Government cuts, Darwinism and outsourcing

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The USP: the key differentiator that sets your business apart from the best of the rest. It’s as important now as it’s ever been.

Some viewed Chancellor George Osborne’s announcement on first round public sector budget cuts earlier this week as bad news for the outsourcing industry.

I take a different view on these cuts. They may well turn out to be an opportunity. While overall they may mean fewer new prospects for general outsourcing suppliers in the short-term, we could see real innovation drive the industry forward, as suppliers compete for a larger slice of what may in some instances be a shrinking public sector outsourcing pie.

I firmly believe that if the budget cuts are to be made without cutting services, then outsourcing is the key and we’ll see new projects being awarded.

Many ITO suppliers, however, are less than optimistic and expect the Government cuts to hit this sector particularly hard. But, it’s certainly not as gloomy as some would have us believe.

In the short-term, the cuts will have a minimal impact on ITO. If all ITO suppliers currently have contracts in place, just terminating this could cost the Government dearly, going against its rationale for outsourcing in the first place.

In the medium- to long-term, to save money and deliver a good – or improved – service, the Government needs to do even more outsourcing, so the scaremongers will soon be put in their place.

Among all this uncertainty, one thing is clear: everyone in the sector, whether supplier, or end-user, needs to innovate in order to thrive. The main problem is that suppliers believe they are innovating, whilst end-users couldn’t disagree more with this assertion.

For example, as a supplier you might understand that your government customer has to cut back, but rather than fight them through the contract perhaps you could offer more services at an overall slight price rise? Or even centring services in an area of low employment?

But is that innovation? For many in our sector, ‘innovation’ lacks clear definition and has almost become a dirty word. Regardless of sector or industry, businesses need to effectively understand their customers’ needs to win greater market share – innovating can help achieve this aim.

We cannot afford to innovate, for innovation’s sake, but it must be a way to help us stay closer to customers to effectively fulfil their needs. The outsourcing relationship, the services and the products which suppliers offer are all benefiting from this competition-fuelled inventiveness.

For a long time, many outsourcing providers have tried to move up the value chain. Creating higher value services and partnerships has traditionally been seen as the way to cement relationships and by doing so, justify a more productive, more profitable relationship for all parties.

At a time when budgets are still under threat, suppliers need to ensure that new innovations, and their associated advantages, are forthcoming to impress existing clients and secure new ones. The benefits to be gained by tapping the needs of markets, experimenting and implementing new initiatives, cannot be underestimated.

Some suppliers seem to be doing it and succeeding while others are not. The question is can a supplier afford not to innovate? After all, standing still is dangerous.

The NOA runs a regular Innovation Steering Committee to guide the industry and set the agenda in outsourcing innovation. Also we have a Public Sector Transformation Special Interest Group looking at best practice, tools and experiences in shared service, outsourcing and even in-sourcing in the public sector. Get involved by visiting www.noa.co.uk

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