Outsourcing - the insider guide

Contracting out services is a growth area, but managers need to maintain the interests of their existing employees to avoid strife.
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THE DECISION to contract out part of a business is one that few managers relish. But outsourcing of support and services, from buildings maintenance to IT, is on the increase.

Among white collar tasks in both the public and private sectors, IT departments are most frequently candidates for contracting out. Companies turn to outsourcing to concentrate on their core business, gain access to better skills or technology and, above all, to save costs.

"The market is still growing," suggests Kim Lambert, commercial manager at Integris UK, the outsourcing arm of Groupe Bull. The first wave of outsourcing was contracting out data centres and mainframe operations, she explains.

Now, companies are looking to outsource support for PC networks too. This might be the help desk, applications development or maintenance. In the public sector, whole computer-based tasks, such as revenue collection, are being put out to tender. The first wave of outsourcing involved self- contained data centres, which were easy to transfer to the IT contractor. PC-based outsourcing raises the prospect of the contractor and client's staff, former colleagues, working on the same site for different bosses.

Outsourcing brings tangible benefits. According to a study by Benchmark Research for Integris, more than 50 per cent of organisations found that outsourcing cut costs. In the public sector, that rose to 83 per cent. Given the size of IT budgets, the savings are frequently significant. Organisations also reported that the quality of the IT services improved.

Managers will find that outsourcing is far more effective if the contract is detailed and carefully written. The reasons for outsourcing also have to be right. "If you are going to outsource, you should not outsource a problem," says Ms Lambert. "You have to realise that if you do that, you are not going to cure the problem, just move it."

Unfortunately, outsourcing has a rather poor reputation among both managers and staff. It is seen as problematic for managers and unpopular with employees. Rightly or wrongly, many IT workers feel that outsourcing is purely and simply a way to cut costs, and that their jobs may be at risk as a result.

Concerns about the effects of outsourcing on staff prompted Integris to commission the research, which polled decision makers, contract managers and employees. One weakness quickly came to light: communications between managers and staff left much to be desired.

Even those companies which put efforts into explaining the effects of outsourcing before it took place fell down by failing to maintain communications once the contract was let. "It showed how important attention to communications is, especially on a one-to-one level," says Ms Lambert.

Uncertainty, the research found, was the most important cause of stress among affected employees. More than 40 per cent of surveyed staff found outsourcing to be stressful. Staff worries about their jobs before contracting out gave way to new concerns about their roles afterwards.

Almost a third of employees said they found the new relationship a source of tension. Managers, Integris believes, should do more to ease the transition from working as colleagues to working as customer and supplier.

Researchers also found that workers who transferred to the outsourcing company - usually a large, international IT firm - had high expectations about improvements in salaries and benefits but, especially, in career progression and in training. Salary increases were most marked in the public sector, where 53 per cent of staff reported that pay had improved, although working hours increased for many. Where outsourcing companies failed to deliver on their salary promises, it formed a major source of resentment.

In response to the problems, Integris has drawn up a People in Outsourcing charter. It hopes the document will help companies overcome some of the problems that have hampered contracts in the past. This is especially pertinent as some of the original outsourcing contracts let in the early 90s are coming up for renewal.

The charter covers steps managers need to take before the contract begins, at the start of the contract, during the outsourcing period and, as importantly, when it comes to an end. The emphasis is on good communications, both between the contractor and the client, and between both sides and the employees involved.

Employees, Ms Lambert admits, often feel powerless when their functions are transferred to another firm. Where contracts are now being let again, there is no guarantee that the same outsourcing company will win the contract, so staff may face their third employer in 10 years.

"Inevitably, they may not win the contract again," she says. "How do you handle that from a staff point of view? Outsourcing is a decision people do not make for themselves. You choose who you work for, but when you are outsourced, that choice is taken away from you."

The charter stresses the importance of communications throughout the outsourcing process. The outsourcing company, for example, should provide transferring staff with an environment where they can ask questions openly. The contractor should also provide support for managers and team leaders who need to explain the changes to the workforce.

Integris says that companies involved in outsourcing outside the IT sector have approached it about the charter to see if it can be adapted to their own needs. In fact, much of the charter is good management practice and common sense; it is not unique to computing.

"You have to remember that staff are your real asset, not pieces of metal," Ms Lambert says. "Keep people informed. So many managers do not tell staff what is going on."

The Integris People in Outsourcing charter is available on the Internet at: http://www.integris.co.uk