Good day bloggers

 

There is increasing media speculation about the amount of outsourcing of public sector services that will occur over the next few years as a means of delivering cuts to public expenditure. That’s not all that’s increasing mind you, as Serco (a giant amongst outsourced providers) has recently announced a 21.6% surge in profits, adding up to a very tasty £101.4m.

Serco’s Chief Executive, Chris Hyman, has gone on record to say he expects to make inroads into new public service areas not previously delivered by Serco including: education, welfare to work and prison services. Mr Hyman highlighted that only 15% of the available public service market has been outsourced – and resembling great white sharks in a feeding frenzy it seems a number of private sector providers are anticipating sinking their jaws into the other 85%.

Now I’m sure all of this is good news for the private sector and may help kick start their business…but clearly the private sector depends on profit-making for survival (see Michael Porter’s writings, Competitive Advantage and Value Chain)and that means making a profit from public services. That’s fine if those services can be provided at a considerably reduced rate than currently provided with no depreciation in service quality.

Cabinet Office Minister, Francis Maude,says he expects private sector service providers to curb their profit margins – but I’m not sure how in practice he’s actually going to regulate such profit-making. Serco is currently acting as an adviser to the Cabinet Office’s Efficiency and Reform Group to help identify where savings can be achieve in public sector services.

Whilst I’ve no doubt outsourcing will on occasions be the best business solution for the provision of public sector services, there is a danger of one trick pony thinking. Business options analysis is, in my opinion, key to taking sound, evidence-based judgements…and outsourcing isn’t always the best option, what with building in those profit margins.

I don’t think we should reject shared services, total place and good old business process re-engineering from those options just yet…do you?

Dean