Tuesday, 16 October 2012

Riding the outsourcing wave

There is little doubt that the strategic make or buy decision is territory which requires procurement expertise, but it requires more than 'how to' knowledge, it requires acute stakeholder management and ownership. Today we learnt of the political cost which can be an outcome of a lack of stakeholder ownership, but it strikes me that there are other lessons which we can learn from today's political fallout at Cornwall County Council.

By way of background Cornwall County Council have been wrestling with the decision of whether or not to outsource £300m of council services.  The rationale for the outsourcing was quite explicit:
Under the proposal one of the two companies bidding for the contract - BT and CSC- will be legally required to deliver at least £5m of savings over the next two years, with ongoing further savings in future years, and to create a minimum of 500 net new jobs in Cornwall.
That seems a fairly clear statement of what was intended. Yet the politicians in Cornwall must have questions about the likelihood of achievement as today they had a vote of no confidence which removed the Leader of the Council.  The vote was specifically linked to the outsourcing decision.  The final decision on whether or not to proceed with the outsourcing has yet to be made, but this is not a good foundation for a successful outsourcing arrangement.

Prior to proceeding with any outsourcing there needs to be
a clear belief that outsourcing makes sense and the business assumptions tested for validity.  It would appear that the Councillors of Cornwall have yet to be convinced.

A risk assessment would also be required.  While they have named two potential providers they have introduced a new risk: is the Council ready for outsourcing at the present time?  With a potentially hostile governance model manifesting itself at the present time, it seems that key stakeholders may not yet be ready for outsourcing. Can the potential providers see a 'smiley face' at the end of the proposed partnership or might now be a good time to walk away?  If either of the two potential bidders walk away can the Council be assured of a competitive price?  If both walk away can the Council achieve its business justification?  Is the environment right for a legal obligation of achieving at least £5m savings, and, how will agreement be reached on whether the savings have actually been achieved?

Cornwall County Council and the two bidders now need to ask themselves has the potential partnership the capacity and capability to see this through - if not, perhaps other options need to be more fully explored and a delay until the Council have a high probability of becoming a good partner.

PS 17 October: It is now rumored that, as feared, one of the bidders has withdrawn!

1 comment:

  1. PS one of the potential bidders now rumoured to have withdrawn!