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Outsource magazine: thought-leadership and outsourcing strategy | September 2, 2014

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Outsourcing suppliers: are they really all fat cats?

Outsourcing suppliers: are they really all fat cats?
Martyn Hart

This week’s episode of Channel 4’s current affairs documentary series, Dispatches, raised a number of interesting points around whether outsourcing suppliers in the private sector are the true beneficiaries of the government’s spending cuts.  But did it miss the point?

Screened on the eve of a major report on public sector pay was announced, the programme highlighted the multimillion pound pay packages being earned by heads of private organisations which provide public services, and questioned why they should be the ones to benefit.  But what’s the objective here?  By scaremongering, and forcing private sector companies such as government services company Serco, to defend the salaries of their top managers, the programme served only to undermine the private sector’s ability to adequately provide these services.  This is despite the fact that private outsourcing companies are offering a real and credible solution to some of those who fear that they will be affected by the cuts, by creating new jobs and cost-efficiencies.

The programme, presented by financial journalist Ben Laurance, used the word ‘profits’ as though it were a dirty word – an interesting approach, given the troubled economic times we are living in!  Is it not in the interests of every private sector organisation to maximise its profits?  If it can achieve this by relieving the financial burden on the tax payer and ensuring that these services are run effectively, then should it matter how much the company heads are earning?  Surely, one of the government’s responsibilities is to cut costs, and stimulate growth in the private sector to help take this country out of the choppy financial waters?

Dispatches also asserted that the government’s flagship Big Society policy could benefit big business and cause the public and voluntary sectors to feel the strain.  However, it conveniently made no mention of the government’s recent initiative aimed at ensuring that small and medium-sized organisations are able to bid for government contracts, with a view to increasing transparency and ensure that big businesses are not the only ones to benefit.

The programme also highlighted a number of areas in which outsourcing suppliers have had a negative impact, citing schools in Bradford as one example.  It’s worth bearing in mind that any outsourcing deal has the potential to produce inconsistent results, if objectives have not been correctly set and communicated from the outset.  The programme was right, of course, to imply that simply giving out a contract to the biggest supplier is not the way forward, and care must be taken to ensure that suppliers can provide a compatible cultural fit, and the right level of expertise in order to achieve a successful outcome.  However, what Dispatches did not highlight was that outsourcing and shared services has saved millions of pounds for organisations in this country, with many proven examples of this success.

By refusing to present a balanced argument as to the pros and cons of outsourcing, Dispatches has missed the point, which is that if deals are tendered, and carried out in the correct ways – as the government seems intent on doing – there’s no reason why outsourcing service providers in the private sector should not be the beneficiaries of the government’s spending cuts – after all, they could be the most viable solution for us all.



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