Governments’ demands limit IT Outsourcing

Government bureaucracy and red tape stand in the way of IT companies trying to deliver efficient services…

By: Mark Kobayashi-Hillary, IT Editor, Shared Services & Outsourcing Network (SSON),

There are two stories in the press in the last month that are apparently unconnected, but should be of interest to those focused on IT outsourcing. First, the British government is rumoured to have extracted over £800m of savings from the top layer of IT and hi-tech service firms used by the government. The figure is yet to be confirmed,, but it’s part of a clear drive to reduce the running cost of government IT – similar to other administrations around the world, including the US.

The big difference in the UK is that the new government was elected in May this year and they almost immediately hauled in the leaders of all the major suppliers, holding a metaphorical gun to their head and demanding rate cuts and shorter contract times.

At the time, I commented that the government might be able to achieve far more by working in partnership with these firms, perhaps encouraging them to work together more effectively. If twenty chief executives can be summoned and told to reduce their price then surely the same executives can be brought together and tasked with finding new ways to deliver government services.

Given the rumours about large cost cutting it seems that the more simplistic measure of success has won out.

And this is my real issue over the way government behaves with modern organizations sometimes. Take a look at the new business visa fees being applied in the US. It doesn’t fix the perceived problem of immigration, yet it adds another layer of bureaucracy to companies that are trying to deliver efficient services.

Companies in Europe and the US are all scraping their way out of recession, so adding complexity to the way they do business is not going to help, which leads me to my second point, on immigration and IT services.

The British Business, Innovation, and Skills Minister, Vince Cable, was in Brazil last week talking of the need for more British firms to engage with Brazil. There are some very strong business sectors in Brazil, such as banking, energy, and the environment, but what is notable is how fast the IT services sector is growing there. The general economy is growing at over 7 percent a year, yet the IT sector is growing at over 10 percent, with this growth forecast to be sustained for several years.

With the recession only just over at home and growth limping along at somewhere just above a flat-line, it’s understandable that firms from the US and Europe are looking to Brazil for trade. Capgemini just announced a $298m investment into local IT supplier CPM Braxis, giving them a 55 percent share of the company.

Most of the local IT suppliers in Brazil are busy with the vast domestic growth, but they are exploring new options outside their borders and particularly trying to export services to the US and UK.

But how are these new international partnerships going to be forged in the present climate of anti-immigration rhetoric? The British government is planning a cap on all non-EU citizens and the US government is adding charges and increased scrutiny of foreign workers.

Government leaders are trying to achieve drastic savings, but making it harder for IT professionals to work internationally. Something somewhere doesn’t compute.

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