IT Outsourcing in the Public Sector: Experiences Form Local Government

Abstract

This paper examines the approach taken to Information Technology (IT) outsourcing in four local government councils in the UK. This is important because, whilst outsourcing has become a significant issue in the restructuring of organisations and is increasingly used within both the private and public sectors, there has been a lack of research into IT outsourcing in the public sector and particularly within local government. This paper provides an in‑depth study into how outsourcing is managed in local councils and how successful it has been; especially considering its sometimes controversial nature and the mixed press results it receives. To complete this study, interviews, containing both qualitative and quantitative questions, were conducted with keypeople at the four councils. These interviews examined the rationale for IT outsourcing. The findings from the interviews were then compared to the current literature on IT outsourcing to identify best practice. This research shows that, whilst cost savings remain important, councils focus on achieving best value when outsourcing IT rather than simply lowest cost. Indeed, it shows that whilst outsourcing can result in improved efficiency, councils that focus primarily on cost savings are often less successful. However, whilst the results revealed that IT outsourcing was more successful at councils who focused on long‑term strategic goals, the interviewees considered the strategic benefits of outsourcing less important than improving the service. The structured selection process that is imposed by legislation allows council managers to gain a better understanding of the outsourcing requirements and make informed decisions to achieve best value, however the need for cost efficiency can result in a more short‑term focus. The cost of the process and its inflexibility makes it more difficult for councils to focus on long‑term goals. The study concludes that, whilst councils recognise that both the contract and trust are important to ensure that outsourcing is successful, the culture of risk aversion in the public sector tends to lead to a play it safe mentality resulting in an overemphasis on the contract. This can lead to a short‑term focus that could make it difficult for the council and the provider to work together to meet long‑term goals. The councils were generally skeptical of developing partnerships; however, the research reveals that councils who focused predominantly on the contract were less successful than those who developed partnerships with their providers. The authors therefore recommend that, in order to achieve greater success, councils should develop partnerships and focus on best value and long‑term strategic goals when outsourcing IT.