Big business for smaller companies
The Coalition Government’s ambitious plans to rein in a huge public sector spending deficit might appear to threaten the outsourcing trend. In fact the cost-cutting promise of outsourcing contracts allied to the demand for technical expertise means outsourcing has grown in value to the state and its numerous agencies.
What has changed in Whitehall is a determination to see smaller players get a slice of the outsourcing action, with the government pressing its spending departments to take more account of the services small and medium enterprises (SMEs) can offer. Baroness Wilcox, parliamentary under-secretary for Business, Innovation and Skills, talks of an “aspiration that 25 per cent of central government contracts should be awarded to SMEs”.
This new emphasis on getting less prominent names into the picture is having a clear impact on the way businesses like Hewlett-Packard (HP) operate. HP is a global technology giant that runs a large share of the IT at the Department for Work and Pensions (DWP), the largest spending UK government department. The DWP pays out £800 million in benefits every day and has a technology regime to match. While HP is a prominent player in the DWPs tech line-up, other businesses are responsible for parts of the wide-ranging contract.
Cost-cutting and technical expertise means outsourcing has grown in value to the state and its agencies
Emergn is a Dublin-based consultancy that specialises in helping organisations to implement new systems as quickly as possible for the lowest outlay. In 2011 it became one of the 600 SMEs that feature in HPs UK supply chain when it was contracted to work on the DWP project. Brian Hanly is in charge of UK business development at Emergn and says the IT giant “asked us to approach the DWP from our own perspective”.
For its part, HP reckoned using a small, lean and agile business would help DWP staff change the way they approached certain tasks. And employing the large contractor as a filter allows the UK government to be much more radical in recruiting SMEs, says Stuart Bladen, a senior HP executive who deals with public sector contracts. “It’s not easy for the government to contract with 40 or 50 SMEs delivering on one large programme. We are able to identify pieces of work that are right for SMEs like Emergn.”
This initial involvement in the DWP contract has opened the door to a succession of government deals for Emergn. The Maritime and Coastguard Agency is now a client, one that Mr Hanly and his colleagues approached via G-Cloud, a new online tendering platform for state work which was devised to encourage SMEs to get involved.
The need to keep costs under control while simultaneously responding to the public’s appetite for better service standards will continue to trigger outsourcing deals, large and small.
Sefton Council stretches from the northern end of the Liverpool conurbation out over farmland to affluent coastal suburbs. In 2008, it signed a 15-year £17-million contract with arvato, an outsourcing provider that is part of Germany’s Bertelsmann group, to handle a whole range of public-facing services.
Michael Jones, arvato’s partnership director for Sefton, points out how a fresh eye can soon find new ways to save money at a time when “pressure on services is unprecedented.” Reducing the computer printer population alone from 1,800 to 200 by using more flexible devices should save £1 million over five years. This kind of simple but radical revision of existing practices has recovered £1.6 million in overpaid housing benefit and promises to deliver total savings of £20 million during the term of the partnership.
The bottom line remains delivering value back to the taxpayer and outsourcing is still the means to that end.