UK’s public service outsourcing sparks debate

16 September 2008:

The UK public sector is known as one of the most sophisticated users of ICT and BPO among governments worldwide.
A government-sponsored study by UK economist DeAnne Julius found that outsourcing of public services benefits taxpayers. According to the report, competitive tendering has led to an estimated 10% to 30% cost savings with no undesirable effect, and has improved service quality in some cases. IT is often part of business process outsourcing, and it involves contracting out an area of the business processes while the client retains strategic and government control. The UK utilizes back office outsourcing, which includes internal business functions like purchasing, payroll and records management, and front office outsourcing, which includes customer-related services like call centers.

The Department of Business Enterprise and Regulatory Reform (BERR) report show that the UK’s ‘Public Services Industry’ (PSI) has grown significantly in the past 12 years is now the second most developed in the world next to the US, with revenues totalling to £79 billion and generating £45 billion in value added and employing more than 1.2 million people.
Additionally, a 2007 study conducted by Kable, a leading provider of public sector research, estimates that the total spend of the UK’s public sector in outsourcing reached £5.3 billion in 2007 and is likely to reach £7.5bn by 2012.

Julius quoted a number of studies, and found that in the US there has been no significant association between contracting and employment in local government services. While in New Zealand government outsourcing attributed to 58% of cost savings due to labor cuts. “Government departments and local authorities should seek to introduce competitive challenge into areas of service delivery where it has not yet been tried and consider how best to incentivize further innovation in sectors where it already exists”, suggests Julius.