New Government in the UK. More Outsourcing on the Horizon.
Last month the British people voted for a new government. It was not a straightforward operation because no single party achieved a majority vote. The ruling Labour party were eventually ousted and a coalition of the Conservative and Liberal Democrats took over, with the Conservative leader David Cameron becoming the new Prime Minister.
But what does any of this have to do with the IT services industry in Europe? Well, the previous British government spent a lot of money to save the banking industry and stimulate the economic recovery after the crash that began in 2007 with the US credit-crunch and then swept the world.
In fact, the British government is running a deficit this year of about £180bn. That’s an enormous amount of money to find and so the new government is reducing spending in all departments. As soon as they took office there was an announcement of an immediate £6bn saving. Just this week, further initiatives were cancelled, saving another £2bn, but these are only small amounts compared to the total deficit.
Without a doubt, there will be a shift to more outsourcing and shared services to encourage further efficiency and savings. There are many experienced suppliers with a long history of supplying services to the government, but this is a new era. There is a hunger for innovation and new types of service and charging.
You need a near-death experience if you are going to change the way a large organisation operates and the British government has suffered something very close to that. They are exploring new ideas with new partners and more outsourcing is on the horizon.
Suppliers in Eastern Europe are well positioned to offer greater efficiency, but importantly to be able to offer a service located within the European Union. It’s possible for non-europeans to win business from the government in the UK, but in the present age of austerity, Europeans have a huge advantage.
Chris, you are right. There is scope for the UK to be selling services rather than just outsourcing everything offshore. In fact I think the government will move to a shared services philosophy before true outsourcing. But that still means a big move to the private sector for many workers who are currently in the public…
The move towards outsourcing seems at odds with the new Coalition Government’s desire to create more jobs. Even today, they have talked about stimuli to enable mobility amongst the workforce (tax breaks for companies founded outside the South-East for example).
Surely what the government should be doing is demonstrating leadership in effective and efficient IT – by encouraging companies to establish *service based* IT offerings – rather than simply assuming outsourcing overseas will always be the most efficient. I’d like to see Messrs Cameron and Clegg follow their own retoric and enable the UK to be an IT services leader rather than outsourcer.