Monday, 19 May 2014

Outsourcing – some further thoughts

A couple of additional points have occurred to me.

Firstly, it is interesting that so far the discussion about outsourcing child protection services seems to assume the outsourcing of all the service to one supplier. The discussion of outsourcing in commercial organisations, on the other hand, usually focuses on activities that firms undertake and seeks to determine which of those activities are most suitable for outsourcing.

For example, Willcocks, Petherbridge and Olson [1] argue that activities that are ‘necessary evils’ (such things as administration, facilities management and payroll) are often good candidates for outsourcing. They also believe that ‘qualifiers’ (activities that are essential for business operations but which do not differentiate one firm from another, such as airline maintenance) can be candidates for outsourcing but only where cost and quality criteria are very closely met. On the other hand those activities that they call ‘order winners’ (activities that are absolutely essential to a firm’s success and which differentiate it from other firms) should NOT be outsourced.

Outsourcing the whole service is in effect withdrawing from the market. It is simply admitting that someone else is better placed to provide the service. It seems to me that any firm seeking to win an outsourcing contract of that nature needs to be able to demonstrate very well that it is the better option on all counts, which is not easy to do, even where existing services are deemed to be failing.

The second thought concerns contracts. Even for simple activities of the ‘necessary evil’ variety, outsourcing contracts can be fiendishly complicated. The problems arise from trying to anticipate what will happen in future circumstances that are often difficult to specify in tight legal terms. Unforeseen circumstances often result in two firms arguing, and not uncommonly resorting to law, about issues that have arisen but which are not clearly set out in the contract.

If that can happen with relatively simple activities, such as payroll or IT maintenance, it takes little imagination to see what disaster might occur in child protection when a highly complex and unforeseen circumstance comes about. While the two parties argue it is likely that a child, or several, will suffer as a result.

And how do local authorities that have outsourced child protection ever get to grips with how they monitor the implementation of a contract concerning such a complex service that is meeting a highly variable range of complex needs. The thought is breathtaking.

The more I think about it, the less well thought out this proposal from Mr Gove and Mr Timpson is. I think they will need to do a lot more thinking if they are to convince many people that there is merit in this idea.    

[1] Leslie Willcocks, Peter Petherbridge, Nancy A. Olson
Making IT Count: Strategy, Delivery, Infrastructure Butterworth-Heinemann, 2002