Outsourcing Lessons Learnt – More from Somerset and the SW1 Venture

Regular and long-standing readers will know all about the Somerset County Council ill-fated outsourcing partnership with IBM, and the work of local citizen Dave Orr in holding the public bodies to account over events. (If you don’t, you catch up via this free download!) After various legal activities, the parties settled last March but the analysis continues.

We mentioned here the lessons learnt report issued (to their credit) by Somerset in February earlier this year. Following criticism that this was a little limited in its scope, Kevin Nacey, Finance Director from Somerset County Council (SCC), has released a follow-up analysis. It’s valuable stuff for anyone contemplating major BPO outsourcing really. You would really hope that other public bodies do read this in particular, although looking at what certain councils seem to be doing ( e.g. Barnet) you do wonder if they are bothering.

My overall take on it, if I had to come up with one over-arching conclusion, is that “mega-outsourcing” deals look almost impossible to get right. Once you have different services included, different stakeholders, long and complex contracts, it just seems incredibly difficult not to run into some of the issues identified here. The contract becomes unmanageable in effect and being an intelligent client is just too difficult for the vast majority of users.

But rather than going through the report in depth here though, we’re going to recommend two other commentators who have done that job already.

The Best Practice Group are a specialist advisory firm who have probably worked on more failing outsourcing projects than anyone – and indeed have helped many other clients make sure their projects don’t fail.  Alan Watton of the firm has written a detailed and perceptive review of the report, identifying “six further lessons learnt”. This is a quick sample but do read the whole piece here.

“2. Identifying the cause

“Southwest One had to manage competing priorities from its clients and the partners also had varying opinions on the level of performance provided. Remedy for such circumstances differed depending upon initial views of the scale of the performance issue and what each client required for its service.” (Quote from the report.)

The second sentence of the above extract is new. It seems SCC experienced a lack of alignment between the three public sector partners (Somerset County Council, Avon and Somerset Police Authority and Taunton Deane Borough Council). They all had different ideas about the severity and impact of the contractual problems on their own organisations. This appears to have resulted in different perceptions about how to escalate the issues that had arisen.

In order to avoid the ensuing debate on how to objectively identify the cause of the issues, it can often be useful to have an independent critical ‘friend’ with extensive experience to help guide the thinking of the respective partners...

Further assistance in the holistic sense, whereby the technical, operational and contractual issues could have been aligned early in the relationship, may have given advance warning to head off the types of challenges SCC have reported on. The report doesn’t provide any indication that this holistic support was sought or provided at the outset of the relationship”.

And Tony Collins, famed for his work in exposing dodgy government IT contracts, has also written an article here on his Campaign4Change website. (He's also published good recent articles that are well worth reading on Universal Credit and changes in the systems that run UK tax).  Here is a quick excerpt from his review of the Somerset report.

“Originally Somerset was proud of its deal with two councils and a police force. Its auditors in 2007 praised the deal’s innovative approach. Now we learn from the latest Somerset report that the contract was “incredibly complicated”. The report says: One of the most significant lessons learnt related to the sheer size, breadth and complexity of the contract. Both the provider [IBM] and the Council would agree that the contract is incredibly complicated.A contract with over 3,000 pages was drawn up back in 2007 which was considered necessary at the time given the range of services and the partnership and contractual arrangements created.

But all big outsourcing contracts run to thousands of pages and are unlikely to be anything but incredibly complicated.”

So, as we said earlier, are big outsourcing deals simply impossible to manage properly? Discuss ...

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First Voice

  1. RJ:

    “Impossible” is a very strong word, Peter, although the answer to your question is in itself probably quite complex.

    Firstly, we need to define a “big” outsourcing deal – there are many large organisations who have successfully outsourced very large (1000+ seat) global finance operations but, although the scale may be “big” and the geographical and organisational scope may be wide, the services are not actually that complex, which makes the management of the provider relatively simple.

    In my limited understanding SW1/IBM was not only large but also covered an extremely wide range of services and stakeholders and tried to pull together three disparate groups of stakeholders. Not only did it have the challenges of managing an external, profit-driven provider across different functions, ut it also brought with it the challenges of managing what was effectively a consortium approach, which, even when well-defined, is usually herding the proverbial cats.

    Governance is critical to managing outsourced deals and many organisations, SW1 included, seem to forget that outsourcing doesn’t mean that someone else will suddenly take all of your problems away and solve them: you still need to employ people to manage the external provider. And not only that, those individuals need a whole new skill set that your existing internal team probably doesn’t possess.

    Now none of that makes it “impossible” to manage a contract like this, but it does make it extremely difficult and does mean that you need to maintain a substantial governance process and team in-house which might well undermine the business case and probably wouldn’t have gone down well with those looking to publicise a quick win when the contract was launched…

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