Barbara Hohbach
Virginia
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February 27, 2002
Accenture Releases Global Study on Outsourcing Government Services to Private Sector

World’s Government Executives Rate Outsourcing Highly – Yet Cite Room for Improvement

WASHINGTON, D.C., Feb. 27, 2002 – Commonly used as a blunt tool to wring costs out of “non-core” government functions, outsourcing is finally beginning to be explored as a way to transform the culture and effectiveness of government workplaces – and not necessarily with a transfer of jobs to the private sector, according to a new international study released today by Accenture.

Yet inherent obstacles in government outsourcing – and often mixed results – indicate there are plenty of valuable lessons to be gleaned from a few pioneering agencies that have achieved break-through success.

The report includes specific recommendations from experts and government executives worldwide who have successfully used outsourcing to boost both performance and efficiency in their own workplaces. Few executives ranked cost savings as the primary objective in outsourcing – preferring instead to focus on increasing the overall value of services. However, the study cited research showing that governments generally can reap average cost savings of 20-40 percent over the life of an outsourcing contract, which typically runs anywhere from three to 10 years.

“Until very recently, outsourcing was nearly an unspoken word in public-sector circles – and in fact is still practiced only by other terms in some U.S. states,” remarked Tom Healy, a partner in Accenture’s government practice. “Now government outsourcing is finally beginning to show its vast potential to help deliver public services faster, more efficiently and with equal if not better results. Governments are finding that outsourcing is the place where time, efficiency and effectiveness converge.”

Key Lessons

  • Stay actively involved. Rather than delegating accountability for outsourced activities, public-sector executives must stay involved by leading strategy and operations.
  • Manage expectations. Tasks that public servants previously completed by asking someone in the next cubicle may require a formal request or a manager’s approval if outsourced. Clarifying the new work process beforehand will make the new steps less contentious.
  • Involve employees and unions early. It may not eliminate employees’ feelings of uncertainty, but communicating early and often will help them navigate the process.
  • Look beyond savings. Value drives outsourcing more than cost savings, according to most executives – 70 percent of whom identified cost savings as only one of numerous benefits of outsourcing. Other benefits include: improving capabilities, improving executive focus on priority issues and improving service to constituents.
  • Use innovative business models. Some government executives are applying these innovative models to outsourcing, such as joint ventures and private finance initiatives – sometimes even extending public-sector activities into whole new revenue-generating arenas.

The Accenture report was based on interviews with 50 senior-level government executives with direct experience managing outsourcing initiatives and 11 policy advisers with expertise in public-sector outsourcing. The executives are from eight countries: Australia, Canada, New Zealand, Singapore, South Africa, Spain, the United Kingdom and the United States, and they represent industries ranging from tax and finance to defense, health and agriculture.

A small minority of government officials surveyed around the world have used outsourcing to measurably and dramatically alter the culture and effectiveness of their workplaces. Often these executives have found that their own role has shifted from one of largely managing infrastructure to one of coordinating the continuous flow of information between growing numbers of service suppliers (the government and its vendors) and service recipients (citizens and the business community).

Although substantial progress has been made by involving union voices in the outsourcing process, the study showed that resolving labor concerns – along with identifying ways to measure progress as baselines change – continue to top the list of key challenges to outsourcing. Other main concerns identified in the study were internal resistance to change and management’s fear of losing control.

A Look Ahead
Executives surveyed generally ranked the future potential of outsourcing higher than the effectiveness of current outsourcing projects in helping to achieve their organization’s strategic mission – suggesting that they recognize room for improvement.

The study indicated that as governments focus increasingly on citizen-centered ways of providing services, major process changes and a heavier-than-ever reliance on advanced technologies will be necessary for many agencies. These are resources that most governments will not be able to afford on their own – a problem further magnified by the highly competitive market for technical skills. This points to an increased need for outsourcing for years to come.

About Accenture
Accenture is the world’s leading management and technology services organization. Through its network of businesses approach – in which the company enhances its consulting and outsourcing expertise through alliances, affiliated companies and other capabilities – Accenture delivers innovations that help clients across all industries quickly realize their visions. With more than 75,000 people in 47 countries, the company generated net revenues of $11.44 billion for the fiscal year ended August 31, 2001. Its home page is www.accenture.com.

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