Outsourcing has many advantages. Economies of scale perhaps as
the outsourcer provides similar services to a variety of similar customers. The
latter could include central or local state institutions. Also the need for
capital investment required were the services to be provided in-house would be
borne by the outsourcer.
Companies providing outsourced services would argue that they
take on a variety of hidden costs – recruitment, insurance and capital
investment to provide outsourced services at a competitive price.
A question that some believe is not asked often enough is
whether the outsourced service really is necessary. Clearly the barriers to
setting up and running a service in-house are considerable. One of the benefits
of outsourcing is that this lead time / initial investment in expertise as well
as capital investment is not there. But it can also lead to buying an
outsourced service on the basis of ‘it seemed like a good idea at the time’.
Also there is the temptation for the person commissioning the outsourcing, to
succumb to pressure / inducements.
Whilst I may be mistaken, I feel often that much of the work I
come across may not have been absolutely essential; some examples are below[1].
Between 2007 and 2010 I noticed that the pavement on Shaftsbury
Avenue was changed three times. From the tar surface to large square paving
stones; then to small bricks. The final
change was changing the straight edge of the pavement into curves. What were
the benefits of these changes in quick succession? Were they really necessary?
At my local Network Rail station, I’ve noticed many changes. I
wonder whether all of them were necessary. For example ticket machines were
installed in the centre of the ticket area. In a few years, these were then
removed and moved a few feet to other locations in the ticket area. Now they
are installed against the walls. For over thirty years passengers went between
platforms via ramps which lead, at one end of the platform, to a tunnel and at
the other end to a walk-way which lead to the ticket gates and the ticket area.
These tunnels were closed and replaced by a bridge which had steps and lifts.
Also the ticket barriers were moved a few inches nearer to the ticket area –
requiring a considerable amount of work. In addition short pillars (supporting nothing) have been put on the walkway facing the car park Were these changes really necessary?
Staying with Network Rail, at other stations I see sometimes
contractors in high-visibility jackets in groups of three or four not doing
anything actually. Perhaps I am missing something?
An aspect of outsourcing that may not be widely appreciated is
its consequences for migration. Many staff members of outsourcing companies may
be willing to work for low wages because once five years have elapsed, one can
apply for permanent residence in the UK.
Moving some outsourced activities into the state can have
beneficial effects: continuity, local employment, retention of expertise and
intellectual capital.
But outsourcing can be right in many situations – for example
when smaller companies or state enterprises wish to benefit from wider
expertise and economies of scale and scope that the service provider brings.
For these benefits to be realised, it must be managed properly.
[1]
Other
examples: Leadenhall Street – repeated resurfacing between 2011 and 2014;
Croydon - Streetlights: silver lampposts replaced by black lampposts. Then some
silver lampposts restored again. But
finally black lampposts working.
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