Outsourcing should be about service

Companies should not see outsourcing as a quick fix solution to reduce costs, according to a user round table event held in London last week.

While external service provision such as overseas outsourcing might reduce costs, delegates said that a company's motivation should be to improve customer service and efficiency.

"We've had some financial benefits, but only because our original systems cost us too much money in the first place," said Richard Dawson, IT director at airline BMI. "Outsourcing is not about substantial cost benefits, it's about service improvement."

The airline outsources its mainframe business applications and desktop services to ICL, and its telecoms system is externally managed by Newburn Consulting.

"We don't want to be managing IT, because it's not core business. IT people are difficult to find and hard to retrain. We would rather work with service providers who are experts in their field," said Dawson, adding that the company has shunned overseas outsourcers and selected recognised home grown service providers.

Reuters has also rejected regular approaches from suppliers offering low-cost Indian outsourcing."You need to be closer to the activity," said Mark Darby, head of the alliance programme at Reuters. "If you go for offshore outsourcing, your main motivator may be cost, but your key motive for outsourcing should be doing things more efficiently."

Reuters has signed a three-year contract with ICL for outsourcing its logistics and supply chain management services. Under the contract, 28 Reuters staff will be transferred to ICL's offices.

June May, chief executive at telecoms company Affinity Internet Holdings, believes that Indian outsourcing is simply a form of cheaper labour. "It's a sad reflection on the company using the service," she said. "It's a form of long-distance outsourcing that isn't sustainable."