In the media

The public sector is dependent on outsourcing, and this places particular demands on the internal organisation

Zeeshan Rajan

By Torsten Knudsen, Zeeshan Rajan


15 November 2023

The struggle to access the right IT skills is acute. This is now being solved in the public sector by outsourcing more and so gaining access to the right resources, and this pits completely new demands on supplier management.

Over the past 10 years, the primary reasons for IT outsourcing in the public sector have been lower prices and a need to focus more on the core business.

That has changed. The primary driver in the public sector is now the way outsourcing provides the necessary access to resources and talent.

This change is due to a general challenge in obtaining specialised resources, especially for smaller public companies, as they cannot match the salaries of specialists in the private sector.

We see this particularly for areas within data management, cloud and security, which have an extraordinarily high demand for skills.

Due to the high demand for highly specialised skills, salaries have increased, and the public sector is finding it difficult to recruit these specialists.

Therefore, they need to acquire them through outsourcing in order to transform their business and keep up with developments.

The private sector does not have the same problem. Here, outsourcing is still primarily used to enable them to focus on the core business – something that in the public sector is only used as an argument by one in four. All these figures are taken from this year’s Whitelane's IT sourcing report.

The public sector has also been through a great deal of digitisation, which will only continue.

But as the demand for specialists has increased in the private sector, they have disappeared more and more from the public sector, and therefore you now have to outsource to gain access to the right resources and skills.

Suppliers have a large amount of resources as well as a greater knowledge and more specialists to draw on. The experience and knowledge of specialists can be used widely between sectors and create better results for end users.

This is all well and good if the internal organisation in the public sector can control suppliers and their delivery. However, in our experience, in certain places this can be a challenge.

Here is our take on why this is so and the best possible way to overcome it.

Get control of your needs and the supplier market

As a customer, you must always have set out your own requirements and conducted a real needs analysis before a tender is launched.

If you outsource to gain access to resources and talent, this requires in-depth knowledge of potential suppliers, as it is important to choose the right suppliers who know your company or industry best.

What you should look for in a supplier is a really good knowledge both of you as a customer and the sector you are in.

For the public sector in particular, this requires knowledge of how the public sector works, e.g. both in relation to documentation requirements and bureaucracy.

Many public sector companies do not have problems with the English language, but all notes, settings and the like are always in Danish. Therefore, it can be difficult for non-Danish companies to understand what is going on when they have to supply resources to the public sector.

It is therefore imperative to have employees who can act as a link between Danish customers and other cultures when outsourcing in the public sector.

Proper supply chain management is the key to success

The management of suppliers requires a focus on several areas.

For example, you must have the right skills to understand the contracts, follow up on the delivery, know your own needs and wishes and most importantly, you must fill internal roles with the right people and have the right processes in play.

The very act of understanding a contract and what it says is something that the public sector is good at, and has been for a long time.

The challenge that many public organisations are struggling with now often lies in being able to communicate and collaborate with large suppliers, because the two parties are not synchronised in their processes and organisation.

The best way to work with a supplier, and so manage them best, is if there is consistency across organisations and processes.

This means that if the supplier has a service delivery manager and an account manager, then you must have a similar role that they can communicate directly with.

If there is not, the collaboration will be muddled and inefficient and it will be difficult to hit your targets for much of the delivery and continuous improvements. This is especially true if you as a public customer have not communicated your needs and wishes effectively, or if it has been communicated to the wrong person or in the wrong forum.

When you, as a public organisation, have several large suppliers, this will result in an internal organisation that is divided by projects or core systems instead of being based on best practice. You will not get cross-functional cooperation and sharing of common experience.

Therefore, as an organisation – public sector or not – you need to consider the model you want to steer by and collaborate with the supplier on.

The best results are achieved if there are relatively similar roles in both supplier and customer.

However, this can have a negative effect if you have to make too big changes to fit in with the supplier, as it can cause too much distortion in your own organisation and processes. You must therefore carefully consider how cooperation with the supplier should be managed.

Regardless of the level of outsourcing, it requires clear and mature supplier management.

Even if you have outsourced, you must be able to manage the suppliers' delivery, act as a counterweight and ensure that the internal organisation knows what the supplier offers and what the agreement is.

If this is not in place, your cooperation with the supplier will be inefficient, and the delivery will not match your needs.

And when the delivery does not match your needs, the consequence is either that it has to be corrected through increased costs and more time, or that the quality of delivery is not what it should be.

Read the article in Danish Computerworld here.

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