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How can outsourcing help me reduce costs?

By 18th March 2014No Comments

Half of all public services are outsourced.  This is despite the fact that some major contractors (G4S and Serco) have been investigated by the Serious Fraud Office and forced to repay £109m and £68.5m respectively.  The very public failure by G4S to provide sufficient security guards for the 2012 Olympics was not the best advert for outsourcing high profile projects.
So why do government departments such as the Ministry of Justice and the Department for Work and Pensions still outsource so much of their workload ?

The answer lies in flexibility, value and accountability:


If new skills are required the company will have to choose between hiring permanent skilled staff, retraining existing staff or outsourcing.  The first two options usually entail long-term commitments which will be burdensome if trading conditions worsen.  Outsourcing can allow the company to quickly “bolt on” (or shed) extra skills and capacity without diluting their core skills.


A properly managed tender process for major services/supplies allows companies to ensure best value, often better than they could achieve in-house.  Additional savings are possible where services are “offshored” from domiciles with high taxation/employee benefits to locations where such costs are lower.


A properly managed tender process provides documentary evidence showing how major buying decisions were arrived at – a major consideration for the public sector.

Many businesses do not hesitate to outsource “peripheral” tasks such as IT, payroll or HR but are fearful to venture further for fear of losing control.  However a recent KPMG Global Pulse survey found that 9 out of 10 companies believed – despite having shed considerable headcount – they had still not done sufficient to reduce costs.  How can an already lean company reduce costs still further yet respond rapidly to take advantage of an upswing ?  By selective outsourcing.  However – the overarching message in the above summary is “properly managed”.  Select your outsourced supplier/consultant by reputation and recommendation, consider linking remuneration to results/SLAs, and define deliverables clearly.  What results can you expect ?  A 2012 Deloitte global outsourcing survey discovered that 76% of respondents were either satisfied or extremely satisfied with the results outsourcing brought them.  Maybe it’s time to give it serious thought.