back to article Dear Santa: Can gov.UK please stop outsourcing?

Here's a cheerful factoid that gets gleefully wheeled out by family lawyers each year: the first Monday after Christmas is the busiest day for divorces. Contributory factors seem to be post-Christmas financial strains, holiday season stresses and misjudged prezzies ("why the hell did/didn't this person buy me a wearable - it's …

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  1. Anonymous Coward
    Anonymous Coward

    a thought

    One issue is quality of outsourcing specification.

    Cornwall wanted out because BT hadn't delivered on what Cornwall thought they were getting. BT - unsurprisingly given the value of the deal to them - were arguing that they were meeting the contract and it took a judicial intervention to show them the error of the ways. That BT thought they had an argument, given that both sides could afford a panoply of lawyers and this wouldn't just be a "see you in court" intimidation, implies sufficient vagueness in the outsourcing contract.

    Though given that Cornwall can completely walk away, rather than force BT at it's own expense to make good on the deal, suggests that BT have burnt many boats along the way.

    1. Novex

      Re: a thought

      The vagueness in contracts is probably the salient point. They're most likely written to allow the outsource company to add extra costs above and beyond any original tender value quoted to the purchaser, thereby allowing the outsourcer to use those extras to generate their profit, and probably without any ceiling on what the extra costs can be for and can amount to.

      That being said, not all outsourcing contracts are bad, it's just, as intimated in the article, that they need to be more carefully negotiated to prevent the outsourcer gaming the contract. If the negotiations on contract terms eventually stall due to not meeting on such points, then it's probably better if the purchaser sticks with in-house arrangements.

      1. Anonymous Coward
        Anonymous Coward

        Re: a thought

        Thinking on this a bit further. What makes for a bad out-sourcing spec? How are the contractors caught out (other than by their own hubris/incompetence)?

        Are there cases where a tenderer scopes out the processes, bungs 10% (example on top) and then when they take it on find out that the [public body]'s functions are actually more complex/higher volume than anticipated?

        eg a council specifies that housing benefit enquiries should be dealt with in 5 working days, and then 6 months into the contract, there's a change of legislation/policy and the number of enquiries coming in doubles.

        1. a_yank_lurker

          Re: a thought

          There a couple of sources to bad contracts. First the entity outsourcing does not really understand what they need and how to convert them into a reasonably tight spec. I would expect this to be a problem with many organizations. Second the contractor, who probably is aware the spec is poor, does not proactively try to get the entity to pin down what they need before signing the contract.

          An ancillary problem with outsourcing is the workers are not employees of the organization but of the contractor. Potentially the contractor can shuffle bodies around at their whim hurting the organization.

          1. Tom 13

            Re: Potentially the contractor can shuffle bodies around at their whim hurting the organization.

            I've worked in IT for about the last 20 years, before that I did Desktop Publishing. Half of that time I've either been doing screw driver shop field work or contact work. The other half I was doing internal support for a contracting company. The only time place I saw bodies get shuffled around at whim was on the internal support gig. All the contracting jobs have specified positions that need to be filled, and certain requirements for those positions. In fact, I'd say it is nearly impossible for our contracting agency to shuffle people around at whim. The people overseeing the contracts know our faces and our work. When one of us is reassigned, questions are asked. In fact, to the extent I see people coming and going, it is in a different branch of the agency and at the direction of the government employees.

        2. Vic

          Re: a thought

          Are there cases where a tenderer scopes out the processes, bungs 10% (example on top) and then when they take it on find out that the [public body]'s functions are actually more complex/higher volume than anticipated?

          IME, it's the other way round: the contract is for all the services the original body *thinks* need doing. It's only some months down the line that they realise their in-house boys were doing a whole lot more than that, and growing the contract to cover those services that are no longer costed involves a significant change in the outsourcing contract.

          In particular, I've yet to see an outsourcing contract involving TUPE that doesn't increase costs, decrease capability, or (more usually) both.

          Vic.

        3. tfoale

          Re: a thought

          Having been involved in several outsourcing contracts in a previous existence: usually the winner has underpriced, either because they misunderstood the requirement or because they had a mechanism for making their profits later - EDS is notorious for that one. Often the outsourcing party has focused on price rather than results. The contracts often lock in a specification that looked ok when first written two years before the contract was awarded, but looks increasingly at odds with the organizations needs a few years into the contract, with no way to improve things. There are often perverse incentives: one outsourcer I had to price an IT service for had spent their limited capital budget, had a restricted operations budget but could add consultancy when they wanted, so I had to price the service in consultancy hours.

          The best outsourcing contracts aren't based on cost savings at all. They recognize that the outsourcer has expertise or facilities that the outsourcing party needs access to. They allow flexibility during the life of the contract, have frequent senior meetings to ensure that everything is still on track, and have sensible management of the inevitable exit.

          1. Brewster's Angle Grinder Silver badge

            Re: a thought

            "...so I had to price the service in consultancy hours."

            Ahh, now I understand the hideous consultancy fees that seem to attach themselves to every project.

  2. Efros

    On the Christmas Present Issue

    My wife and I, heh, have always taken a fixed amount of cash and gone and bought ourselves something at Christmas. Saves a lot of time and stress and means we can spend that time on more important things like buying the noisiest most annoying toys we can find for the the grandkids. Annual parental revenge is a sweet thing!

    1. Anonymous Coward
      Anonymous Coward

      Re: On the Christmas Present Issue

      I fondly remember supplying sound grenades (with batteries installed) to a number of stockings (opened at child wake time without parental supervision)

    2. Hans 1
      Joke

      Re: On the Christmas Present Issue

      @Efros

      >Saves a lot of time and stress and means we can spend that time on more important things like buying the noisiest most annoying toys we can find for the the grandkids.

      Daddy, what are you doing on here ??? BASTAAAARDS!!!!

    3. Roo
      Windows

      Re: On the Christmas Present Issue

      "we can spend that time on more important things like buying the noisiest most annoying toys we can find for the the grandkids. Annual parental revenge is a sweet thing!"

      We've learnt our lesson... Nothing goes into the Xmas stockings unless we can positively id what it is. We also share Xmas with a set of grandparents, and the kids just love to share their stocking unwrapping with their grandparents as soon as they wake up...

  3. Anonymous Coward
    Linux

    Munich

    Wonder if UK councils will follow Munich's successful example now that they've done all of the heavy lifting?

    https://en.wikipedia.org/wiki/LiMux

    http://www.theregister.co.uk/2013/12/16/munich_signs_off_on_open_source_project/

    1. Anonymous Coward
      Anonymous Coward

      Re: Munich

      The very fact you have to take one single example - Munich - over and over means really nobody went that route. Ask yourself why...

      1. Demosthenese

        Re: Munich

        The French Gendarmerie is another example, and is a significantly bigger deployment of Linux desktops than the oft quoted Munich example.

      2. I. Aproveofitspendingonspecificprojects

        Setting for the day

        You can take the politician out of the theft but you can't take the theft out of the politician:

        October 2014 – In response to inquiries by the Green Party, mayor Dieter Reiter revealed that a transition back to Microsoft Windows would cost millions of euros.

        You can't seriously expect us to believe you only bribe ISO directors, can you, Steve?

        Edit

        (Anyone happen to know what setting would give you enigmatically Steve from Dewix?)

      3. Hans 1
        Happy

        Re: Munich

        Arles, France, went that way as well ... there are quite a few more:

        https://en.wikipedia.org/wiki/List_of_Linux_adopters

        Apparently, Linux ousted "Windows for Warships" in the Navy! In the Navy, you get to sail the seven seas... sorry, Xmas hang-over ....

        That wikipedia list is "very" incomplete, judging by http://www.openmairie.org, there are MANY more in France ...

      4. Anonymous Coward
        Anonymous Coward

        Re: Munich

        Is it because people are stupid?

  4. a pressbutton

    Outsourcing works...

    ... if the thing you are outsourcing is fully definable

    and the requirement will not change at all over the life of the contract.

    and the outsourcer can make a profit in there somehow

    This is why you see outsourced server farms / hosting environments so much - excellent example of what can be sensibly outsourced.

    This is why waste collection can be outsourced (and renegotiated as recycling is brought in)

    In terms of many PFI deals, or outsource deals for local councils for the most part all you need to do is stop central govt changing laws etc, stop local govt having elections and changing priorities, and stop people behaving differently over the life of the contract.

    No, no hurdles there.

  5. BurnT'offering

    Government outsources because ...

    ... it makes it easier to sack people.

    1. John Brown (no body) Silver badge

      Re: Government outsources because ...

      ...and bring it all back in-house later but under new (and cheaper) employment contracts.

  6. Anonymous Coward
    Anonymous Coward

    Law against offshoring

    Outsourcing is one thing, how about this law to tie up a lot of loopholes, solving both offshore tax cheats and IT jobs going abroad?

    "If your business deals in the UK, 100% of its staff, must be based in the UK. No wing or department of any business can be run by another business; everything must be done in-house."

    1. Mike Street

      Re: Law against offshoring

      "If your business deals in the UK, 100% of its staff, must be based in the UK. No wing or department of any business can be run by another business; everything must be done in-house."

      First, of course, we'd have to leave the EU, and probably end any idea of future trade deals with them or anyone else.

      Apart from that, its a stupid idea. Why wouldn't you use the best/most cost effective supplier? Why spend more than you have to?

      1. Ben Tasker

        Re: Law against offshoring

        Also a bit crap if you expand and go global. Now available in Asia, but sorry Asians, our call centre is open 9-5 UK time.

        It'd probably keep jobs here temporarily, but UK based businesses would be unable to compete with non-UK business so we'd likely all end up jobless in the long run

        1. Anonymous Coward
          Anonymous Coward

          Re: Law against offshoring

          @ Ben Tasker - So folk in the UK are incapable of working shifts like folk in forn parts then? Crikey, I must've dreamt that fifteen years of my life then! 8-}

          1. YetAnotherLocksmith Silver badge

            Re: Law against offshoring

            @esme

            Probably not at £8 a shift like they can pay a call centre in India for (UK) overnight cover, no!

        2. jonathanb Silver badge

          Re: Law against offshoring

          I don't think Cornwall County Council is going to "go global", or even expand into England. The Tourist Board might want to take telephone enquiries from people in Asia, but that's about it as far as global reach is concerned.

        3. Anonymous Coward
          Anonymous Coward

          Re: Law against offshoring

          RE: "Asians, our call centre is open 9-5 UK time.", not heard of 24/7 IT? it's really good as the computers do not need sleep.

          UK offshored support staff, ignoring the security issues, are in my experience utterly inferior to that offered by the same company's UK agents.

          It might be said that if the first world spent less time training up the third in how to rob them then perhaps their would be less fraud. outsourcing to another country is used is because the outsourcer is paying less for the "same" service than they would where they sell their products, so why not just tax any company outsourcing first world business, one rate for in Europe and much higher one for outside that region.

          First world support companies and agents are vetted, regulated and required to meet a much higher level of expertise, this demands in turn a higher reward for that higher level of competence.

          In the third world corruption is rife and accepted as the norm so it is unsuprising that passing them your data results is security breaches, if you want security then it best to have a full genuine history on the staff handling your data and it is always going to cost more.

      2. Commswonk

        Re: Law against offshoring

        "Apart from that, its a stupid idea. Why wouldn't you use the best/most cost effective supplier? Why spend more than you have to?"

        Superficially the above is perfectly correct, with the possible exception of calling the idea "stupid". Firstly the "best" supplier may not be the "most cost effective", and neither might actually be determinable from the pile of tender submissions. Bean - counters always look at the bottom line, which means that whatever the organisation is it always finishes up with the cheapest bidder; somehow bean - counters (and others) always seem to believe that notwithstanding being the cheapest service offered it will somehow also be the best.

        Of course there are limits to what can be offshored. The refuse collection company's HQ may well be in the Cayman Islands, but it seems improbable that the refuse collectors will be. Call centres are probably the easiest function to offshore (along perhaps with first line IT support) but even then there are perverse effects: let us assume that Big UK Company A outsources / offshores its Call Centre, and it employs (for the sake of argument) 100 people. That's 100 people in the UK not being employed and having to be paid out of work benefits, healthcare costs (to which they are not contributing) and perhaps housing benefit. From the company's perspective it is a good deal, but from the viewpoint of UK plc it most certainly isn't. Similarly even if the outsourced functions are dealt with by UK - based personnel (for the simple reason that UK streets cannot be swept by people living in Mumbai) if the company awarded the outsourcing contract is based outside the UK then the Treasury has little or no prospect of seeing any Corporation Tax flow into the coffers from it; we've seen more than enough of Stabucks / Amazon / Facebook / Google / and so on making money in the UK from UK citizens but because of various tax laws being able to pay little or more likely no UK Corporation Tax.

        As a result we all lose out on a macroeconomic level even if the company that has outsourced some function is rubbing its hands in glee at the savings it (thinks it) has made.

        As I said in a post in a different thread yesterday I am not a fan of outsourcing, and some of the reasons are clearly outlined above.

        1. Wensleydale Cheese
          Unhappy

          Re: Law against offshoring

          " That's 100 people in the UK not being employed and having to be paid out of work benefits, healthcare costs (to which they are not contributing) and perhaps housing benefit. "

          In the context of councils outsourcing, that housing benefit is of course payable by the councils. It's a hidden cost that ought to be considered, although it's probably difficult to pin down accurately.

          1. Commswonk

            Re: Law against offshoring

            In the context of councils outsourcing, that housing benefit is of course payable by the councils.

            I don't think that is true; I think housing benefit is paid for by central government, with councils just acting as agents. It remains, however, a hidden cost of offshoring if that offshoring results in a UK resident being unemployed.

      3. kwhitefoot

        Re: Law against offshoring

        > Why spend more than you have to?

        Because the money gets spent in the local community you get a lot of it back.

    2. a_yank_lurker

      Re: Law against offshoring

      If it is the UK government or UK only business, it might work. But any other scenario it is likely doomed to failure. I am on the other side of the pond and time difference means that UK offices are closing about lunch time for me. So if either side needs the other there is a narrow window when both are in the office and available. Not a workable situation.

  7. Anonymous Coward
    Facepalm

    Agency problems

    You can't contract for innovation and IT is now the primary enabler of service improvement in organisations.

    1. Rusty 1
      Unhappy

      Re: Agency problems

      I think most organisations do incidentally contract for innovation. Innovation as to why something couldn't be delivered due to some really subtle inconsistency or defect in the original spec that really had naff all to do with anything, and only, as it happens, came to light yesterday.

      Cue the line from Andy Hamilton's "Old Harry's Game", something along the lines of: "oh no we're 'innovative' bankers, we aren't responsible."

  8. MyffyW Silver badge

    Don't outsource a mess. It just becomes an outsourced mess.

  9. Oh Homer
    Paris Hilton

    The bizarre logic of outsourcing

    I've never understood how paying a for-profit middleman can possibly be cheaper than cutting him out and doing it yourself at cost.

    1. Captain DaFt

      Re: The bizarre logic of outsourcing

      "I've never understood how paying a for-profit middleman can possibly be cheaper than cutting him out and doing it yourself at cost."

      Well it all comes down to volume; Their sales droids are loud and persistent!

    2. a_yank_lurker

      Re: The bizarre logic of outsourcing

      It depends on what the service is and much pain and aggravation is saved by the service and whether the service is a core functionality of the business. Payroll and HR administration for a small company might be a good candidate for outsourcing. But what many companies forget is core functions should be kept in house no matter how aggravating they are.

    3. Chris G

      Re: The bizarre logic of outsourcing

      "Cornwall's Wallis agrees that the move to outsource can be a false economy. "I do think there's beginning to be a bit of a backlash against these companies whispering sweet nothings into councils' ears. Councils are beginning to realise they are quite adept at making savings themselves, without having to also make a margin like companies do.""

      This has always been my argument since maggie started the whole CCT thing in the '80s. Particularly for Councils who often have a large relatively flexible staff, keeping everything in house and not having to be answerable to investors must make them highly competitivecompared to the likes of Capita, BT et al.

      The thing in both cases,is, quality of management, outsourcing providers to win a tender often pare everything down to the bone so it's the 'variations' pay the real profit. Variations are anything that falls outside the original specs of the contract and depending on the agreements made can be very expensive for the client that neglected his homework before signing a deal.

      When Maggie introduced CCT most councils had management wonks who were jobs for lifers and had no real understanding of commercial managment practices, hopefully the managing staff in councils now have more of a clue and can do things more efficiently.

      1. chris 17 Silver badge

        Re: The bizarre logic of outsourcing

        @chris g

        It's not just the service that was outsourced but the liabilities owed to staff too like pensions, health care etc. Public bodies knew they had too much staff they couldn't afford to dispose off so they hived them off to another business that would trim the fat for them in order to make a profit. They just assumed the level of service would remain the same as per their contracts, and could possibly survive a small drop in service. Little did they know the outsourcer do everything they can to save a pound and charge the customer an extra 2.

    4. Anonymous Coward
      Anonymous Coward

      Re: The bizarre logic of outsourcing

      One of the massive problems with the out-sourcing scheme is that you will only ever receive at most what was contracted for - those f*ckers aren't going to work harder for you and deliver more (for those lovely gold stars on the office kitchen fridge). And you are highly likely to find that they will find every last little problem to delay delivery or restrict deliverables.

      Whether it is the UK gov out-sourcing to a UK company or any company out-sourcing to an off-shore org, you have to expect that you will be disappointed or ripped-off. Those c*nts will drag you down to their level and beat you on experience.

      And then you have the issue support. It's worse.

      1. Terry 6 Silver badge

        Re: The bizarre logic of outsourcing

        It's sort of covered in posts above, but needs to be spelt out.

        Many service functions in-house do a job which has evolved away from the original role to meet the needs of the organisation, ( and will continue to do so, if reasonably sensibly run.)

        Defining what that department does, how it works and meets the organisational needs will not fit into some clever cut-and-dried theoretical model written into an SLA. There will be any number of specific functions that won't fit into that contract, or that the bean counters and outsourcers won't understand, as well as an infinite number of small variations of the "We don't clean Mrs. Jones' office on Wednesday evenings, because she's usually in meetings at another site all day. But we give it an extra good clean on Thursday because she has a big meeting and there are always biscuit crumbs everywhere" variety. Add into that the odd little useful jobs that the in-house people do because they are part of the joint endeavour, part of the team. For example the outsourced contract will specify wiping the desks with a damp cloth to remove dust. Cleaning the sticky mess of spilt coffee, lunches eaten at the desk and Friday afternoon cakes will be an "extra" that will be charged for at £10 per desk, but the in-house team just did this as a matter of course.. Where the contracting-out team are informed of these issues they tend to respond by denial ( "Well they shouldn't be eating at their desks").

        Or to put it another way, outsourcing is A telling C what they think B does, without actually knowing what B does, how they do it or why they do it like that. Or how often this might have to be adapted, or how or why. And C entering into a contract with A based on what A told them the job was.

        A great example I just remembered, our contractors had to supply paper towels. But no one had specified that this was for the staff rest area as well as the toilets. Or how much had to be supplied on what basis, or who had to supply extras if we ran out between refills. So the sodding towels sometimes ran out before the end of the month.

        1. Commswonk

          Re: The bizarre logic of outsourcing

          While I was writing my previous post Terry 6 wrote: Or to put it another way, outsourcing is A telling C what they think B does, without actually knowing what B does, how they do it or why they do it like that. Or how often this might have to be adapted, or how or why. And C entering into a contract with A based on what A told them the job was.

          I have worked for Department B; Department A was a contracts branch remote from B and awarded the contract to organisation C. The best bit was that A repeatedly refused requests from B to provide a copy of the contract, so at best we had a rather hazy idea of what was and was not covered by the contract.

          To be fair most of it seemed to work all right despite C being taken over by another company with resultant changes in the personnel in C with whom we were dealing. And then I retired...

          ...which is what I am going to do now. Commswonk needs his sleep and it is Christmas Day tomorrow.

    5. Anonymous Coward
      Anonymous Coward

      Re: The bizarre logic of outsourcing

      Possibly if it coincides with a necessary large capital spend on new hardware and software licencing at the same time, then the short term costs would favour the outsource.

      Equally avoiding public sector pension costs would on paper favour an outsource.

      1. Commswonk

        Re: The bizarre logic of outsourcing

        Possibly if it coincides with a necessary large capital spend on new hardware and software licencing at the same time, then the short term costs would favour the outsource.

        Trouble is that there will be no way of knowing if your preferred bidder (or any of the others) may have to incur similar expenditure; they won't be under any obligation to disclose the information. If the winning bidder is to incur serious up - front costs on your behalf then you are going to have to pay for it one way or another, and just how much you are going to have to pay per month / quarter / year will be a function of the length of the contract, and of course the longer the contract the harder is it to get anything meaningful from the crystal ball to work out what future requirements might be. If your contractor has to pay out for new hardware then you will end up paying what it is costing them plus a percentage on top.

        Equally avoiding public sector pension costs would on paper favour an outsource.

        True, and by repute public sector pension costs are somewhat excessive, but I suspect that that is because of the spiralling salaries of local authority C levels, (and their equivalents in the Civil Service) not the more modest remuneration paid to "front line" staff (horrible cliche). And the saving won't be as much as you might want because the outsourcing company's employees will be entitled to pensions on retirement as well.

        On top of that your winning bidder may well have to take on your now redundant personnel under TUPE; once upon a time they were (I hope) loyal to you. It is more than likely that they will transfer with the feeling that they have been royally shat on; they may or may not develop a loyalty to their new employer, but not much of that loyalty will creep into work they do for you. Sooner or later people realise that the only person who will look after their interests is them themselves, not any employer. It can be quite a painful realisation so the sooner it happens the better, and they can look after their own careers rather than expecting hoping that their employer has their interests anywhere in the corporate priority list

        In related news I heard on the steam wireless earlier today that Capita are being penalised for not delivering the goods on the contract to carry out recruitment for the Army; the Army is finding itself short of personnel as a result.

    6. The obvious

      Re: The bizarre logic of outsourcing

      Because if you've worked for an outsourcer you'll know that instead of hiring some skilled people on decent wages and have to give them pensions and things like that as is required by council policies and those pesky unions, outsourcers can usually hire people who are barely literate at minimum wage (or less if they're "apprentices"), cut a bunch of corners (apologising if they are unlucky enough to get caught out), treat them like excrement and sit back to cream the profit off the top.

      If they really want to make some money then they can do the same in some 'low cost country' safe in the knowledge that the contract probably didn't say anything about where the people doing the work are based, only that it's done.

    7. Anonymous Coward
      Anonymous Coward

      Re: The bizarre logic of outsourcing

      Then you know very little about business. I'm not saying everything should be outsourced (although I know of companies like this) but a company should focus on the value they add and leave other tasks to companies that specialize in other fields. The prime example of this is delivery of letter, almost every company outsources that job to Royal Mail, in fact it would be thought bizarre if a company didn't

      1. Terry 6 Silver badge

        Re: The bizarre logic of outsourcing

        The prime example of this is delivery of letter, almost every company outsources that job to Royal Mail, in fact it would be thought bizarre if a company didn't.

        Poor logic here. Since delivery of letters after they left the office premises was never a function of the organisation, this is not, in any realistic sense "outsourcing". Whereas, getting an organisation to answer your calls from the public on your behalf is. Because the service was always a part of the business.

        Further, support activities are only not core to the job of adding value if the organisation fails to see itself as an organic whole and only recognises the bits that are actually exchanged for money as having value. In reality the tea-ladies ( or gentlemen) may not be making widgets themselves, but may be instrumental in ensuring that the widget makers are productive.

        1. Vic

          Re: The bizarre logic of outsourcing

          In reality the tea-ladies ( or gentlemen) may not be making widgets themselves, but may be instrumental in ensuring that the widget makers are productive.

          Many moons back, I worked in an engineering department that had its own secretaries. When we wanted something typed up, we'd scrawl a rough-out of what we wanted, and one of our divine secretaries would transform that into something we could send to customers.

          Then, we all got access to computers. All of a sudden, we engineers could write our own letters - so we lost our secretaries. The bean counters saw this as a huge cost-saving.

          In reality, we spent three times as long on every bit of paperwork, at double the hourly rate. It cost the company a fortune...

          Vic.

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