Second-Generation Outsourcing
Although the need to minimize costs still plays an important
role in the decision to outsource, all three of the organizations featured in
this chapter were seeking additional benefits. The Medicines and Healthcare
products Regulatory Agency (MHRA) wanted to use new technology to share
information more effectively while complying with increasingly stringent
regulatory demands. It also looked to outsourcing as a means of improving the
procedures by which medicines are approved, not simply to automate the processes
it has traditionally relied upon. The UK's Vehicle and Operator Services Agency
(VOSA), responsible for overseeing a range of vehicle safety and licensing
operations, needed to ensure that its IT infrastructure could keep pace with its
rapidly evolving role. Similarly, Sainsbury's Supermarkets was seeking to
reverse a decline in margins and saw outsourcing as a way of making radical
change to existing processes and systems and to improve business performance.
‘Technology change impacts people and processes too,' said Richard Wildman, from
Accenture, which worked with Sainsbury's on this project. ‘We had to ensure that
large-scale change could occur without disruption to Sainsbury's service levels.
It was like sailing a ship while you're still building it.'
This is true for all the outsourcing projects nominated for an
award from the MCA. Contrary to popular myth, good outsourcing projects are more
likely to be focused on generating revenue, improving customer satisfaction and
raising productivity than many other types of consulting.
However, the greater the scope of outsourcing, the greater the
challenges involved. Not surprisingly, flexibility has become something a holy
grail. With too many stories of companies who, having outsourced, found
themselves trapped into paying over the odds for changes to rigidly defined
contracts, the need to be able to accommodate change was uppermost in the minds
of all the companies featured here. The MHRA needed an open-ended outsourcing
contract so that new processes could be accommodated without paying premium
charges. VOSA had already outsourced its IT infrastructure, only to find that it
could not keep up with the level of change taking place in the business. With a
workforce distributed across a network of offices, VOSA was not just interested
in flexibility but in scalability. It needed a new outsourcing contract that
could provide a high-level framework into which different initiatives could be
slotted.
Inherent in flexibility is the idea of preparing an organization
for the future, giving it operational resilience in the face of uncertainty and
change. Under its contract with Sainsbury's Supermarkets, Accenture is not only
taking over the operation of existing systems but is overseeing their wholesale
replacement, building Europe's largest consumer database, updating buying,
merchandising systems and supply chain systems and providing new HR and
financial systems to support the company's 1 million employees.
Another feature of these cases is the speed with which the
projects were expected to yield benefits. Because of their scale and scope,
outsourcing contracts typically last for between 5 and 10 years - far longer
than an ‘average' consulting project. Of the first generation of contracts, many
have become mired in arguments about the quality of service provided. With most
of their efforts focused on running established systems and processes,
outsourcing companies found it hard to identify the areas for improvement.
Although still at a preliminary stage in its planning process, the MHRA
(formerly the Medicines Control Agency) needed to realize the benefits of its
decision to outsource within two years, if it was to meet its business
objectives. There simply was not enough time to develop the detailed definition
of the outsourced service typically required in such cases.
Flexibility and speed are both made possible by a new approach to
the client-outsourcing supplier relationship. Clients are rightly cynical of
much of the talk around ‘working in partnership' with their suppliers. All too
often, experience suggests, companies pay lip-service to this ideal without any
real conception of how they are to deliver it in practice. Key to each of these
three projects was the extent to which conventional customer/supplier barriers
were overcome by innovative, risk-sharing contractual terms. Whereas VOSA's
first outsourcing contract focused wholly on the immediate services to be
provided, its deal with Atos Origin ensured that the relationship would be
measured in terms of broader business goals. Neither of the conventional models
for working with private sector suppliers would have worked in this case. A
traditional contract would have been too rigid, but the obvious alternative - a
Public Private Partnership (PPP) - was primarily designed for greenfield
construction projects, not the renewal of existing information technology. With
this in mind, VOSA produced a document stating its budget and its objectives;
suppliers were invited to bid for specific business propositions designed to
achieve those objectives, but the actual process by which they did so was not
prescribed. Atos Origin also adopted performance measurements that reflected
VOSA's goals, rather than via compliance to a traditional service level
agreement.
Ensuring the commercial goals of clients and suppliers
encouraged the high degree of openness and sense of team spirit common to all
the projects in this chapter. The alignment of Atos Origin's corporate goals
with those of VOSA was mirrored by ensuring that people from the two companies
worked together. As Nigel Shenton, Head of IT at VOSA explained, ‘Our teams are
badgeless. At the top level we're working to coordinate a number of initiatives,
some of which don't even involve Atos Origin. The end-user is the same, so it's
critical we work together to turn these into a coherent programme of
work.'
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