Not my words – this is the description given by none other than Francis Maude, the Paymaster General – see this article in the Telegraph
This ties in with the Green Report that highlighted the inefficiencies across Government.
Although it is pleasing to see that Government has last started to realise that there is an alternative to front line cuts, I do question how they will bring real innovation from the private sector and indeed from the SME’s within the private sector to make real change.
The big opportunity for the Government and the country as a whole is to accept that change is required (i think that we are getting there on this point), understand that there are alternative approaches available other than from the big 4/5 ‘consultancies/ outsourcing’ firms (that have been getting fat on the profits that they taken from the public purse over the last few years) and engage with the smaller, more nimble new entrants to the market that bring in all of the innovation.
Only time will tell whether this opportunity is taken or wasted!
This is a very interesting Video
It really does support what we have been saying for a long time – there is a real need for Government – Central and Local to come together and collaborate across back office functions. This will drive out massive efficiencies without the negative impact on front office services.
xynergie have the skills, experience and will to deliver massive value, improved performance, reductions in costs and efficiency gains across both public and private sectors.
In the Gartner report Business Process Outsourcing Vendor Consolidations: Is Your Contractor at Risk? it suggests that buyers should beware of the “nuances” of the following factors on the stability of BPO providers: the economic crisis, unprofitable contracts, loss of “marquee” deals, overexposure to the banking sector, capitalisation for deal pursuit, and levels of BPO contract cancellation.
So what do Procurement Heads need to be aware of to avoid such an issue?
Some BPO providers are carrying unprofitable contract portfolios, largely stemming from “too-much, too-soon” pursuit of deals, without much thought as to how to transition them to a standardised, rationalised, profitable state of ongoing operations.
Procurement Heads should gain insight into prospective providers’ deals to understand how profitable the vendor is. Most vendors will be reluctant to share this information, some will not, as there is a growing awareness of mutual dependency that characterises BPO.
BPO is a partnership and trust is the key to success. Being open about the profitability of their BPO business with you, as a client, can engender a mutual understanding of what it will take to be successful in the deal, and in the longer term, this can limit the risk to both parties.
Too much or too little new business?
It is equally important to gain insight into the service provider’s track record of winning new business, particularly over a sustained period of two to three years – paying particular attention to recent contract wins. Handling multiple deals at once is a necessity in outsourcing, and buyers need to know that a vendor can successfully cater to their needs, rather than struggling to deal with a backlog of business.
Although market share in terms of revenue may look impressive, it can be misleading. If they’re essentially running a closed book of business, it is possible that revenue may be shopped around to be sold off to competitors, or new market entrants.
Procurement Heads should also validate whether the vendor is able to exploit new trends, and new ways of conceiving, delivering and managing BPO services.
Influenced by logo clients?
The anchor client is likely to receive platinum-level attention from the vendor due to the strategic ‘do-or-die’ value of the revenue they represent so beware of being a small fish in a big pond. The loss or prospective loss of a logo client is also an important indicator, so Gartner recommends “prudent due diligence”. Ask the logo client for a reference: find out about their experiences with the vendor and assess how committed they are to the vendor.
Understand the cash position that your BPO brings to the table. Some vendors that are heavily leveraged or have become cash-conservative during the recession, may lack the funds to invest in significant front-end transition activities, or bid for the sort of business deals required to maintain the critical mass that is essential for the future success of the business.
Failure to win big deals can also be a bad sign. A vendor’s bid and proposal costs often run in to millions of pounds before the deal is even won, and if a provider has spent “significant cash and months” in deal pursuit, the loss of a large deal to a competitor can be “devastating”.
Dependence on financial sector?
BPO providers that are wedded to the banking and finance sector may face a particularly uncertain future. Exposure to the banking sector is by no means an absolute harbinger of doom, but as the financial services sector accounts for around one-third of the total BPO market globally, some sourcing executives will need to be wary.
Financial services pure-plays and BPOs that generate more than 85 per cent of their revenue via financial services will be most vulnerable, according to Gartner. Providers with significant amounts of BPO revenue from the banking sector were the first exposed to the credit crunch, then the meltdown in the financial services sector, and wider global recession where they could be the most exposed.
Contingencies for contract termination?
Over the past two years Gartner has seen the rates for contract cancellation and in-sourcing rise sharply, and there is no reason to suppose that this trend will be reversed. So it is increasingly important for BPO sourcing managers and their legal advisors to build exit strategies into contracts, and develop contingencies for contract termination, before signing any future deals.
Include clauses in the contract covering change in ownership, and using language to the effect of “in the event of a change in ownership, we can terminate the contract if we so choose” (with proper consideration given to the acquiring vendor’s “forward pathway”), and taking the management of the relationship with the BPO beyond tactical operational issues.
Set aside time through a formal communications schedule for both parties to assess the strategic health of the relationship, because relationship management can help to reduce the likelihood of contact cancellation.
The cost of changing suppliers can be steep, and nobody wants to switch service providers unless it is absolutely unavoidable or significantly beneficial. But change is an inevitable part of the business cycle, the evolution of the BPO industry seems unavoidable, and some organisations will be unable to avoid switching providers or in-sourcing their business processes at some point over the next couple of years. So now might be a good time to take steps to minimise the pain.
As the UK government looks for ways to reduce costs, it is widely anticipated that there will be a move towards Business Process Outsourcing (BPO) to help achieve the efficiency gains required. One area that may be looked at for outsourcing is Procurement.
Although the jury is out on whether Procurement Outsourcing delivers value, this post looks at what needs to be done to ensure success.
I believe that there are six critical areas in ensuring success;
1. Prepare: Aligning Objectives with the Provider.
BPO deals are typically long term arrangements and they require close and effective working relationships in order to be successful. A BPO provider is essentially an extension of the customer’s internal team. Ensuring a healthy cultural alignment and a trusting relationship between the parties is essential. This includes establishing open and regular communication and a clear mutual understanding of objectives, obstacles, and resolution requirements.
2. Create:Defining and Optimising Processes.
Procurement BPO works better when a customer’s processes are defined and accurate data is available. Some customers may be tempted to outsource the delivery of problem categories that are lacking standard processes, but an outsourcing engagement is not sufficient to fix fundamental process flaws or data gaps.
3. Implement:Securing Internal Support and Adoption.
If all of the internal constituents within the organisation are not committed to support and utilise the new provider, the programme’s success will be jeopardised.
4. Transition: Establishing Strong Governance.
In the course of any outsourcing engagement, issues will crop up and a thoughtful and well-supported governance plan will allow both the provider and the customer to deal with any roadblocks as they arise. Despite any current convictions that requirements will be stable over time, there will undoubtedly be unexpected changes to processes, delivery scope, delivery scale, dependent tools, and data.
5. Transform: Assuring Provider Innovation.
Providers should not be perceived as just order fillers, nor should they focus all of their innovation efforts around reducing their own cost of delivery. Both parties need to promote ongoing innovation by the provider that will benefit the customer.
6. Perform: Validating Savings.
After a few years, the baseline to measure savings can become hazy. This becomes particularly problematic when there is internal pressure to justify the cost of outsourcing, or when some portion of the provider’s payment is based on risk sharing.
Embarking on a Procurement BPO evaluation can be a challenging time for any organisation. With a sound evaluation methodology, an unbiased perspective, and a well-informed understanding of the potential benefits, costs, and risks, organisations can make value-creating decisions more confidently and execute those decisions more effectively.
The new coalition government has rather erratically announced a £7.5bn cut in the budgets for BSF and there is yet another outrage from local communities that have been affected.
Although, I never hear of any realistic alternatives from the moaners, having read a range of articles on the subject over the last week or so, I believe that there is a real option that so far just doesn’t seem to have been considered.
Looking at some of the designs that have been submitted for various projects throughout the country, it is evident that the architects are using the opportunity to make their mark in the local community and on the face of it, I don’t have any real issues.
However, it must be remembered that first and foremost, a school needs to be functional and it is apparent that some of the newly built schools just aren’t and that’s where the designers have got it wrong. Design over function never works!
So, what’s the alternative, an alternative that will reduce costs and just maybe facilitate the building of more schools?
I’m working on the premise that a school is a school and given schools of similar size, the obvious question is why do we need to have different designs. Lets concentrate upon designing the ‘ideal’ functional school and lets make sure that all future builds utilise at least 90% of this standard design. The remaining 10% will concentrate upon the look and feel and will facilitate some individualisation and styling.
The approach that I’m proposing is in practice in the motor industry – the Audi A4 has exactly the same underpinings as the VW Passat, as well as a Skoda and a Seat model. Although you can see the familiarity of the four cars when they are together, they still retain their individual styles.
Why can’t this be applied on designing schools?
That’s the question that we should be asking and forcing the government to consider.
Can Procurement continue to operate as it has for many years?
Can Procurement professionals continue to simply manage categories and focus all their attention on getting better deals from their supply chain?
I believe that the answer to these two questions is the same – absolutely not!
As the global economy sways in the wind almost daily at the moment, Procurement professionals have the opportunity to jump up, grab hold of the opportunity and drive change in the way that organisations think about and manage the supply chain.
Collaboration is the future and Procurement can and indeed should look to drive a collaborative spirit into the heart of every organisation (both private and public). Having worked with many organisations, I’m still surprised that;
- organisations still operate in silos – this is at the root of some of the issues in the UK public sector where departments do not collaborate at all
- category management is at the very core of procurement functions but this tends to focus on driving better deals with suppliers rather than looking at improving the end to end planning process
In future, we need to ensure that a collaborative spirit is applied across the whole organisation.
Collaboration is required throughout the supply chain process, from planning to ultimate delivery. It’s only when we get all of the key people (both internal and external) around the table to discuss openly the challenges faced by the organisation will sustainable solutions be found. Operating is a position of openness and true partnership is the way to go. Embrace every part of the supply chain to take maximum advantage of their expertise and knowledge.
Procurement functions are in an ideal position to take advantage of this opportunity – to become the conductor, the facilitator, the devils advocate.
Yes Procurement has a future, but not as we know it presently!
We have just released our latest white paper, entitled “How to boost your bottom line in a difficult economy by re-engineering your procurement function”
The paper covers the extremely topical issue of how you can reduce your overall spend whilst improving service delivery. Download your free copy here – http://www.tipsconsulting.co.uk/WP-procurement-process-reengineering.php
Even a day after the event, I still can’t believe how utterly useless the England football team was against Germany. The way that those same players that a few weeks ago were thought of as world beaters dissipated into also rans beggers belief.
Which got me thinking?
Within your organisation, what can you learn from this miserable defeat?
Who within your organisation is the Gareth Barry, runs around a lot like a headless chicken and delivers bugger all, or a Steven Gerrard, a leader with absolutely no passion whatsoever. Or what about John Terry – my one memory of the whole world cup is when he tried to head a ball that was a foot off the floor!
I could mention Wayne Rooney – promised a lot but didn’t deliver, Emile Heskey (why did he bring him on at the end?) – the person that you wanted to close the deal but delivered dead ducks all year long. I could go on and on and on!!!
All of these players (probably with the exception of Heskey) deliver week in, week out for their clubs, so why not for England? How many individual stars do you have in your organisation that seems to have everything but when you bring them together, 2 + 2 (not the latest line up for Capello) makes 1.
This is even more important to consider when you are reviewing your supply chain. Each aspect/ party of your supply chain are inter-dependent upon each other. What can you do to ensure that your supply chain plays like an Argentina or for that matter Germany, rather than England.
Within our latest White Paper, I explain some ideas about how to accomplish this.
Download your copy now by clicking here
Emergency Budget – is there an alternative way to realise the savings that George Osbourne so desperately craves?
Over the last 13 years, the British economy has got into a right mess in the belief that spend, spend, spend was the way to generate growth in the economy. On one level, this approach succeeded – the UK economy did grow but the growth was achieved on the back of massive debt, both personal and within Government.
The result – the biggest deficit ever and massive public borrowings that will take generations to repay.
So the new coalition government have little alternative but to blame the previous spend, spend, spend approach of the Blair/Brown administration and implement massive cuts in public expenditure and increase taxation in order to balance the books.
My question to you is whether this is the only way to get out of the mess that we find ourselves in.
Lets look a little deeper into the output from all of this spend over the last decade;
- a massive public sector – the size of the public sector increased massively under the labour government that tried to control every aspect of our lives
- gross excesses and duplication in front line services – you only need to look at either the business support or social support services to see evidence of this duplication. The result is that people and business just don’t know who to turn to for help and advice and instead go to talk to many different departments all offering something similar
- private sector companies getting fat on the back of public sector contracts – this is prevalent in the business support area where contracts are awarded for support structures but with no real evaluation of success ever undertaken – how can we ever know whether we got value for money
- inefficiencies across all Public Sector bodies – a recent IoD study highlights that if the Public Sector had maintained the level of efficiency gains achieved within the private sector during the labour government, the savings would be exceeded £57bn!
So what can be done?
I suggest that the most effective approach would be a route and branch review of what we need from each public sector body – what are they there to achieve and more importantly, what do the public require from them, becuase after all they are there to serve the public.
In private sector, we challenge the status quo at every opportunity – I don’t see that in Public Sector organisations.
My experience of the Public Sector is that they shy away from looking at best in industry practices or from getting involved in collaboration projects – they hide behind the comment that “the public sector is different” and therein lies the problem.
The longer the Public Sector is allowed to bury its head in the sand, the longer it will take for us to get out of this mess.
We need to aggressively cut out waste from the system.
We need to challenge every activity and service to see whether it is adding value
We need to completely review how we procure goods and services – we can demonstrate how to boost bottom line profits by re-engineering procurement processes - this is as valid in the Public Sector as it is in the Private Sector
We need to encourage Private and Public sector firms to collaborate to ensure that best practice is translated and we rid ourselves of the mistaken belief that the ‘public sector is different’
Yes, this will create job losses, yes it will have an impact on all of our lives and yes, it will probably mean that we will still have to raise taxes.
However, it will mean that we have minimised the impact – it is completely unreasonable to think that we can sit back and do nothing – we all have to take a stand and do something to ensure that our children and our childrens children can live in a country that can provide them with a platform to achieve greatness.
Lets stop moaning about it and lets stop trying to protect every aspect of our public services. Rather, lets ensure that this Government listens to our needs and makes the changes that are required rather than the ones that will get maximum political impact.
It will be interestin to see what George Osbourne announces this afternoon.
Watch this space….
In a recent article, the UK Government has announced that they are moving to an aggregation model to generate increased procurement savings – see article here http://www.supplymanagement.com/news/2010/aggregation-layer-to-consolidate-government-buying/
So is this the answer to the UK deficit?
I’m sure that there will be benefit in this approach but I fear that we are missing an opportunity to radically review the way that Goods and Services are provided.
By employing a more structured approach to agrregation and supplier rationalisation, it should be more than possible to realise annual savings in excess of 15% of spend. In many instances, 15% will be conservative.
Want to know more about how the Government or indeed your business area can realise such savings? Then click here and I’ll be delighted to tell you about our Integrated Procurement Solutions