IT outsourcing in the public sector local government: experiences of the management and selection of IT service providers

M. Cox, Martyn Roberts, John Walton

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Abstract

This paper looks at issues in Information Technology (IT) outsourcing in public sector local government in the UK, to determine how successful they have been and to establish any best practice. 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. This paper focuses in particular on an analysis of the risks of IT outsourcing and the management of the outsourcing contract. The research shows that a thorough risk assessment must be completed before an outsourcing contract is agreed. Local government tends to adopt a very cautious approach to outsourcing based on risk minimisation. Hidden costs are one of the greatest risks when outsourcing. Hidden costs occur in selection, managing the contract, and making changes to the contract, all of which can offset any cost savings identified at the start of the outsourcing contract. The research shows that local councils recognise the importance of the contract and that it has the largest single impact on the success or failure of the outsourcing agreement. Having a well written contract is necessary to minimise the risks posed by outsourcing. However, the local government bodies recognised that it is impossible to cover every detail in the contract, particularly where needs are fluctuating, and that an element of trust is required to manage the contract successfully. The research suggests that contracts need to be strict enough to motivate the provider but should be realistic and achievable so that they do not inhibit the development of a working relationship. The paper also addresses issues in the selection of outsourcing providers and more recent developments since the new UK government’s austerity programme 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.
Original languageEnglish
Pages (from-to)231-243
Number of pages13
JournalThe Electronic Journal Information Systems Evaluation
Volume15
Issue number3
Publication statusPublished - 2012

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