Study: Governments like outsourcing

Governments worldwide are increasingly bullish about outsourcing, according to a new study of 22 nations by management consulting and technology services firm Accenture Ltd. of Hamilton, Bermuda.

Seventy-seven percent of high-ranking government officials said their government's position on outsourcing was either "encouraging" or "actively encouraging," according to the study, "Outsourcing in Government: Pathways to Value," released by Accenture May 15. Likewise, the same percentage of officials said their governments will outsource more functions and processes over the next five years, the study found.

The study, which included more than 130 government executives, defined outsourcing as "contracting with a private-sector firm to take responsibility for a function or process for which the government remains accountable." The definition excludes short-term project work and privatization, where the government is no longer accountable for the function.

While much government outsourcing is centered on technology infrastructure, the study authors found increasing efforts to outsource business applications and business processes. Seventy-four respondents said their governments are outsourcing IT applications; 66 said they are outsourcing IT infrastructure. More than 100 respondents said their governments are outsourcing various business processes, such as Web site design and maintenance and customer relationship management.

Moreover, the executives cited improved speed or quality of services as the most important reason to outsource, followed by gaining access to expertise and new technology. Saving money ranked seventh on a list of 13 reasons to outsource. Five years ago, the top reason to outsource would have been saving money, said Thomas Healy, managing partner of Accenture's Global Government Outsourcing Services and leader of the study.

The switch shows governments are under pressure to improve services, and "shows government buyers are becoming more sophisticated in understanding what outsourcing can achieve," that outsourcing can improve service, and lower costs at the same time, said Steve Rohleder, group chief executive of Accenture's global government practice.

"To a certain extent, government has just looked at technology as an expense," Rohleder said. "When they take a business process and say this is our problem and the outcomes we want, integrators, tell us how you are going to fix that, their results are much more positive. The outsourcer of the future will have strong business process acumen to supplement IT."

In addition, 89 percent of executives said their outsourced processes were either important or absolutely critical to the government's mission, a departure from conventional wisdom that says mission-critical functions are not outsourced.

Rohleder said the top reasons for outsourcing include:

  • Lower revenue and higher spending, creating pressure to do more with less;

  • Growing citizen expectations that government should be available around the clock;

  • Looming, large-scale government employee retirements.

  • In the United States, outsourcing focuses on technology infrastructure, but is moving toward business process outsourcing. In particular, the Department of Homeland Security and some of its component agencies are moving aggressively toward outsourcing some functions, Rohleder said. At the state level, Florida is an aggressive outsourcer. Gov. Jeb Bush has said he wants to outsource as many functions as he can to reduce costs and improve services, Rohleder said.

    The United Kingdom has done the most extensive outsourcing out of the 22 nations surveyed, and has been a pioneer of public-private partnerships, Rohleder said.

    Click for a link to the study

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