a bundle
- retaining an in-house team as a source of expertise and competitive capability
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