Outsource Magazine

Outsourcing has long been an effective method of streamlining businesses and cutting costs, and in times of austerity, its importance once again comes to the fore.  But while the private sector has benefitted from outsourcing for many years, encroachment into the public sector has been incremental and sometimes unpredictable.  

There were murmurings in May that government plans to open the public sector to private firms would not go as far as first thought.  The share price of both Capita and Serco even dipped briefly as a result.  Such fears were allayed however, when the Open Public Services White Paper was finally published in July. 

David Cameron was adamant that "the principles it sets out will make it impossible for government to return to the bad old days of the standard state monopoly". So there are opportunities for private outsourcing firms, a variety of SMEs and charities to step in and provide the services that the government can no longer afford to provide. 

One potentially fruitful area is a joint approach from outsourcers and charities.  The profit and non-profit sectors are inevitably moving closer to provide public services and if they can manage their unfamiliar new bedfellows, it may well be a happy marriage.  But what exactly can each sector bring or contribute towards delivering a successful public service?

The private sector has been given the responsibility to take on a public service role because it has experience and expertise in budget management.  Publicly managed, many service areas have been poorly managed and spent unwisely and even beyond their means. Private outsourcing firms can be trusted to keep their budgets under control.  But it is not just services.  Any outsourcing company, which is able to procure the products necessary to the private sector, such as medical equipment, is in a good position to flourish. Financial efficiency is one thing, but quality of service is still essential and it is here that the non-profit sector can truly contribute. 

Charities, by their very nature, have an intimate working knowledge of the needs of the public.  Their expertise is fostered from the grass-roots, a world away from the boardrooms of the private sector.  Working from each other’s inherent knowledge and experience can maintain a partnership that is both financially efficient and sensitive to the needs of the public.  One such example is the work being done in the prison sector by Serco and the charity Turning Point.  Both recognised a lack of end-to-end support for re-offenders and Turning Point bought their experience of helping those suffering mental health issues and substance abuse to the work Serco was doing at HMP Doncaster and Belmarsh West.

But there is another crucial aspect in which profit and non-profit sectors are coming together. Since the financial downturn, and under the threat of a double-dip recession, charities are under increasing pressure to streamline their own finances.  This can be seen in the growing trend of charities with shared aims merging.  The prospect of outsourcing financial services is becoming ever more attractive to charities as they attempt to cut costs. Clients of outsourcing firm Charity Business save on average around 40 per cent of their back office costs, totaling over £135 million, which leaves extra available for charitable purposes.  

Outsourcing financial services can also bring a hardened and extensive knowledge of the methods of fund raising crucial to the non-profit sector, particularly in such testing times.  With local outsourcing companies joining with local charities to provide local services, there is the opportunity for charities to tap into the financial experience of the private sector, and the opportunity for the private sector to provide this essential service to the non-profit sector.

Public sector spending cuts, reform and the financial crisis are bringing the profit and non-profit sector together.  But the mistrust and unfamiliarity of this arranged marriage will be forgotten if they can work from each other’s experience to provide cost-effective public services.  The closer they become, the more opportunity there will be for charities to outsource their financial services. The opportunities exist now for the profit sector to embrace the brave new world of the not-for-profit arena.