UK: Smart (Out) Sourcing Will Always Be Good Business

Last Updated: 22 September 2010
Article by Wayne Lawrence

The current economic climate in the UK certainly presents some significant challenges for businesses and the public sector. For businesses there is the ever continuing pressure on margins. For the public sector there is the challenge of delivering public services when faced with significant cuts in funding.

It is clear that given these challenges businesses and the public sector alike must become ever more efficient in order to deliver what their customer/the tax payer wants – "more for less".

Amidst those challenges there are also some great opportunities for business. The Conservative – Liberal Democrat Coalition Government have made it clear that given the need for dramatic cuts in public spending the question of what services ought or need to be provided by the public sector is on the agenda – the clear inference being that the role of the state in the direct provision of public services will shrink with the private sector taking on a significantly wider and potentially deeper role in the delivery of "public" services in the UK.

Given these circumstances there is a good future for businesses that embrace opportunities for Smart[Out]Sourcing in order to improve their own operational efficiency and/or potentially a new/growing market for the provision of services to the public sector in the UK.

For any business considering exploring outsourcing part of its business or support functions there are a number of key strategic and commercial considerations that ought to be considered and that underpin the likelihood that the relevant project will deliver the desired outcomes for the business. These include the following.

Project Initiation

It is critical to the success of any project that the customer evaluates the business case for the project.

The business case needs to identify the overall scope and business objectives of the project. This may include objectives on improved efficiency and/or reduced costs and/or wider objectives on business transformation that would perhaps require significant capital investment by a business if it were to seek to procure the relevant infrastructure and skills internally within its business.

The business case should also consider the scope of the project and what elements of the current business processes ought to be outsourced or retained within the business. It should also involve some initial consideration on the risks that could impact on the success of the project.

Procurement/Engaging with the Market

There are obviously different issues and constraints facing the private sector and the public sector (eg procurement rules) when seeking to embark on a procurement process for outsourcing services. Having said that there are some common themes in terms of being prepared for the engagement with the market that can have a significant bearing on the costs involved in the procurement process and the overall success of the outsourcing arrangement through the life of the contract.

As indicated, one of the key outputs from the business case should be a clear understanding of the business objectives and business requirements related to the project. This need not be a detailed 100 page tome. It is preferable that it is focussed on the business' desired outputs (ie the output based specification) but contains sufficient detail so that it effectively conveys the customer's requirements to the market.

This document can be used to assist the customer when engaging with potential suppliers by ensuring the customer retains an understanding on the baseline of its requirements and any movements from this proposed by potential suppliers.

One key message I always deliver to clients when they are proposing to engage with potential outsourcing partners is that – "the business should be clear on what it wants to buy and should be certain on what it can afford to pay."

The Beginning, the Middle and the End

There are a raft of significant "second–order" commercial and operational considerations that require to be addressed in any outsourcing project. Time does not permit consideration of those issues in this article.

It is however worth emphasising one or two strategic thoughts that will underpin the achievement of the business objectives from any outsourcing project.

The Beginning – Many significant outsourcing projects involve detailed transition planning to ensure a smooth handover of service delivery to the outsource service provider – this can involve staff transfers (which can be a very sensitive area), asset transfers and the transfer of existing support contracts. This process should not be taken lightly by either the customer or the supplier as a bad start can result in a long-term hangover that endures through the duration of the contract.

The Middle – I have already highlighted the importance of having a well documented output based specification of the customer's requirements. This is the backbone of any outsourcing arrangement.

In addition to this it is important that the outsourcing contract contains mechanisms that (1) support the delivery of the customer's business requirements (including service levels or key performance indicators, contract management meetings and governance and reporting mechanisms) and (2) allow the customer to effect changes to the customer's requirements (they will not remain static for the duration of the contract) and the scope of the services without being exposed to over zealous charges relating to the proposed change. Benchmarking and pricing transparency mechanisms can assist the customer in achieving this.

The End – Like all (good) things an outsourcing arrangement must inevitably come to an end. This is an area where it can (perhaps understandably) often be difficult to get clients to focus their attention at the beginning of the new relationship.

Whilst it is accepted that many outsource service providers approach contract handover in a professional manner it should be remembered that on termination there is inevitably some hardening of the commercial approach from service providers on what they are obliged to do contractually. It is therefore important that any outsourcing contracts contain robust provisions on exit management and handover assistance to ensure the smooth transition of the relevant service either back in-house or to a new service provider and to protect the customer from any "gaming" on exit which could potentially erode the value derived by the business from the outsourcing arrangement.

This article has touched on some key issues relating to outsourcing. There is an underlying message for any organisations contemplating looking into outsourcing part of its business operations – if you do it right and invest appropriate time and effort into the process this will improve greatly the prospects that the outsourcing project will deliver the desired business outcomes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.