Socitm Warns Against The Risks Of Outsourcing

Socitm has warned that outsourcing government ICT services can be “fraught with risk”, in its latest report for public sector IT managers.

However, the Costs of Outsourcing – Uncovering the Real Risks study does not take an overall negative view of outsourcing, pointing out that outsourcing can protect smaller departments from changes in technology. It also says that smaller organisations can benefit because of the economies of scale it can bring.

Spreading The Outsourcing Bet

The briefing recommends outsourcing where there are obvious gains but warns against outsourcing a major component of the service, or even the whole ICT service, describing it as “a major commitment and fraught with risk”.

Socitm’s Benchmarking of the ICT service, belies the myth that outsourcing is a cheaper alternative. The benchmark has compared costs and measured user satisfaction over the past 10 years and the results have led the professional body to conclude that most elements of a service will be more expensive if outsourced.

The report goes into the risk and cost arguments in some detail but also sheds light on how to get the best outcome for those who venture into the outsourcing market.

Managers should identify whether real savings will be achieved 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. It also advises that professional advice should be sought  when framing and negotiating the contact.

Because of the risks it claims are present, Socitm recommends that organisations should adopt ‘strategic outsourcing’. By identifying components of the entire ICT operation that would benefit and offering them to the market individually, rather than as a bundle, checks and balances can be made. Comparing the service costs and user satisfaction levels offers the outsourcer a bargaining chip to keep the third party companies in line.

It also recommends keeping an in-house team as a source of expertise and competitive capability through innovative projects that will improve the services, and offers protection from suppliers that try to gain extra income by offering services down the line that only they can provide.

It also suggests that the smaller organisations, who may see benefits from outsourcing, could also consider partnering with others to gain the economies of scale without stepping into the outsourcing market.