In light of a cluster of large outsourcing organizations recently collapsing in the UK, the UK’s Institute for Government has investigated this practice’s value. The report, ‘Government outsourcing What has worked and what needs reform?’, was released September 2019.
The report examined outsourcing success categorically with financing and some people-facing services failing evaluation. IT has had chequered delivery, but, on the whole, is considered a valuable service to contract to third-party specialists. Knowledge and tools within IT iterate so quickly which can result in practice falling out of step, where outsourcing agents are expected to remain in step.
The failures experienced across several outsourcing contracts in the UK are certainly not exclusive to the UK. Outsourcing has always had strengths and weaknesses and for an outsourced contract to be successful, best-practice must be followed on both sides from the procurement phase through the contract’s lifecycle.
What is Outsourcing?
Outsourcing is the handover of a service to a third-party company – usually a specialist in that field with competences and tools that will achieve greater results than would be achievable if that same service were performed in-house.
The rationale driving outsourcing is that costs can be reduced, quality can be increased with wider benefits such as innovations and improved efficiencies.
Identified Issues with Outsourcing
Outsourcing back-office functions – HR to IT – has been shown to reduce costs between 20-30%.
20-30% cost reduction is phenomenal. Given those levels, how can outsourcing go wrong? The UK’s Institute for Government report identified four key themes that were consistently present where poor results from outsourcing occurred:
- The contractors didn’t engage with the market early in the procurement phase or come to understand enough about both the service and the provider, resulting in problems over the contract lifetime – including disputes and cost overruns.
- Those responsible for reviewing bids for work focussed too much on the lowest price. Other critical points of evaluation such as quality and ability to deliver were deprioritized.
- Risk management was transferred to the outsourced company without sufficient evaluation of their ability to handle and manage risk.
- Poor contract management resulted in outcomes falling short of expectations.
What Traits Were Present Where Outsourcing Was Successful?
There are several conditions that make outsourcing more likely to succeed. Above all, these include:
- A competitive market with high-quality suppliers.
- The intended outsourced service is not an integral part of the organization’s core business as to make outsourcing inappropriate.
- The ability to measure the value added by the outsourced service provider.
Computer Assisted Facility Management (CAFM) services to CRES departments has the unique position that it is so niche, few companies operate with CRES being a central part of their core business. Even if CRES is the primary focal point, CAFM capabilities change so rapidly, CRES companies still rely on outsourcing. However, there is a tremendous amount of competition within the market driving the industry as a whole as competitors look to continuously innovate driving ever greater gains for clients.
Dependent on the client’s balance of goals, CAFM suppliers can provide several metrics showing the value their services/ platforms are achieving – from data quality improvements, to space and energy consolidation to improvements in wellbeing and wellness for employees. CAFM and CRES can also link in with related business functions to collect data on how improved workplace experience has reduced absenteeism, presenteeism and attrition. All of these figures outline considerable benefits to the organization, but each one can also be linked back to bottom-line gains or savings.
Metrics can be delivered to the client at regular intervals or displayed as KPI’s on their CAFM platform’s dashboard.
CAFM and CRES at large is going through a tremendous transformation with new work methodologies and technology capturing deeper, more granular metrics. Specialist firms should be keeping current of trends and technology. Where a client’s knowledge of these developments has fallen behind, specialist firms can be leaned on to leverage their knowledge/ technology filling gaps, driving client innovation and achieving greater efficiencies.
Outsourcing to specialized service providers can provide significant benefit – including cost-reductions of up to 30%.
Naturally, with the extent of outsourcing, there are cases of bad apples. As a specialist provider to many large organizations, The Changing Workplace is aware of the pain points that can be experienced and openly discuss and guide clients through these issues assuring the solution we offer is aligned to the client need.