UK Outsourcing Index Q2 2015
Shared services accounted for £1.2 billion in central government outsourcing since the 2010 Treasury Spending Review, compared to just £58 million during the previous five years
Outsourcing of shared services also increased in local government during the same period with deal value doubling to £97.9 million
The 2010 HM Treasury Spending Review heralded a surge in demand for shared services in the public sector, according to the Arvato UK Outsourcing Index.
The value of shared services contracts outsourced to the private sector has reached £1.3 billion since the 2010 Spending Review, with central government departments commissioning the lion’s share of agreements worth £1.2 billion.
Before the Coalition Government came to power, central government departments had only spent £58 million on outsourcing shared services to the private sector, according to the findings.
Shared services refer to agreements under which numerous departments or agencies pool back office functions to a single source. The research, compiled by business process outsourcing (BPO) provider Arvato and industry analyst NelsonHall, examined outsourcing of shared services in the public sector from 2006 to the end of June 2015.
Debra Maxwell, CEO, CRM & Public Sector, Arvato UK, commented: “Central government departments moved quickly to work with private sector partners to drive their shared services agenda as part of their strategy to deliver billions of pounds in savings. Though shared services was not new within government, private sector outsourcing partnerships can bring in the necessary expertise for real, large scale transformation, including the drive to standardise processes and implement new technology platforms do to the job. With departments likely to be asked to deliver even more efficiency savings in the forthcoming Spending Review this autumn, the drive to share services will only grow.”
Shared services outsourcing doubles across local government
Local councils have signed shared services outsourcing contracts worth £97.9 million since the 2010 Spending Review, doubling the £53 million agreed during the five years before.
The Arvato UK Outsourcing Index found that deals to share customer services and revenues and benefits processing between local authorities have driven the growth.
Maxwell continued: “Despite a rise, adoption of genuine shared services among local councils has been relatively low. We expect to see a greater number partner up to leverage significant savings, with the next Spending Review anticipated to deliver even greater cuts in funding.
“In light of the scale of savings required, new, revolutionary ways of working will also have to be considered by councils. Whether that’s increasing the use of social media in customer services or embracing robotic automation, the private sector can help authorities drive the transformation and bring in the expertise.”
Local government outsourcing grows outside shared services
The period following the 2010 Spending Review has also seen a 27 per cent rise in the value of revenues and benefits contracts outsourced by local authorities, with £239 million spent in total, according to the findings.
Transactional processes such as Council Tax and Business Rates collections and benefits payments have increasingly been handed over to private sector providers in the last five years.
Maxwell added: “The budgetary pressures under which local government has operated since the last Spending Review have coincided with major welfare reforms and a wider agenda for digital transformation. This has led many authorities to seek solutions from outsourcing partners in areas like revenues and benefits services.”
The Arvato UK Quarterly Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm Nelson Hall, in partnership with Arvato UK.