This article considers outsourcing primarily from a policy perspective, examining where it sits within public service reform and expenditure management. In particular, it discusses the conventional scope of outsourcing in Ireland, Government policy and public sector reform in the area of outsourcing, and the future of outsourcing in the public service.
Scope of public sector outsourcing in Ireland
Outsourcing is taken to have a broad definition, essentially the sourcing, on a contract basis from a third party supplier, of services which represent an organisational technical function or business processes, previously (or, in respect of new functions, expected to be) provided in-house. Contract services range from IT hosting, through IT managed services, to a range of possible business process outsourcing services.
Cloud computing is not discussed in detail in this article. The government in its Programme for Government and the Public Service Reform Plan highlighted information and communications technology (ICT) as a key enabler to delivering improved public services, and therefore a component of the overall public service reform programme. In June 2012, the Department of Public Expenditure and Reform (DPER), through the Centre for Management and Organisation Development (CMOD), issued a document entitled Supporting Public Service Reform: Cloud Computing Strategy. This deals with government cloud computing strategy and data centre consolidation strategy.
Also, while the topic of shared services is discussed, it is considered primarily in the context of policy in so far as it affects outsourcing. It is the view of the author that the topics of shared services and outsourcing are closely linked, in that a shared services programme must include, at least to some degree, an element of outsourcing to achieve maximum potential cost savings and efficiencies. How significant the element is a matter for decision making. That position seems broadly speaking to be developed government policy in the outsourcing area.
Overall, outsourcing has not been to date a material feature of the Irish public sector ICT and business process landscape. Certainly, we have seen no mega-deals of the type seen, for example, in the UK public sector under the Margaret Thatcher and Tony Blair governments. What deals have been done have tended not to register above single-function managed service or business-process on the evolutionary scale. The agencies, local authorities and other non-departmental components of the public sector have historically been more favourably inclined to outsourcing than the core departmental public service. In the early days of the economic crisis central government seemed to be retrenching away from using external service providers across a range of ICT related areas, with an emphasis on internal skill development. This shift, which would effectively render outsourcing a non-starter, seems not entirely to have found its way into current government policy, although the general air of caution in the outsourcing area is still a marked feature of government policy.
Across the public sector, we have seen no large scale multi-function business process outsourcing transactions to date, such as the outsourcing of a substantial percentage of the operations of a government department. No official statistics are available of which the author are aware, although non-official statistics are in circulation. Anecdotally a figure of spend on external service providers as a percentage of total public service spend at 6% is mentioned. By comparable international standards this is low. A recent IBEC report, entitled Delivering World-class Public Services Working with Business, dated February 2013, reports Ireland to be the fourth from the bottom in the OECD rankings of outsourcing as a percentage of public service spend. The figures were compiled by the IBEC economics team based on OECD statistics.
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This article first appeared in the Practical Law Multi-jurisdictional Guide to Outsourcing in November 2013 and is reproduced in part with the kind permission of its publisher Practical Law.