VAT shift could open back door to mergers

By Simon Baker, THES 

But as tax rules ease, institutional unions still face cultural hurdles, say experts. Simon Baker writes

Credit: Kobal

Want to do business? A VAT reprieve for institutions and their shared-service providers will encourage joint ventures

Mergers between universities may become more likely once they see the benefits of sharing services under new rules that remove a crucial tax barrier, it has been suggested.
It follows the announcement by chancellor George Osborne in his Autumn Statement that institutions will be able to work together to provide services without incurring a VAT cost.
University leaders have long argued that current rules deter them from sharing "back office" provision because they must save at least 20 per cent to make the project worthwhile.
But under the new proposals, which could come into effect next year, higher education institutions can provide a service together without imposing a tax burden.
Under the detailed plans set out in draft legislation by the Treasury last week, universities would run services via separate "entities" that are wholly owned by the institutions involved.
Although there had been some concern that this in itself could create a large administrative burden, the British Universities Finance Directors Group (BUFDG) has said that the proposed rules appear to be a user-friendly solution that would keep such costs down.
Andrew McConnell, finance director at the University of Huddersfield and chair of the BUFDG, said that even before the announcement had been made, there had been "active" discussions between institutions about potential sharing of services, particularly in the area of ICT.

But he added that it remains to be seen whether the Treasury's announcement would finally lead to an explosion in shared services or "whether it's just that people have been using the VAT obstacle as an excuse".
Jon Wakeford, director of strategy and communications at University Partnerships Programme, a firm that has long argued that the sector could save billions through sharing services even with the VAT barrier, said long-standing cultural barriers had always been a "key hurdle".
"The stumbling block tends to be the notion that somehow institutions will lose what is essential about them, that they will lose part of their character," he said.
He added that he did not see the sense of this argument with respect to sharing purely non-core services such as day-to-day procurement, accommodation and facilities management.
Meanwhile, Damian Shirley, partner and head of indirect tax at legal firm Eversheds, said that once institutions went down the road of clubbing together in certain areas, it could open the door to more full mergers as leaders came to realise the potential to make savings by working together.
"If universities begin to find efficiencies in sharing some of their back-office services, it could raise the question, 'Why aren't we going further and merging our core operations?'" he said. "One can already see those kinds of conclusions starting to emerge."
Mr Shirley also suggested that other factors, such as the threat to jobs among middle management, could come to the fore.
"It will be an interesting time to see if what were seen as incidental issues in the background are now thrown into the foreground and become the reasons why universities are not sharing services," he said.
simon.baker@tsleducation.com.

Removal of VAT barrier to encourage shared services

29 November 2011

By Simon Baker

A major barrier to universities saving money by sharing services is set to be removed by the government.

In his autumn statement today, the chancellor George Osborne said that the government would introduce a VAT exemption for services shared between organisations that are already exempt from the tax, such as universities.
In the past, universities have been deterred from saving money by sharing services such as payroll and procurement because any new operation would have to charge VAT back to the partner institutions.
This would mean that a shared operation would need to save at least the cost of VAT – currently 20 per cent – to be worthwhile.
However, the new arrangements – which had already been consulted on following the 2011 Budget – suggest universities could set up a new joint organisation to run services without facing an extra tax bill.
Nicola Dandridge, chief executive of Universities UK, said the move was “good news” for the sector and met a key recommendation from the recent Diamond Review of efficiency in higher education.

“Universities have wanted to develop more cost-effective operating models, and more creative collaborations with external partners.
“But to date, the VAT rules have acted to block this. We hope today's announcement will address this issue,” she said.
Meanwhile, the chancellor announced the launch of an online portal called HE Global to provide information and advice to universities on expanding overseas and also a vehicle to help the sector, government and business work together in selling “education offers” abroad.
Paul Marshall, executive director of the 1994 Group of smaller research-intensive universities, said: “Having ready access to insight and advice through a resource like HE Global will help institutions implement their own international strategies.
“We’ve also called for a collaborative approach to promoting cross-sector opportunities overseas. The new vehicle proposed in today’s statement will no doubt play a big part in making this a reality. We look forward to helping to take this forward.”
simon.baker@tsleducation.com

A programme shared is a problem halved

Universities could increasingly use the same degree programmes as they share services to save money, the vice-chancellor of London Metropolitan University has suggested. Malcolm Gillies questioned whether the University of London model, under which several separate institutions offer the same courses devised collectively, could be adopted more widely.
He asked delegates at the Shared Services for HE: Strategies for Results conference on 21 November whether universities could "go even further" than pooling functions such as IT and human resources.
"Could there be selective breaches of academic autonomy, and still have a fully coherent academic institution?" he asked, adding that institutions did not yet "quite have the answer" to this question. "The very qualification I have ... from the University of London, is a classic (example), in that now, if you did the same thing it would probably be awarded by four or five different bodies. In many cases that's very healthy," Professor Gillies said.
He also argued that whereas a year ago universities were looking to improve the quality of their services by sharing them, they now wanted to do so to save money.
"This year there are new cost-saving imperatives," he said. "There's a likely reduced number of higher education students next year, it could be as high as 10 or 12 per cent."

Professor Gillies is also chair of the board of London Higher, the body for higher education institutions in the capital.
He said that within the group there was a "good willingness to talk and some interesting shared approaches emerging" over pooling insurance, treasury management, and recruitment functions.
But he added that there was still a "lack of leadership" and that some institutions remained "wary" of sharing services.
In May it was revealed that the University of Warwick was in talks with the outsourcing company Tribal and five other unnamed universities about sharing "administrative services and IT infrastructures".
Tribal said that the discussions are still continuing and the other institutions remain anonymous.
david.matthews@tsleducation.com

For-profit? Charity? In the market, they'll act the same

24 November 2011

By David Matthews

Competition for 'share' will dissolve institutional difference, Deloitte claims. David Matthews writes

Distinctions between charitable and for-profit universities will disappear as all converge in the pursuit of "gaining or retaining market share", the head of education at consultancy firm Deloitte has claimed.
Julie Mercer said that private investment in universities and for-profit entrants to the sector were not a threat to the academy's mission because institutions would see a "convergence of behaviour, whether they are charitable or for-profit".
"I don't think it matters what kind of institution you are: you need to know your market and...target your marketing and your offer appropriately," she said. "What drives all of them is gaining or retaining market share."
She added: "The reality is that every single one of these institutions will be competing for students...so I think you will start to see some different behaviour from universities.
"Let's not kid ourselves that universities don't see themselves as commercial organisations: they do."
Sally Hunt, general secretary of the University and College Union, said that Deloitte should know that there was "a fundamental difference between a higher education institution whose primary goal is to provide education and a company whose first allegiance is to its shareholders".
"The only colleges being sued for fraud by students and the government in the US are those run for a profit because education can't safely be run to make a fast buck without degrading the product," she added.
Universities UK said in a 2010 report, The Growth of Private and For-Profit Higher Education Providers in the UK, that public institutions "have to operate in a businesslike manner and make 'profits', but their key motive is to promote the public good".

The "key distinction" was that while both types of institution make surpluses, those of the for-profits "flow into the private hands of shareholders" rather than being invested in capital funding and expansion.
Ms Mercer said that private equity companies saw UK higher education as a "beautiful swimming pool that everyone wants to jump into", but no one wants to go first.
She said that investors were looking to fund the expansion of postgraduate and international student numbers because they were not limited by number controls.
This might occur "if, for example, a university had a great brand around postgraduate qualifications, and an investment enabled [it] to grow and attract more students".
Ms Mercer argued that investment had to go to areas "that are not in the regulated system", which could also include areas such as innovation and intellectual property.
With private equity, "what you're starting to see is not [investment] in whole institutions but an aspect of that institution", she said.
Investors were keen to put money into the sector because "the political door is open; the ambition is clearly there".
david.matthews@tsleducation.com.

Finance shared services

Finance shared services | sharedserviceslink.com

http://www.sharedserviceslink.com/file/92757/finance-shared-services-sharedserviceslinkcom.html?gclid=CKuv8tzI2awCFQINfAodSjP1qw

Finance shared services can have many benefits for businesses, particularly in times of economic uncertainty when administrative costs seem to rise and the burden of legislation appears to grow heavier.
Shared services is essentially the better-performing sibling of centralisation, involving full collaboration between different parts of a wider organisation or group of companies.
It differs from outsourcing, whereby processes that were previously carried out internally are handed over to an external third party. With shared services, a separate body within an organisation is established to do the work.
Within this shared services centre, processes are centralised, standardised, consolidated and automated so that they become streamlined, more efficient and less expensive, which is a win-win situation for all involved.
At sharedserviceslink.com we can help you understand the finance shared services options available to you and formulate an approach that works for your business.
We provide monthly webinars on shared services, as well as white papers and reports, video interviews, newsletters and interactive conferences, all designed to help you improve the performance of your finance shared services ventures and your business.

Benefits of shared services

Efficiency is the core benefit of finance shared services, which in turn can result in large cost savings. Business typically report cost reductions of around 50 per cent, although they can be as high as 70 per cent.
But adopting a shared services business model is about more than just cost cutting. Another big advantage is higher and consistent standards based on best practice norms, which can lead to more responsive dealings with customers.
Shared services can also free up time from routine processes that can be spent on value-added or customer-facing tasks, and it can help to ensure continuity and resilience of service as well as improved visibility.
Economies of scale can be created through shared services too, giving businesses greater influence with suppliers and helping them gain a competitive advantage over their rivals.
Of course shared services benefits will differ from organisation to organisation, and while cost reduction may be a major motivator for some, others may be more interested in improving service delivery for the benefit of customers.

Shared services obstacles

Adopting a successful shared services business model can be complex and there are several obstacles that could prevent your organisation from making the most of collaboration and consolidation.
For example, disputes may arise regarding ownership of certain processes and activities, so communication is key to make sure that all parties are on board and that transitions are made as smoothly as possible.
Not only is this important from a human resources standpoint, it is also essential to good customer service and can help to ensure that there are no gaps in service provision.
Other potential barriers may include a lack of trust, cultural and policy differences, perceived risks to competitive advantage, problems with the technical infrastructure and VAT liability.
You'll need to think about how a shared services centre will operate alongside other elements of your business model and how roles will be defined so that important processes are not overlooked.

Make the most of shared services with sharedserviceslink.com

Companies recognise that, when properly optimised, finance shared services can be a highly effective tool. However, it's important to get it right, as a poorly structured model will not bring the benefits you desire.
At sharedserviceslink.com we can educate your teams and help you with the process of sharing services, so that you can overcome any obstacles in your way and start to see the advantages.
We provide members with informative resources such as white papers, reports, video interviews and newsletters, and we hold regular events such as conferences, master classes and webinars with key industry speakers.
Joining sharedserviceslink.com is free. All you need to do is complete our online member registration form and you'll receive ten issues of our newsletter and free access to our downloadable content and presentations archive.
To find out more about finance shared services and how it can help your organisation, or to ask about our conferences, webinars and online resources, simply get in touch

Creating Value conference: Who should attend and cost

A keynote address will be delivered by Zoe Radnor (Professor of Operations Management, Cardiff University), and there will be a number of workshops run by colleagues who have delivered efficiencies successfully, both from HE and organisations in the private sector (e.g. on shared services, lean, idea capture schemes etc.).

All are welcome, and the conference is specifically aimed at managers in university professional services, who want to find out more about how their department or unit could work more efficiently and effectively.

Online booking will open in mid-October. To find out more about the conference, visit the website at: http://www.exeter.ac.uk/spc/stratplan/hefcecreatingvalue/conference or contact the conference organisers Steph Sanders (s.a.sanders@exeter.ac.uk) and Iain Springate (i.e.springate@exeter.ac.uk).

Researcher and Project Manager- 'Creating Value'

Strategic Planning and Change

University of Exeter

http://www.exeter.ac.uk/spc/stratplan/hefcecreatingvalue/

www.twitter.com/morewithlessHE

I.E.Springate@exeter.ac.uk

01392 726195

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Creating Value conference: Provisional programme

The provisional programme is subject to change, and will be updated as speakers and their precise topics are confirmed. 
9.00-9.45: Registration and refreshments
9.45-10.00: WelcomePatrick Kennedy, Director of Strategic Planning and Change, University of Exeter.
10.00-11.00: Keynote address, followed by questionsProfessor Zoe Radnor, University of Cardiff
11.00-11.20 Break and refreshments
11.20-12.10: Workshops 

• Implementing Lean thinking- Capgemini. Lean is a generic process management philosophy, looking to make processes as efficient as possible, whilst delivering maximum value for the customer. The aim of the workshop is to introduce the concept of Lean, and consider what the benefits of implementing it might be for universities, based on the example of a large institution that is currently implementing Lean.
• Data mining to identify potential efficiencies. This workshop will discuss how large datasets relating to core university processes can be interrogated to look at how efficient processes are, where savings and improvements could be made, and to provide an ongoing measure of efficiency of processes. The workshop will use as a case study work being done at the University of Exeter to identify gaps in data being collected and to fill them, as well as to interrogate existing datasets in order to identify and deliver savings.
• Using idea capture schemes to gather intelligence from staff on working more efficiently and effectively- Anthony Denatale, Ideas UK. Staff often have great ideas about how their organisations could work more efficiently and effectively. This workshop will look at the benefits of staff suggestion schemes, and how to plan and run one successfully in a university.
• Making shared services successful- Carol Mills, Director of HR, University of Liverpool. Shared services has been identified by Universities UK, among others, as a potential way for universities to make savings. This workshop will look at how universities can make shared services a success, particularly drawing on experience from Liverpool.

12.15-1pm Speed updatingThis session will include several brief updates on how universities are delivering efficiencies and improving effectiveness successfully, and the launch of an online learning resource to help managers deliver savings.
1-1.45pm Lunch
1.45-2.30pm Workshops (repeated)
2.35-3.30pm Making it happen: Increasing efficiency and effectivenessThis session will involve a panel discussion and question and answer session, focusing on ways delegates can take forward some of the ideas presented at the conference, including key challenges and change enablers.
3.30pm Conference close

Creating Value conference: Who should attend and cost 

The conference is open to all, and is specifically aimed at managers in HE working within professional services, who want to find out more about how their department or unit could work more efficiently, and save time and/or money.

Examples of staff that might like to attend are:

• Faculty/School managers
• Assistant Faculty/School managers
• Directors/Assistant of Planning/Projects
• Directors/Assistant Directors of finance
• Project Managers
• Team leaders.

The cost is £145.

Creating Value: Delivering more with less in Higher Education

The University of Exeter is organising a conference entitled ‘Creating Value: Delivering more with less in Higher Education’ on the 5th January 2012. Delegates will hear about practical approaches that universities and those from other sectors have used to successfully deliver more with less, and increase efficiency and effectiveness.
This is important given the difficult economic climate, which, allied with the new funding regime, increasing expectations of students, and increasing global competition, means that to succeed, universities need to become more efficient, agile, and skilled at delivering more with less.  
The conference will focus on different ways that universities have successfully delivered efficiencies, as well as examples of what those in other sectors have done that are applicable to HE, and will aim to provide information and ideas for HE staff to take away and apply in their institutions. The conference will draw on good practice from within and beyond HE, including the work of the HEFCE-funded ‘Creating Value’ project, which has developed an evidence-based set of resources to aid managers in HE to deliver more with less.
The conference will include:

• Keynote presentation from Zoe Radnor (Professor of Operations Management at Cardiff University Business School), who has conducted important research into how institutions, including universities, are improving efficiency/effectiveness
• Practical workshops on delivering efficiencies (e.g.  implementing Lean, data mining to deliver efficiencies, idea capture schemes focused on making savings, and sharing services effectively)
• Speed Updates from several universities about how they are delivering efficiencies
• Launch of a set of online resources to help managers in universities deliver efficiencies
• Panel discussion focused on how to take the ideas from the conference and put them into practice.

How can you become a more intelligent outsourcing customer?

Freedom of choice outlined in the Open Services white paper, along with the rising trend for shared services, means spreading best practice in outsourcing has never been more important.
Government departments need to become more savvy consumers of services. It's the only way to cut costs whilst keeping service quality up-to-scratch.
The National Outsourcing Association Summit takes place on 9th & 10th November in Central London.
We have a released an extra 30 FREE places for public sector delegates (after they are taken, prices start at £640 + VAT)


Attending the summit will help you:

• Find out how collaborative relationship management will save you money
• Study innovative projects that have delivered big savings
• Speak openly with outsourcing users across all sectors
• Get advice from suppliers in a non buyer / seller situation
• Compare your department with a variety of best practice examples
• Make best use of the electorate's hard earned cash

Top level speakers from:

News International, Marks and Spencer, Essex County Council, Thames Water, Nottingham University, Land Registry, Deutsche Bank, BBC and Carphone Warehouse.

What you will learn at this conference will enhance your outsourcing acumen, helping you get better value with the voting public's money.


How to book:
To see the full programme and to download the booking form please click here
To find out more, contact Natalie Milsom on 0207 292 8689 or nataliem@noa.co.uk

Optimized Print Services - Introduction and Concept

Introduction and Concept

Flash Animation


Consult


Implement


Manage


Brochure

Making printing infrastructure work efficiently

Office technologies have advanced, users’ needs have changed. A lot of current printing environments are patchworks of printing, imaging and fax devices that aren’t managed or serviced to keep up with today’s business world. Konica Minolta’s Optimised Print Services (OPS) combine consulting, hardware, software implementation and workflow management in order to lower document spend. The OPS concept focuses on four essential areas:

• Fleet: Right-sizing the document output fleet to actual business needs, providing optimal business process and fleet support, and establishing continuous optimisation ? balanced with minimal cost of ownership and environmental impact.
• Process: Analysing all business-relevant document flows in order to increase productivity, to benefit from saving potentials and design, to implement and operate a solution tailormade to meet your precise daily needs.
• Finance: Offering different purchasing and leasing options as well as various contract models, and integrating existing contracts into a single transparent financial plan.
• Security: Designing and implementing IT and information security solutions, from user authentication and data-safe hard disk handling of disposed devices to complex network security requirements.

The OPS concept is based on a three-pillared approach: Consult, Implement and Manage.

Konica Minolta Optimized Print Services:

See http://www.konicaminolta.co.uk/business-solutions/products/consulting-and-services/optimized-print-services-old/introduction-and-concept.html 

http://www.konicaminolta-ops.eu/

LUPC Spend Analysis Shared Service

The London Universites Purchasing Consortium (LUPC) is a not-for-profit professional buying organisation owned by its Members, for its Members

LUPC has teamed up with BravoSolution to launch a brand new Spend Analysis Shared Service exclusively for LUPC Members. 

The central aims of the service are to ensure that LUPC frameworks continue to provide value for money and that new spend areas are identified and investigated where we can fully leverage our Members’ collective buying power.
Under the deal with BravoSolution, LUPC can analyse summary spend data at Consortium level, enabling us to monitor the use of LUPC frameworks and spot new value opportunities to generate further savings for our Members.
We have also detailed, high performance spend analysis within affordability for a great many of our Members.

LUPC Members, have you sent us your data?  Act today!
You can ensure that your Institution is included in this important shared services project by sending us your 2009-10 summary spend data (AP data) on a Microsoft Excel spreadsheet to l.administrator@lupc.lon.ac.uk.  Call us on 020 7863 1691 if you have any questions.

Huge discounts exclusively for LUPC Members
As an LUPC Member, you now have the opportunity to benefit directly from the new Spend Analysis Shared Service at a vastly reduced special Member’s rate, by providing your own detailed data extract direct to BravoSolution.  You can access a whole series of reports using a web-based system rich in functionality, allowing you to carry out your own detailed analysis to help identify trends and procurement buying or process savings for your Institution.  Full training is available.
Key features of the LUPC Spend Analysis Shared Service tool are:
Collaborative benefits

• Compliance analysis with existing LUPC framework contracts
• Identification of new contract opportunities
• Identification of supplier consolidation opportunities across Members and categories
• Increased negotiation leverage in existing relationships through demand aggregation

Direct Member benefits

• Online analysis and increased visibility into spend
• Accurate classification using line item details
• Category benchmarking across LUPC
• Contract compliance with Member’s own contracts

Specially-negotiated rates for joining the scheme for each Member are available

If you are interested in joining the scheme or would just like to hear more details, please contact Charlotte Reichard of LUPC on 020 7863 1692 or mailto:mail%20to:%20charlotte@lupc.lon.ac.uk, or Mike Roberts of BravoSolution on 07795 431102 or m.roberts@bravosolution.com.

UCU Camaign - Open letter: signatories 4,001+

Open letter: signatories 4,001+

Open letter to vice-chancellors and principals asking them to confirm that their university will not seek to privatise or contract out any aspect of the running of any academic department or key support function.

http://www.ucu.org.uk/index.cfm?articleid=2439

Do Shared Service make Sense?

Interesting debate at the Data Centre Efficiency event that the SusteTECH project has put on in Bristol. John Milner from the JISC laid out the case for the JISC run, HEFCE inspired Universities Modernisation Fund in providing a brokerage service that will deliver cost efficient cloud resources for the sector. The debate is around whether this type of provision can match a properly designed and engineered local institutional data centre.
http://www.jisc.ac.uk/whatwedo/programmes/umf.aspx
Another pint being made is that PUE is a bit of a trap as a measurement of data-centre efficiency. Because PUE is a simple ratio of IT energy  load against total energy load for the data centre, it can hide the fact that one way to tackle the question of data centre energy use is to start to address the IT load. How can we do this? Projects like the Cardiff University Planet Filestore project show one approach to reducing the load by shifting seldom accessed files to lower tiered storage, but there are other approaches that might provide some ways to tackle this. One is to look at the efficiency of the software and its use of computing resources, another to look at the overall provision of IT – and here the work of JISC’s Flexible Service Delivery Programme has relevance as it is helping institutions to makes sure that their IT provision is actually aligned to the needs of the business.
All in all, a very stimulating and enjoyable morning, with a visit to the University of Bristol’s HPC facility to round things off.

Who would want to be in the driving seat on the road to nowhere?

With its brittle certainty, uncertainty and risky punts, the White Paper will win few hearts, especially among students, says Sir David Watson

Credit: James Fryer

It's a good, and certainly not a hypocritical, device for Vince Cable, David Willetts and the Department for Business, Innovation and Skills (BIS) to have put students at the heart of their White Paper on the future of higher education in England. The test to which they will be held by history is whether they succeed in genuinely improving the prospects - of learning as well as earning - of students across the system, as opposed to getting the coalition government out of a hole.
Higher education is a policy area in which the Conservative and Liberal Democrat parties fought the 2010 election on diametrically opposed positions. This difference was not just about undergraduate fees. The Conservatives promised continued expansion, on the grounds of both social mobility and economic priority. The Liberal Democrats (not just because they struggled to see how to pay for it) thought that enough was enough. Perversely, given many of their other policies, they have come to be the "pulling up the ladder" party.
This White Paper represents the 11th new "framework" for UK higher education since the Robbins Report of 1961. To put it crudely, for every third entry of a student cohort since then, the system has been thrown up into the air by a government claiming that it is fixing the sins of the previous administration (including sometimes its own party).
This latest framework exhibits the characteristic mixture throughout this half-century of reform of brittle certainty, uncertainty and evidence-free gambling on the outcomes.

Some elements confirm earlier announcements, including the broken-backed response to the Browne proposal on fees. In early and mid-December, and against a background of the strongest student protest seen since the late 1960s, the coalition won votes in both Houses of Parliament supporting a significant modification of what the Browne Review said. For example, Browne had suggested that the upper limit on fees should be removed, and that fees above a certain level should be subject to a government-retained levy to help to support the whole system. In the event, a cap has remained and the levy has disappeared.
The proposals here attempt to make a curious kind of market, where at one end students with high qualifications (AAB at A level) can almost demand entry to a range of so-called elite institutions (whether or not these have the capacity to respond) and at the other end institutions will be encouraged to undercut each other on price. At the same time, the Office for Fair Access will have its teeth sharpened.
A second category of proposals (mostly those where the coalition initially disagreed) are out for "consultation". These include: post-qualifications applications (PQA, where there must now be enough solid evidence in favour); upfront payment of fees (but with little modelling of likely effects); reduction or removal of VAT for shared services (a no-brainer, except to the Treasury); and another attempt at devising a regulatory system that is both lighter-touch and more interventionist. Sir Tim Wilson's review of "how we make the UK the best place for university-business collaboration" falls into the same zone of "more research needed".
In contrast, there are the evidence-light leaps of faith. These include: the robustness of data about the student experience (someone should paint "And when did you last see your tutor?"); the lighter-touch "regulation" of standards and awards (surely counter-intuitive after the post-expansion moral panics about what constitutes a degree); and the cavalry over the hill of the "for-profit sector" (with no acknowledgement of the US evidence about how such companies can fleece and distort a generous system of public support for deserving students). Another dilemma concerns the concept of the "high-performing" institution. Here, the analysis seems heavily predicated on what students start out with rather than their situations upon graduation.
It is now surely worth speculating what a U-turn in response to this literally half-baked collection of policies for England might be, not least since England is now even further out of line with Scotland (which wants no truck with fees, except for students from England) and is inching away from Wales (which will apparently subsidise its students being charged fees above the 2004 level). Northern Ireland has still to declare its hand. Most serious of all is the effect on public finances. Upfront, this will simply increase costs (while, perversely, dampening demand). Over time, and not least because of European Union obligations, the returns look wildly optimistic. Perhaps the most significant piece of whistling in the dark is the blithe confidence that 70 per cent of the funds advanced on students' behalf will come back through the loans system.
Cynics may be tempted to say that the stated intention of putting "students in the driving seat" is a further attempt to deploy the "consumers" to beat up the "providers". In my view, based on research on students' hopes, dreams and concrete experiences, this is a crude oversimplification. Many more of these than the White Paper acknowledges already understand their part of the deal - and will remain to be convinced that a highly strained coalition knows what is in their best interests.

Postscript : Sir David Watson is principal of Green Templeton College, Oxford.

The people below stairs

We should not be so dismissive of back-office staff, for not only are they vital to the academy, they are human, Paul Greatrix says

Credit: Elly Walton

In these straitened times, there continues to be much talk of the savings that universities and colleges could make through outsourcing, shared services or partnerships with private providers. There have been reports that BPP is talking to several universities about bidding to run their non-academic operations. For The Economist, the "hand-wringing over BPP's move to run back-office services" is "insane". Many people ask why, if all private-sector businesses and many public-sector institutions can have their grass cut or their IT support provided by another company, can universities and colleges not do the same?
I find this argument troubling, and I don't think I'm hand-wringing. The issue is the terminology - or more precisely, the attitude behind the casual, unthinking use of the term "back office". Because the first target for consideration for cuts always seems to be back-office staff.
But what exactly is the back office? In a university context, it is generally taken to mean those staff who are neither engaged in teaching or research nor involved in face-to-face delivery of services to students. So they might be, for example, working in IT, human resources, finance or student records. Or they might be the people who maintain the grounds, administer research grants or edit the website.
Too often, their somewhat anonymous roles mean that they are treated as third-class citizens in the university context. Because they are out of sight and largely out of mind, most people really don't know what they do; as a consequence, it becomes much easier for others to write them off and offer them up as the first to be sacrificed when cuts have to be made. Back-office staff do not have an obvious income line and can easily be regarded as expendable. The attitude is resonant of the Victorian view of those "below stairs". This perception (or lack of perception) is unhelpful, and not terribly good for morale - particularly among those who are so casually dismissed as being "just back office".

This situation will not be improved by resort to the easy rhetoric about the importance of staff at all levels having a stake in the mission (spare us another recitation of the apocryphal tale of John F. Kennedy's visit to Nasa during the Apollo programme, when a janitor, asked what he did, told the president that he was working to put a man on the Moon). It requires everyone to have the right attitude to all staff in all parts of the university and to recognise the contributions they make.
It is essential to university success that all the services the institution needs are delivered efficiently and effectively. All these functions are fundamental and necessary. The grass must be cut, staff must be paid, and detailed and accurate student numbers must be submitted to the Higher Education Funding Council for England so that the university can receive its grant. Although provision of such services is not in itself sufficient for institutional success, it is hugely important for creating and sustaining an environment where the best-quality teaching and research can be delivered. Of course this can be done by contracting out to a third party; however, this may not offer the most effective or efficient service in the long run.
But in any position, people - whether they are employed by a university or by a private-sector company - must be treated properly. Universities are special places. Interactions with and understanding of academic staff and students are a key part of every job throughout the organisation. Lock people away in the back office and they might as well be working for a paper wholesaler in Slough.
In a theatre, the front-of-house and back-of-house personnel have different roles and different talents; nonetheless, all are vital in supporting the performance. In universities, all professional services staff, whether in direct contact with academic staff and students or not, contribute to institutional success. Casual talk of outsourcing or downsizing back-office functions undermines this contribution.
So please choose your words carefully. Better still, let's just ban the term "back office".

Postscript : Paul Greatrix is registrar of the University of Nottingham.

David Cameron calls civil servants 'enemies of enterprise'

• PM in strongly worded attack on bureaucracy
• Small firms invited to bid for major public contracts

• Nicholas Watt, chief political correspondent
• guardian.co.uk, Sunday 6 March 2011 19.33 GMT
• Article history

David Cameron promised to cut bureaucracy. Photograph: Toby Melville/Reuters

David Cameron has pledged to confront the "enemies of enterprise" in Whitehall and town halls across the country, attacking what he called the "mad" bureaucracy that holds back entrepreneurs.

The prime minister, who was criticised for failing to outline economic growth plans after last year's autumn spending review, moved to recover ground by promising to place the promotion of enterprise at the heart of the budget on 23 March.

In one of the strongest attacks by a prime minister on the civil service, Cameron yesterday made clear he shared the frustration of Tony Blair, who famously claimed in 1999 that he bore "scars on my back" from those opposed to his reforms.

The prime minister, who said that enterprise was about morals as well as markets, listed three "enemies of enterprise' in a speech at the Conservative spring forum in Cardiff:
• "The bureaucrats in government departments who concoct those ridiculous rules and regulations that make life impossible, particularly for small firms."
• "The town hall officials who take for ever with those planning decisions that can be make or break for a business – and the investment and jobs that go with it."
• "The public sector procurement managers who think that the answer to everything is a big contract with a big business and who shut out millions of Britain's small- and medium-sized companies from a massive potential market."
The prime minister added: "Every regulator, every official, every bureaucrat in government has got to understand that we cannot afford to keep loading costs on to business because frankly they cannot take any more. And if I have to pull these people into my office to argue this out myself and get them off the backs of business then believe me, I will do it."
The chancellor, George Osborne, who used his speech on Saturday to announce the creation of 10 enterprise zones, will unveil changes in the budget to give small- and medium- sized firms opportunities to bid for large government contracts.
"We're throwing open the bidding process to every single business in our country – a massive boost for small businesses, because we want them to win at least a quarter of these deals," Cameron said.
The speech showed the influence of Andrew Cooper, Downing Street's new director of strategy, who starts his new job on Monday. Cooper is said to be drawing up a vision for the future to show that the government has plans that go beyond spending cuts.
The prime minister said he was optimistic about the future because Britain is the home of innovative entrepreneurs. He then launched a staunch defence of his recent trip to the Gulf, on which he was accompanied by 36 British business leaders, including eight from the defence and aerospace sector.
"I know some people are disdainful about [selling Britain to the world]," he said.
"They see me loading up a plane with businesspeople and say: 'That's not statesmanship, that's salesmanship'. I say this: attack all you want, but do you think the Germans and the French and the Americans are all sitting at home waiting for business to fall into their lap?"

East Lindsey and South Holland launch shared service

District councils make service available to other public bodies

• Guardian Professional, Tuesday 5 July 2011 17.26 BST

• Article history

Two district councils in the east of England have set up a shared service for front and back office functions which they are offering to other public authorities.

East Lindsey and South Holland have created a limited company named Compass Point to handle HR, finance, payroll, IT support, revenues and benefits and customer services, operating from two centres in Manby and Spalding.
The joint venture is owned by the two councils, with shareholdings reflecting the size of their services and investment at 63% for East Lindsey and 37% for South Holland, although they have equal voting rights with three members each on the governing board.
Almost 300 staff, about a quarter of the total for two councils, have been transferred under arrangements to Compass Point, which began operations on 1 April.
The move has involved an investment of £4.5m in new technology, including a BizTalk server to connect the legacy applications, a Microsoft Dynamics ERP and an Avaya telephony system.
Nigel Howell, chief executive of East Lindsey, told GGC: "We're offering two sets of services. There's the traditional outsourced services where we might tender for work, or other authorities might invest and become new partners in the company.
"We are relatively young but we've had interest from a number of organisations already, mostly in potentially becoming partners. This is the most novel aspect of what we've done."
He said the two councils have estimated that Compass Point can deliver £2.1m in savings in the first full year of its operation and £30m over 10 years.

This article is published by Guardian Professional. For updates on public sector IT, join the Government Computing Network here.

The Dimensions of Outsourcing

By Desmond Doran and Stephanie Morgan of the Kingston Business School Kingston University Kingston upon Thames

Contents [hide] 1 The Dimensions of Outsourcing 2 Introduction 3 Why do organisations outsource? 4 What activities are typically outsourced? 5 What is the Process of Outsourcing? 6 What are the difficulties associated with Outsourcing? 7 Trends in outsourcing 8 Current debates and future issues 9 Resources 10 References 11 Bibliography

Introduction

This paper will explore the various dimensions of outsourcing and the processes and difficulties associated with the transfer of in-house activities to external third parties. In essence, outsourcing involves an organisation handing over control of a function to another organisation that then takes responsibility for the provision of that function. Outsourcing as a viable alternative to in-house provision became popular in the 1990s as organisations experienced increased competition and began exploring ways to reduce their costs (Mullin, 1989)^[1]. This led to the development of an outsourcing industry capable of providing cohesive and attractive options for organisations seeking cost reductions for peripheral services and products. Whilst traditionally associated with back-office or support activities, outsourcing is now increasingly seen as a viable alternative for activities that could be regarded as core to an organisation’s operations and is now utilised extensively in both the public and private sectors.

What is Outsourcing? Outsourcing has been defined by the National Outsourcing Association (NOA) as: 'The provision by a third party organisation of services or a bundle of business processes that historically have been performed in-house by the service receiving customer.'

Bravard and Morgan (2006)^[2] break down the key elements of outsourcing as:

• The contracted use and leverage of third-party resources, assets and skills,
• with guaranteed levels of quality, resilience and value to cost criteria and measurement,
• to deliver services previously provided in-house,
• possibly involving the transfer of existing staff to the service provider,
• and/or transformation/rejuvenation of the business support processes and technology.

Outsourcing is often confused with sub-contracting. Sub-contracting is a situation where an organisation uses the resources of a third party to provide services that it has not previously provided in-house. For example, the completion of year-end accounts is traditionally sub-contracted by small businesses that do not have their own internal resource for such activities. Similarly, a building firm will often sub-contract trade activities and focus its own resources on the building itself. Outsourcing therefore refers to the transfer of activities previously provided in-house.

Why do organisations outsource?

The motivation for outsourcing has been explored by a number of authors in a number of sectors. The catalyst for change was work undertaken by Skinner (1969)^[3] who developed the concept of organisational 'focus' (concentrating on activities that were small, manageable and which the operation can become excellent) whilst Prahalad and Hamel (1990)^[4] developed the distinction between “core” and “non-core” activities which now form the initial assessment of most outsourcing decisions. Moving beyond the boundaries of the firm, Teece (1986)^[5] developed the notion of “complementary assets” which revealed the potential benefits of partnering with external organisations in order to improve overall organisational performance. In essence, each of the above developments were step changes toward creating an environment in which outsourcing became a natural consideration for organisations seeking to improve their operations.
There are now many reasons why organisations choose to outsource activities previously provided in-house:

• To focus upon core business activities – outsourcing non-core activities can free up internal resources to concentrate on more critical activities.
• To Reduce and control operating costs - this is perhaps the primary reason why many organisations do turn to outsourcing. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows organisations to avoid large expenditures in the early stages of their business development. Outsourcing can also make your business more attractive to investors, since you're able to inject more capital directly into revenue-producing activities.
• To improve focus – outsourcing can allow an organisation to focus upon what it regards as the most important issues relating to their long-term viability. For example, a retail operation might regard selling goods or services as its primary focus and providing customer support services (for warranty claims, delivery arrangements, spare parts enquiries etc) as a non-core activity that could be outsourced.
• Gain access to world-class capabilities - this is particularly the case in Customer support services and Logistics where global capabilities have improved as a result of advances in technology and the development of cohesive solutions by global players.
• Free internal resources for other purposes - this reason for outsourcing has grown as organisations focus upon what they regard as their core competencies.
• A function is time-consuming or difficult to manage – typically examples of such activities include payroll (as a business expands its operations), website management, health and safety training (to comply with changes to legislation).
• Insufficient resources – leading to the need to utilize the capital resources of specialist service or product suppliers.
• To reduce risk - Every business investment carries a certain amount of risk in terms of markets, competition, government regulations, financial conditions, and technologies. Outsourcing providers assume and manage this risk for you, and they generally are much more proficient at deciding how to avoid risk in their areas of expertise.

Similarly, McCarthy (1996)^[6] notes that firms consider outsourcing in order to provide the opportunity to refocus their operations and to provide time to improve processes associated with their core activities. Taking a more strategic view, Lankford and Parsa (1999)^[7] view outsourcing as an opportunity to completely re-engineer the organisation. They argue that re-engineering provides the opportunity to examine who is best suited to performing a task, who can do the task with the greatest efficiency and the highest quality

What activities are typically outsourced?

Typical outsourced activities include:

• IT functions – including the transfer of payroll, the management of IT systems, website management and application/order processing activities.
• Customer support services – stock ordering, claim handling, delivery queries.
• Business processes – including recruitment, payroll and secretarial services.
• Logistics – whilst essentially focussed upon moving goods this service now extends to warehouse management, procurement and stock control and supply chain management activities.
• Training services – taking on responsibility for customer service training, health and safety compliance training.
• Maintenance – buildings, lifts, grounds etc.
• Accounting – typically involving the maintenance of book-keeping systems, tax management and invoicing.

What is the Process of Outsourcing?

Dornier et al (1998) developed an outsourcing decision matrix which assesses the strategic value and criticality of activities being considered for outsourcing (Figure I). The strategic value is the extent to which the activity contributes to the achievement of competitive advantage whilst criticality relates to the contribution that it makes to the performance of the final product of service to which it contributes. The matrix consists of four key areas – Novelty, Proprietary, Commodity and Utility. The novelty dimension is not essential to the functioning of the final product but may reflect specialized or restricted technology. Proprietary items are likely to be based upon core competencies of the organization and are unlikely to be considered for outsourcing. Commodity items are likely to be based upon standardised and commonly available technology and make minimal contribution to product or service functionality – such items are often considered appropriate for outsourcing. Finally, Utility items are regarded as critical to the final product but are based on readily available technology. Outsourcing of such items should only be considered when a supplier offers an adequate level of cooperation and service to ensure product/service availability.
Figure I – The Outsourcing Decision Matrix

The process of outsourcing has also been considered by McIvor (2000) who proposes a logical framework for evaluating the outsourcing decision consisting of a number of key stages (Fig II)
Figure II – Framework for evaluating the outsourcing decision

Source: Adapted from McIvor, 2000
Stage 1 of the process is, perhaps, the most critical. At this stage you must identify the ‘core’ activities of your business and what activities might be regarded as ‘non-core.’ Core activities are those activities that the organisation does particularly well and that from the basis of a competitive advantage whilst non-core activities are those activities that could be outsourced to a third party without negatively impacting the nature or scope of your operations.
Once you have performed this stage you can move onto...
...Stage 2, which involves evaluating relevant value chain activities. Value chain activities include in and outbound logistics, operations, marketing & sales, and services . The idea behind this stage is that you compare your ability to perform these activities with those of potential outside suppliers. This will enable the company to identify its relative performance for each core activity along a number of selected measures.
Stage 3 attempts to identify and measure the costs associated with either retaining the activity in-house or outsourcing the activity. This stage needs to be undertaken as accurately as possible and should reflect prudent accounting practices that accommodate overhead, management, capital and transition costs, loss of business or utility during the changeover period, and managing the supplier during the initial stages of the activity. If the cost analysis indicates that outsourcing is still viable then management should consider selecting a suitable supplier to perform the relevant activity.

The type of relationship formed will depend, to a large degree, upon the nature and scope of the outsourced activity. If the activity is regarded as critical to the organisation’s future then steps need to be taken to ensure that the supplier delivers according to the contractual specification and that penalties are in place for situations where the supplier fails to deliver contracted obligations.

What are the difficulties associated with Outsourcing?

Whilst outsourcing has been heralded as a way of controlling costs and improving services levels there are a number of difficulties associated with outsourcing which need to be considered before embarking upon such an option. The key difficulties associated with outsourcing are:

• The potential for loss of control of the process. Once a contract has been agreed it is then that the real impact upon everyday operations is felt. New staff, new uniforms, new approaches make real the feeling that the outsourced process is no longer under your control. Additionally, you may lose the flexibility that you had when the activity was performed by your own staff.
• Other companies may also be using the service provider. Therefore in some cases, the best interests of the service provider may be diluted with other users; this may lead to a loss of competitive advantage.
• Employees may react negatively to outsourcing and consequently their quality of work may suffer. This has often been the case where the outsourced activity has been performed in-house for a number of years. Within the public sector, particularly the National Health Service, outsourcing has often been regarded negatively as a way of reducing headcount rather than a way of improving services. As a consequence there may be a great deal of tension between the service provider and other staff within the organisation.
• Creates potential redundancies – a natural consequence of many outsourcing decisions is the reduction in employee numbers. The impact of such reductions needs to be accommodated by the outsourcing organisation when planning the outsourcing process.
• The fear of the service provider ceasing to trade (bankruptcy, etc). It is incumbent upon the outsourcer to undertake a financial assessment of the outsourcing organisation to determine its long term viability. This is particularly important where the outsourcing contract is for a long period.
• Potential for price rises – once the service is outsourced the service provider is in a position of power, particularly where the service user has few options to seek an alternative provider or where the costs associated with changing the service supplier are prohibitive.
• Managing the outsourced operation – Whilst outsourcing can often lead to immediate reductions in outgoings the cost of managing the outsourced activity is often overlooked and can be considerable. Such costs include monitoring, management and administration costs.

Harland et al (2005) suggest that there are a number of risks associated with outsourcing which include:

• Failure to differentiate between core and non-core activities
• Difficulties in Insourcing the activity if the outsourcing activity fails to effectively deliver desired outputs
• Lack of skills and competence to manage outsource relationships
• Lack of understanding, skills and competence to design appropriate service level agreements with the outsource supplier

Such risks are often overlooked and may impede or negate the expected benefits of outsourcing. However, it is often difficult to determine in advance what skills and competencies are required for managing outsource relationships.

Trends in outsourcing

Predicted trends in outsourcing have been modified somewhat due to the global recession. There are opposing views about whether outsourcing will increase even faster or reduce under current circumstances (Allen, 2009, Flinders, 2008). There is also debate regarding whether multi-sourcing will become more popular, or whether clients will tend to stick to one supplier to increase discounts (Tholons, 2009). However the general view is that the complexity of outsourcing, the range of activities being outsourced, and that the number of countries developing their outsourcing offer to the West will all increase. In terms of locations, China is likely to become a major player, particularly in offering to South Korea, Japan and Taiwan. China is targeting the IT Industry and basic finance and accounting processes in the West, although language difficulties still hold it back (Bhatnagar, 2008). Russia is attempting to move into the knowledge market (Swabey, 2008) and Egypt is considered a particularly strong future contender for a range of offshoring due to a low cost base and cultural compatibility with the West, however infrastructure and perceived terrorist risks are still considered problematic (Willcocks, Griffiths & Kotlarsky, 2009). Tunisia and Morocco are becoming attractive to French speaking nations and South America for the Spanish. Language and culture remains a key concern for offshoring, along with the issues of managing at a distance, making nearshoring more popular (Carmel & Abbott, 2007).
In terms of forms of outsourcing, some suggest that organisations will turn more to insourcing or use a smaller range of suppliers as they become more expert at managing outsourcing contracts, with larger organisations developing internal strategic sourcing capabilities (Lucas, 2008). The financial services sector is viewed as particularly suitable for insourcing due to legislative and high rate of change in markets (Kortmann, 2007). As awareness increases of the risks of offshoring a broader range of organisations are likely to consider insourcing as a strategic option. Industry sectors likely to increase their outsourcing spend include healthcare, education, retail and telecom (Tholons, 2009). In the UK service sector the largest increase is considered to be in the public sector, (Health Service Executive, 2008). The occupations most likely to attract increased offshoring include, computer and mathematical sciences, back-office and administrative support, architecture and engineering (Moncarz, Wolf & Wright, 2008, see also Manning, Massini & Lewin, 2008). A recent report by Nelson Hall (Wilmott, 2009) indicates that the global business process outsourcing market will reach 450 billion US dollars by 2012, with a key driver being the need to gain entry into emerging markets. Outsourcing in all its forms remains an important business strategy.

Current debates and future issues

Outsourcing and offshoring in particular, have been criticised in a number of ways, and there is still substantial debate regarding when it is best to outsource and how to ensure the strategy achieves its aims. Some research suggests that 30% of outsourcing contracts do not achieve their goals (with approximately 25% back-sourcing - bringing back in-house) and that up to 60% are not fully satisfied with their supplier (Deloitte, 2005; Logan, 2000), and a number referring to their relationships as ‘difficult and uncomfortable’ (Harris, Parker, Le Quoc & Takahashi, 2005). Core issues are around contract development, measurement and the need for clear service-level agreements, alongside the development of a strong and trust-worthy relationship (Beaumont, 2006; Poppo & Zenger, 2002). Service level agreements must be detailed enough to allow clear evaluation of compliance but flexible enough to allow for future changes.
Issues such as these will also depend upon which timescales are considered and although in the past short term contracts have been popular, there is a view that longer term contracts are more suitable, giving both parties time to learn, and reducing disruption, as long as the contract and all involved take the full life-cycle into account (see Dueck, 1999; Morgan & Morgan, 2007). Legal, moral and ethical regimes and enforcement of these vary by country, and this is increasingly viewed as problematic (see Daugherty, & Dickins, 2009) - and linked to this are concerns about security. Horror stories of credit card details being sold in coffee shops has made the public more aware of these issues, and the recent accounting fraud at Indian outsourcing giant Satyam has raised the profile of risk in outsourcing. Companies cannot hand over the risk or their regulatory responsibilities when they outsource a process or activity, indeed the risks are further complicated.
The human aspects will also need increased consideration, in particular the issue of ‘retained competencies’. Having the right people with the required skills to negotiate, manage and evaluate the outsourcing contracts is crucial, yet our understanding of what these skills are remains weak. These skills are likely to include contractual and commercial understanding, co-ordination and control of suppliers, change management and strategic planning – such skills take time to develop. Issues that are starting to emerge in the literature include concerns regarding the loss of intellectual capital, reduced organizational learning and lack of knowledge transfer (e.g. Willcocks, Hindle, Feeny & Lacity, 2004)). Cultural aspects particularly in offshoring will remain of concern (Swabey, 2008) with research indicating that misunderstandings occur due to cultural differences, increasing the risk in outsourcing (e.g. Metters, 2008).
The development of organisational interfaces and understanding of how to manage virtual organisations will become more important (Useem & Harder, 2000) again this is linked to how well people can communicate and negotiate ongoing contracts. Employee engagement has been shown to be problematic, particularly in transfer situations (Morgan, 2007). Even though staff are often protected (for example, TUPE arrangements in the UK) a poorly managed transfer can lead to a great deal of ill-feeling which can impact upon your business. Coyle-Shapiro, Morrow & Kesler (2006) demonstrated that the level of organizational support from both the original employer (client) and the receiving company are important in ensuring commitment and service oriented citizenship behaviour.
Theories and concepts linked to, for example; the psychological contract, exchange theory, organizational justice, trust, and knowledge management are increasingly being used to understand outsourcing and insourcing (see Coyle-Shapiro & Morrow, 2006; Logan Faught & Ganster, 2004). Trust has been shown to be a vital element in outsourcing contracts (Lander et al. 2004), although developing trust can be problematic over distances (Handy, 1995). Other research linked to these theories but not specific to outsourcing can inform. For example Chiu & Peng (2008) demonstrate a clear link between employee deviance and perceptions of psychological contract breach. This suggests that deviance may be a problem after outsourcing transfers; however, research specific to outsourcing is needed in many of these areas to understand in depth how outsourcing may influence staff behaviours and best practice in managing transfers and ongoing relationships (see Morgan, 2008). Psychological aspects, including emotions, have been shown to influence seemingly rational, economic decisions, including choice of supplier (Donada & Nogatchewsky, 2008). Clearly there is a need to understand how outsourcing affects the people involved to better understand how it will affect your organisation and your customers.
Questions have been raised regarding how long companies can continue to move around the globe finding cheaper labour. The cost of graduate employment in India is already increasing and this wage inflation is a trend seen in the past as work is moved to other countries. The recession is also likely to lead to an increased backlash from the public as protection of jobs becomes a deeper issue. The recent announcements that IBM is to move thousands of jobs to India and China from the US has led to much public interest, although Earle, Madek & Madek (2007) emphasise that state and federal law will not be sufficient to stem the tide of outsourcing. In terms of future staffing organisations also need to consider that for the higher end (e.g. BPO and KPO) we are reliant on a regular supply of graduates willing to work in low level jobs. Of crucial concern to the service sector is the customer experience. Should the outsourcing contract impact on just one of the ‘critical points’ for the end-customer serious repercussions arise, Offshoring in particular has been shown to have a significantly negative impact on customer service (Poppo & Zenger, 1999), although some studies suggest this can also be a problem if customer service itself is outsourced domestically (Whitaker, Krishnan & Fornell, 2008).
Moncarz et al. (2008) suggest that service organisations should only consider offshoring when:

• The level of contact with the customer is low.
• Social networking demands are low (no need to discuss with other staff).
• Need to understand local cultural or social situation is low.
• Inputs and outputs can be transmitted electronically with ease.
• The work can be easily routinized or scripted.

To summarise, outsourcing has many benefits but also many hidden costs (Barthelemy, 2001). Organisations should analyse in detail why they wish to outsource, what they hope to achieve, and use the many tools available to evaluate which activities are likely to benefit from outsourcing. Development of in-house skills to negotiate and manage contracts will be vital. Those organisations already experienced in outsourcing should continue to learn from the process and ensure benefits are quantified, something still rare even in the mature IT outsourcing market (KPMG, 2007). Service level agreements are vital components in successful outsourcing contracts, do not believe the rhetoric around relationships being more important than contracts, research supports the view that the two are complementary (Poppo & Zenger, 2002).

Resources

Outsourcing organisations
National Outsourcing Association (NOA) http://www.noa.co.uk/
The US Outsourcing Centre http://www.outsourcing-center.com/
The Outsourcing Institute: http://www.outsourcing.com/
Global service directory and forum: http://www.outsourcing.org/
The Outsourcing Project (journal) http://www.cxoeurope.com/
Shared Services: http://www.ssonetwork.com/