The how, when and why of public sector outsourcing

For egovernment to deliver on its promise, the emphasis must shift from the electronic front office to the back office, and from web sites to better integration of data and applications across agencies and tiers of government.

This is a much more complex endeavour than simply opening virtual service access points on the Internet, and poses fundamental questions about the core mission and processes of governments, as opposed to the frills and thrills of web sites and portals.

How can governments provide excellent service levels online to constituents in a climate where attention to cost justification and value for money is top of mind?

Funding, favorable political climate and skills are all key.

However, the single most important factor is the way roles and responsibilities of the public and private sector are blended to deliver and manage electronic services.

The pace of technology change, combined with increasing expectations from constituents and ambitious plans to become citizen-centric and more transparent all call for more-intense and effective collaboration between public-sector organisations and a variety of private-sector suppliers (including, but not limited to ICT service providers) and intermediaries.

Collaboration between public and private sector can take different shapes, ranging from providing skills or deliverables - as part of a change project or business initiative - to managing services or solutions - typically as part of an ongoing service delivery.

An additional role for private-sector parties is to intermediate, aggregate or add value to egovernment services.

As well as the licensed intermediaries of government services - such as car dealers registering vehicles or accountants filing tax claims - other intermediaries can act as integration agents.

They can join up services on their customers' behalf (e.g. a utility company providing a change of address service), or even bundle proprietary and public services to add value to each other (e.g. travel agents or banks).

Any sourcing strategy must start with a gap analysis between strategic goals in a given timeframe and current internal capability - competencies, processes and services.

This will reveal which processes or services are either unsuitable or do not have sufficient resources to be run internally.

Government organisations must understand what the local services market can provide in the expected timeframe.

The evaluation must consider the simple availability of a service as well as its service maturity, quality and stability.

Different sourcing models ranging from in-sourcing to full outsourcing, from multi-sourcing to joint ventures of different nature.

Relationships need to be managed over time, which brings in the importance of solid governance framework addressing culture, organization, management, skills and process issues.

It is essential that the contractual relationship benefits both parties.

Whereas this means increased profit and revenues for the external service provider, government organizations have to look carefully at whether and how that relationship has a positive impact on three different areas: service levels to constituents, operational efficiency and fulfillment of political objectives.

Government organisations must also understand the different nature of deal. If it aims at cost containment, service level and price will be the dominant factors.

If it aims at productivity gains, its value will depend more on good relationship and flexibility.

If it aims at innovation and new business models, alignment and vision will be critical to success.

A sourcing strategy must be integral part of the e-government strategy and must be a concern for all top level executives in government, not only the CIO.