UK Government shared services – Offshoring back office jobs, yes or no?

The announcement that Steria has been appointed the joint-venture partner with the UK government for the Shared Services 2 project (SSC2) was made recently, rapidly followed by a one-day strike by some of the civil servants involved.

But perhaps the most interesting aspect of the deal is the offshoring issue. Steria are already the Department of Health’s partner in the NHS Shared Business Services operation. That has used offshore resource, although SBS would also say they are employing more people in the UK year by year. And at the Cabinet Office briefing session last week, I had a couple of off-line chats which made it clear that offshoring is very much on the agenda for SSC2.

The argument in favour is this.

If SSC2 is to be a success, and grow its business – so not simply maintain its current central government work – then it has to be competitive. It will be competing against other back office shared service providers who utilise offshoring, so excluding that option would handicap SSC2 and therefore negatively affect the job prospects of its staff. It might also reduce the return the government might make (as it retains a 25% stake).

However, there are several arguments against offshoring too.

1. Shouldn’t the government try and make this an advert for running shared services within the UK? Aren't there ways of using technology and designing processes to showcase what can be achieved without offshoring? Wouldn’t that be the best news for UK plc?

2. Whilst we’re all believers in free trade, it is somewhat annoying that countries like India swallow up UK jobs whilst erecting its own barriers to entry in areas where UK firms are strong, such as retailing.

3. And ... it just doesn’t feel quite right somehow, that work that is so close to the heart of government, (such as processing government payrolls, paying government invoices), should go abroad. Not a logical stance perhaps, but emotionally, I just don't feel very comfortable with it.

The problem is that once the decision to move to a JV is taken, then I assume that after the initial period, the work will have to be re-competed openly. So at that point a cheaper provider might be able to win the work from the JV – hence the need to be cost-effective and competitive. But whilst I’m not protectionist by nature, and I can see all sides of this argument, I can’t help feeling sad that work and jobs are likely to go from the UK.

But, as in all things political, the key question is this - do the voters in the key 100 marginal seats care about this? I have my doubts.

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Voices (3)

  1. Trevor Black:

    No doubt all of the above risks will have been considered when the risk assessment was undertaken during preparation of the business case! After all we are assured that such decisions are always in the public interest. I am also interested in the long term strategy behind these decisions as I know our Government would not deliberately export our skills and assets just for a quick buck!

  2. Howard:

    i wrote a piece about Shared Services Link (magazine funder by people selling shared services) and their reporting of NHS SBS ‘reported’ savings.

    NHS SBS is a partnership between the DoH and the French company Steria, the same model as proposed for SSC2.

    I speculated that whilst Shared Services Link had introduced a note of caution in its reporting, it had neglected to mention some of the other issues associated. This is not an exhaustive list.

    Other issues SSL might have mentioned:

    – The Loss of local knowledge (increasing fragmentation)

    – Fragmenting flow between the front and back offices

    – Increased unemployment support service graduates

    – Offshoring leading to further Losses in the UK tax take

    – Impact on local (& UK) IT and other support businesses

    – Future scandals of personal data at risk overseas

    – Increased likelihood of industrial action (over low wages, poor terms & conditions)

    – High staff turnover rate leading to less learning

    – Loss of end-to-end innovation due to the creation of a new large-scale bureaucracy (everybody becomes NHS SBS)

    – Increase staffing costs for contract monitoring team (adding costs, rarely included in savings budgets)

    – Increased demotivation, and dissatisfaction, leading to a decrease in productivity and an increase in staff turnover in the remaining support functions (the ‘we are next’ and ‘what’s the point’ effect)

    – Once locked in to a new outsourced/offshored contract, it is often harder to alter or radically redesign the services based upon a new reality

    Savings made by offshoring are not the same as savings made through improved effectiveness and efficiency of the service. Over time the probability is that other costs are driven in which actually increase costs.

  3. Dave Orr:

    Ah…the race to the bottom argument!

    In Country X, children make clothes in dangerous factories that often burn down, but I cannot compete unless my labour costs are as low.

    Does anyone see “the big picture” anymore r think that procurement should be underpinned by social values and macro economic aims?

    In Somerset, the SAP IT skills and specialists come from IBM’s IGSI division in India. So, we have used public funding from UK taxpayers to export key IT skills and jobs to a competing and rising economy.

    Why do something so economically illiterate then? Short term profit of course.

    Can you imagine countries like Sweden, Germany, France, Holland etc exporting jobs & skills with a 25% youth unemployment rate back home?

    You may have noticed that Steria do not have cheap Executives and Senior Managers from India or similar low wage economy…Oh no, the top table jobs stay onshore!

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