Local government ITO: Innovating to reinvest
by Matthew Mower, sourcingfocus.com
Statistics have been released this week, highlighting the number of local councils that have significantly downsized their in house IT departments. In some instances the reductions were incredibly substantial. West Sussex County Council recorded a 90% reduction in IT employees between 2008-09 and January 2012 and the trend looks set to continue. Public sector intelligence specialists Kable predict that spending on IT staff within local government is set to fall further, with research suggesting costs will drop 7% over four years, from £785m in 2012-13 to £739m in 2016-17.
While the outsourcing of local government IT may seem like a move likely to induce socio-economic ramifications, there are several benefits of ITO that should not be overlooked. Cost-cutting will be the core goal of any outsourcing contract, and within the public sector it is important to note that any financial efficiencies gained can be reinvested in other areas that will benefit most.
Neither should it be assumed that this cost-cutting will derive from laying off workers to source cheaper labour. Often it is the case that when a public sector outsourcing contract is negotiated, it is a priority to keep current staff in work. For instance, in the West Sussex County Council case, the number of IT council employees fell from 138 to 12 over a four year period. However the majority of staff involved were part of TUPE transfers that took place in 2010 and 2011, with the employees that once worked for the council transferred to suppliers, providing them with the background knowledge required for the projects.
Inviting private companies to tender for public sector contracts can also attract innovation and productivity improvements, leading to financial rewards. Suppliers are likely to use innovation as a USP in a competitive tender process, and an outsourcer is inherently more likely to provide innovation than an in house department. This is due to a number of reasons. Providing a financial incentive for innovation in the contract is best practice, something which an in house IT department is unlikely to have and therefore less likely to possess the motivation for implementation.
When innovation is a priority for a local government the financial clout required to implement the changes may mean that an outsourcer is also required. The vendor is likely to have the finances up front to implement large innovative changes, whereas local government have to deal with budgetary restraints. The investment can then be paid back over a longer period of time.
It soon becomes apparent that outsourcers have the capability to make real innovative changes and implement them in order to save money for the public sector. They have the capability and resources to think outside the box and create efficiencies that otherwise may not have been realised. While many may assume that outsourcing takes money out of the public sector, the long term benefits of outsourcing mean that local authorities can save considerable amounts and reinvest in the areas that really require it.