BT see in-sourcing as a positive step – any contradiction here?

The Evening Standard featured a little gem in its business pages the other day – thanks to David Orr for spotting it.

“Watch out, outsourcing companies. Telecoms giant BT says it is cutting costs and saving money by - wait for it - stopping outsourcing and getting its own staff to do these tasks instead.

“We think we can run a number of things more efficiently ourselves,” says chief executive Ian Livingston.

An example is that BT has brought its “facilities management capability” in-house, which requires about 1500 staff. That step has removed about 10% of the cost base. Might that be the margin that the outsourcing company was taking before"?

Interesting, given BT are presenting themselves as outsourcing providers, not just for telecommunications related services, where we might recognise they have some deep expertise, but across wider BPO areas and even as more general service providers, particularly to the public sector.  So they are the last bidder standing in the controversial Cornwall County Council outsourcing / JV, and they run a range of services (including procurement) for other councils – South Tyneside for instance.

On the other hand, to be positive about their decision, we might argue that if they think they can provide these services to others, they should “eat their own cooking” rather than using third parties themselves. So bringing these services back in house might show, for instance, that they are genuinely experts in facilities management.

Or we could be more critical and assume that the same principle they seem to be following should apply to BT’s customers in the general outsourcing field  – why not look to do it yourself? It might prove to be cheaper!

I don’t know. But what is undoubtedly good practice is to review outsourcing decisions on a regular basis, and I’ve always believed that should be a key role for the procurement function.  And that applies to everything that you could conceivably carry out in-house. Just because you outsourced desktop IT services in 1992, Facilities Management in 1997, and recruitment services in 2008 doesn’t mean they are still the right decisions for 2013.

Of course, it may not be easy to bring something back in house if you lost that capability 20 years ago. But that doesn’t mean it shouldn’t be considered at least as an option.  Doing that may throw up some interesting options for improving value even if you don’t end up in-sourcing (suppliers get complacent...)

But in any case, challenging the status quo and taking the lead on key “make-buy” decisions should be a core role for a pro-active and strategically focused procurement function.

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