Outsourcing - Why?
Discussion
Ok, I understand the principle of outsourcing - basically you contract certain services out to a specialist company who theoretically can provide you with the service cheaper (IT & callcentres for example). This seems especially popular in the public sector.
However, I see so many articles stating how outsourcing companies end up charging more than it would have cost to keep the service in house, that I have to wonder is it really worth doing, especially in the face of so much evidence that outsourcing doesn't seem to save much money. I know some of it is down to the public sector's inability to cut a decent deal, but are people so short sighted and lacking in hindsight that they totally ignore why previous outsourcing deals really haven't been a good deal for the client?
I suppose much of this could also apply to PFI, and government procurement in general - why is the public sector so good at being bent over and thoroughly shafted?
However, I see so many articles stating how outsourcing companies end up charging more than it would have cost to keep the service in house, that I have to wonder is it really worth doing, especially in the face of so much evidence that outsourcing doesn't seem to save much money. I know some of it is down to the public sector's inability to cut a decent deal, but are people so short sighted and lacking in hindsight that they totally ignore why previous outsourcing deals really haven't been a good deal for the client?
I suppose much of this could also apply to PFI, and government procurement in general - why is the public sector so good at being bent over and thoroughly shafted?
PFI was never meant to save money. It was a way of defering payment. It was one of the most expensive cons the Labour party put over. The cots of PFI have alredy increased and will continue to do so. We moan about the costs ot the money we're putting into Eire but they wil pay back their loan a damn site faster than this country will pay back the PFI costs.
And there' the IT firm known to Eye readers as Crapita.
Sooner rather than later the present government will enforce central purchasing on the police, NHS, fire service and anything else they can think of, ostensibly to save money. But what will happen is that some company, although not probably one that gave them lots of money, will ge given the contract to supply the various uniforms, cars, IT and such and the prices paid by the police et al will increase substantially.
So the government will get all the money back from the contract, a very substantial amount but not as much as if it had been a fair tender, so it will be, to them, like taxing the funding.
many people feel that outsourcing is a way of putting money back to those who put money into the various party's funds.
And there' the IT firm known to Eye readers as Crapita.
Sooner rather than later the present government will enforce central purchasing on the police, NHS, fire service and anything else they can think of, ostensibly to save money. But what will happen is that some company, although not probably one that gave them lots of money, will ge given the contract to supply the various uniforms, cars, IT and such and the prices paid by the police et al will increase substantially.
So the government will get all the money back from the contract, a very substantial amount but not as much as if it had been a fair tender, so it will be, to them, like taxing the funding.
many people feel that outsourcing is a way of putting money back to those who put money into the various party's funds.
I work for an outsourcing company (not through choice).
I know what the charge-out rates are and the margins.
The one I work for is not quite as bad as some of the others I have to work with (they take the piss something ridiculous with their charing) but it must cost the clients 3-4 times what it would cost to employ the staff directly (and they still have to provide desks etc).
So, why? Not a f
king clue
I know what the charge-out rates are and the margins.
The one I work for is not quite as bad as some of the others I have to work with (they take the piss something ridiculous with their charing) but it must cost the clients 3-4 times what it would cost to employ the staff directly (and they still have to provide desks etc).
So, why? Not a f
king clueDerek Smith said:
PFI was never meant to save money. It was a way of defering payment. It was one of the most expensive cons the Labour party put over. The cots of PFI have alredy increased and will continue to do so. We moan about the costs ot the money we're putting into Eire but they wil pay back their loan a damn site faster than this country will pay back the PFI costs.
Sorry Derek, I should have worded it better - I know PFI isn't to save money, I used it as another example of just how the goverment manage to spend so much and gain so little.One of the reasons why government outsourcing is so poor value is that, unlike commercial entities, the government departments don't seem to be able to specify what they want or (in many cases) know how they intend to use the service. Add to that a culture of job-creation and retention and you can imagine how difficult it is to work with these people.
Since I use my real name on PH I can't go into details, but I have worked on the periphery of some big government outsourced IT deals.
Without fail, the department is run and staffed by people who are inherently suspicious of the new systems (or in fact, anything new) as they fear it might replace their job or force them to be more productive. With this in mind, they don't cooperate in the specification of the system, and are vague and obstructive when the architecture and software requirements are being drawn up.
If you do manage to find someone with half an ounce of enthusiasm for the project, the requirements will have changed several times since the beginning, as government policy results in various U turns on what the system is there to do.
Key people will be moved to other departments at random, replaced by people who know nothing about the department.
Many, many people will see every meeting as an excuse for a jolly, you will be seriously outnumbered by people who have no business being there.
As an example, I went to the handover meeting of a £3m self-service HR system implementation for a government agency, this is the point at which we symbolically handover the system to the customer and 'go live' - a formality really as we continue to administer the system.
From my company there was me, the project manager and the customer relationship manager. From the agency there were 42 people, the head of every department that would be accessing the HR system (ie. every department) along with their deputies, secretaries and a half dozen management consultants who were asking why we hadn't delivered this and that feature (because it was never specified, where were you when we were scoping the extent of the system?).
In short, outsourcing companies often deliver what they're asked for, it's just that the bodies doing the asking are so spectacularly incompetent the end result is of no use.
What really galls, is that I know every one of these people is being paid from my taxes.
Since I use my real name on PH I can't go into details, but I have worked on the periphery of some big government outsourced IT deals.
Without fail, the department is run and staffed by people who are inherently suspicious of the new systems (or in fact, anything new) as they fear it might replace their job or force them to be more productive. With this in mind, they don't cooperate in the specification of the system, and are vague and obstructive when the architecture and software requirements are being drawn up.
If you do manage to find someone with half an ounce of enthusiasm for the project, the requirements will have changed several times since the beginning, as government policy results in various U turns on what the system is there to do.
Key people will be moved to other departments at random, replaced by people who know nothing about the department.
Many, many people will see every meeting as an excuse for a jolly, you will be seriously outnumbered by people who have no business being there.
As an example, I went to the handover meeting of a £3m self-service HR system implementation for a government agency, this is the point at which we symbolically handover the system to the customer and 'go live' - a formality really as we continue to administer the system.
From my company there was me, the project manager and the customer relationship manager. From the agency there were 42 people, the head of every department that would be accessing the HR system (ie. every department) along with their deputies, secretaries and a half dozen management consultants who were asking why we hadn't delivered this and that feature (because it was never specified, where were you when we were scoping the extent of the system?).
In short, outsourcing companies often deliver what they're asked for, it's just that the bodies doing the asking are so spectacularly incompetent the end result is of no use.
What really galls, is that I know every one of these people is being paid from my taxes.
GTO Scott said:
Derek Smith said:
PFI was never meant to save money. It was a way of defering payment. It was one of the most expensive cons the Labour party put over. The cots of PFI have alredy increased and will continue to do so. We moan about the costs ot the money we're putting into Eire but they wil pay back their loan a damn site faster than this country will pay back the PFI costs.
Sorry Derek, I should have worded it better - I know PFI isn't to save money, I used it as another example of just how the goverment manage to spend so much and gain so little.When my force went PFI my unit was part of what was sold off. I said that there were changes in the legislation that would save about 50% of the costs of running it but my boss said his hands were tied. So they got to bid for something which they knew would cost them a lot less.
I was going to give all the work over to the chap who was going to be in charge and do nothing to help. But the chap turned out to be a very pleasant chap - I might still have gone sulky but he'd just lost his wife.
I'd spent a lot of time and effort in cutting costs of video id parades. Mine were about half the price of those run by the Home Office approved supplier, and the costs would have got proportionally lower and lower as the years went by. My CC took a bit of stick in supporting us, and then we gave it all away.
That would be bad enough - the bill for PFI is currently running at £8bn a year, more than what we gave to Eire - but, farcically the bill is set to rise by between £1/2bn and £1bn (the actual cost is a state secret) due to the credit crunch meaning that our banks are charging more interest.
How’s that for really stupid?
And I was a part of it all.
Rant not over. Merely put on hold.
TBH outsourcing is both good and bad. I am on a long term contract to a company who do government work. We are one of the fastest responding companies in the uk i believe to the specific fault issues we deal with.
I believe we are presently operating at something like 150% of sla and have done since beginning of project.
In 6 yrs and numerous thousand calls we have only ever failed 2 calls iirc and those were on technicality rather than outright fails.
This means if a switch goes down we WILL have an engineer onsite within 8hrs normally though its between 2 and 3 hrs pretty much anywhere in the country for the projects i work on.
If it was done inhouse they would need at least 3 people onsite at every site (2-300) every day 7 days a week to cover the same 24hrs we do.
The cost of that would be far far higher than what it costs to useus.
I believe we are presently operating at something like 150% of sla and have done since beginning of project.
In 6 yrs and numerous thousand calls we have only ever failed 2 calls iirc and those were on technicality rather than outright fails.
This means if a switch goes down we WILL have an engineer onsite within 8hrs normally though its between 2 and 3 hrs pretty much anywhere in the country for the projects i work on.
If it was done inhouse they would need at least 3 people onsite at every site (2-300) every day 7 days a week to cover the same 24hrs we do.
The cost of that would be far far higher than what it costs to useus.
GTO Scott said:
Sorry Derek, I should have worded it better - I know PFI isn't to save money, I used it as another example of just how the goverment manage to spend so much and gain so little.
I think there are a number of reasons for this.1. Many Govt employees are thick as s**t.
2. It isn't their money, and they don't think they'll be sacked if they f**k it up right royally
3. They used to think they would have a job for life (I am not convinced that many still do not operate on that principle)
4. If they don't p**s away their entire budget then next year they get less.
So, it ain't my money, doesn't matter if we p**s it all up the wall and I'll still have a job no matter what = money wasted.................
When you talk about cost, it depends whether you are talking prime/direct cost or recovered cost, most people use the headline cost when discussing outsourcing but the actual number that should be used is the recovered cost, in a true outsource scenario once the direct cost is outsourced the overhead or management cost should be removed, in private companies this happens, but in the public sector it rarely does.
The reason out sourcing fails is because of SLA's (Service Level agreements) when work is in house you just get your people to do whatever, quickly. When a contract gets out sourced you only get what you've paid for anything extra is chargable. So initial headline contract savings evaperate when the extra's are added. You also lose control of what you want to do day to day as everything extra has to be re-negotiated.
miniman said:
Its about risk mitigation. If we outsource, we do it on a fixed price basis, meaning that our financial exposure is capped.
Dream on. There are far to many examples of contract re-negotiations, upwards. Alongside contract cancelations, due to complete and utter cock ups, that I have witnessed.Derek Smith said:
PFI was never meant to save money. It was a way of defering payment. It was one of the most expensive cons the Labour party put over. The cots of PFI have alredy increased and will continue to do so. We moan about the costs ot the money we're putting into Eire but they wil pay back their loan a damn site faster than this country will pay back the PFI costs.
And at the time the PFI debt was off balance sheet, artifically reducing the stated national debt and helping Brown stay within his (ever shifting) Golden Rules.Where it works is when at least one but preferably several of the following conditions are filled:
1. The provider has built a good relationship with the client and understands what is done;
2. The client needs a limited resource e.g., for a large geographic area, or for a longer period of time than a small number of people could to it, like the IT system above (as the same team can be split among several clients more cheaply than if they were dedicated);
3. The outsourcing client needs expertise in implementing a system far more quickly than they normally could or with greater flexibility of staffing levels;
4. The client is in a high cost labour/real estate market but the service can be provided off site, e.g., a city law firm can base some of its support functions elsewhere without paying city salaries or rents;
5. The client knows its requirements and how to define and cost them even if it lacks capacity to implement them;
6. (Maybe controversial) - the client is less good at doing these things in house and so even a less than optimal outsourced service is an improvement.
1. The provider has built a good relationship with the client and understands what is done;
2. The client needs a limited resource e.g., for a large geographic area, or for a longer period of time than a small number of people could to it, like the IT system above (as the same team can be split among several clients more cheaply than if they were dedicated);
3. The outsourcing client needs expertise in implementing a system far more quickly than they normally could or with greater flexibility of staffing levels;
4. The client is in a high cost labour/real estate market but the service can be provided off site, e.g., a city law firm can base some of its support functions elsewhere without paying city salaries or rents;
5. The client knows its requirements and how to define and cost them even if it lacks capacity to implement them;
6. (Maybe controversial) - the client is less good at doing these things in house and so even a less than optimal outsourced service is an improvement.
Derek Smith said:
PFI was never meant to save money. It was a way of defering payment. It was one of the most expensive cons the Labour party put over.
FWIW PFI was introduced by John Major's Govt. Daring criticised it in opposition because of the long term potential costs. And then in Govt........the rest, as they say...Pub sec outsourcing dates back to the 80s iirc.
Mark Benson said:
One of the reasons why government outsourcing is so poor value is that, unlike commercial entities, the government departments don't seem to be able to specify what they want or (in many cases) know how they intend to use the service.
The same can be said of many of my private sector clients. If the outsourcers spent as much effort on service delivery as they do contract writing then the reputation of the industry would be better.One of my clients had no choice but to accept a quote for work that would take 3 people 3 weeks. In reality it was less than 1 days work to test and deploy.
For businesses, largely the advantages are being able to grow and crucially, shrink, quickly and cheaply. Also, not losing management time on peripheral issues.
For govt. agencies, I believe it is popular because of laziness, blame-path management, and corruption. Probably in that order.
For govt. agencies, I believe it is popular because of laziness, blame-path management, and corruption. Probably in that order.
From my experience in private industry, Outsourcing is generally mandated by the board who perceive that their own staff are not as good at something as a specialist company. The specialist will come and make a presentation suggesting lots of nice savings, and the board are won over.
Once the outsourcing company are in place it quickly becomes apparent that, due to lack of knowledge on behalf of the board, incorrect performance metrics have been chosen so it looks like the outsourcing company are doing much better than they are. Generally they are companies of the "pile it high, sell it cheap" variety, and are generally much worse at the task than the in house team.
Once the outsourcing company are in place it quickly becomes apparent that, due to lack of knowledge on behalf of the board, incorrect performance metrics have been chosen so it looks like the outsourcing company are doing much better than they are. Generally they are companies of the "pile it high, sell it cheap" variety, and are generally much worse at the task than the in house team.
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