Outsourcing And Shared Services Are Key To Delivering Deep Public Sector Spending Cuts

The Comprehensive Spending Review 2010 will deliver the biggest budget cuts since the Second World War, according to leading economists. In anticipation of the Treasury’s announcement on 20 October, I’m urging the public sector to consider outsourcing non-business critical functions or moving these across to a shared services arrangement.

On 20 October 2010, the public sector will be stricken with delivering budget cuts greater than ever previously experienced. Desperate times call for significant cost cutting measures and with outsourcing and shared services having the capacity to deliver dramatic cost savings, these initiatives need to be given serious consideration by the Government and public sector organisations.

Outsourcing non-business critical functions such as ICT, finance and human resources can provide considerable cost savings compared with maintaining these non-core functions in-house. Managing all ICT internally, for example, requires significant ongoing investment into skilled IT professionals, ICT infrastructure and software applications.

Outsourcing ICT to specialists that already have all the necessary ICT infrastructure and IT professionals in place enables organisations to take advantage of economies of scale and thereby negotiate highly competitive contracts with their suppliers.

The Nursing and Midwifery Council (NMC) is one such organisation that has recently outsourced its ICT, signing a five-year contract worth £5.2 million with Advanced Computer Software Group. Advanced is now managing and hosting the organisation’s IT infrastructure across two different data centres. The NMC previously managed its services in-house with four IT staff, who have joined Advanced.

The NMC is the latest of many organisations that have recognised their IT and communications infrastructure can be provided more efficiently and economically by specialist providers such as Advanced.

Similarly, by moving non-business critical functions across to a collaborative arrangement, otherwise known as a shared service, the costs and resources can be shared between all the collaborating organisations.

Public sector organisations that have already gone done this route and are reaping the benefits include Three Rivers District Council and Watford Borough Council, which use the same Advanced financial management system (FMS) within a shared services environment. This FMS incorporates integrated electronic procurement, budgeting and forecasting and document management and imaging software solutions.

Government departments and public sector organisations that need to seriously cut their costs over the next four years should look towards outsourcing or shared services models. These will undoubtedly deliver the dramatic cuts that many public sector organisations will be seeking and the Treasury will be expecting.

Vin Murria joined Advanced Computer Software in August 2008 as Chief Executive Officer and has over 20 years' experience of working for private equity backed and publicly listed companies focusing on the software sector. She was formerly Chief Executive Officer of Computer Software Group, which was taken private in April 2007 and subsequently merged with IRIS Software Group Limited in July 2007 before being sold to Hellman Friedman in a deal worth £500 million. Vin is a Partner at Elderstreet Capital and a Non-Executive Director of Greenco.

  • D Smith

    Financial Times: "The private sector needs to raise its game if it is to live up to its promise of consistently delivering better and cheaper services than its public equivalent, FT analysis has shown.

    The idea that the private sector is the answer in an era of cash constraints is promoted by management consultancies, whose own performance and day rates have recently come under fire from the National Audit Office. They urge more outsourcing on central and local government.

    But the evidence is that it is the introduction of competition – rather than consistently cheaper and better performance by the private sector – that has brought the biggest gains to date. "

    http://www.ft.com/cms/s/0/2e22a09c-daf2-11df-a5bb

    • Thanks for the link, but FT.com articles are only available to registered users and subscribers.