Why IT Outsourcing in the Public Sector Fails



With the final death-throes of SouthWestOne (https://t.co/yJts5PfJOA) and numerous other public sector IT outsourcing contracts being reviewed, someone needs to ask the question “what went wrong?” – or more importantly “what can we learn?”.

I’ve been around long enough in the public sector to have accumulated a few home truths…….. so here they are:


Avoid political dogma – insourcing and outsourcing fashions muddy common-sense and business judgement. This applies to local authority leaders as much as politicians. IT sourcing strategy is hard enough without politics allowed to get in the way. So, practices which we saw through the 1980s and 1990s of total IT outsourcing in the public sector, as a matter of policy were, in hindsight, costly errors of judgement. It’s not that outsourcing IT is inherently ‘bad’, but the political naivety in how the contracts were designed were doomed to subsequent problems.

Don’t try and predict the future. You can’t with IT. The way in which technology is used changes almost every year and the pace of new models of IT delivery emerge is also increasing (e.g. cloud), so your contracts must be flexible enough to accommodate this. Too many outsourcing contracts are tied into rigid ROI and SLA-driven, models that can only fail over time.

Accept that local public services are complex – much more complex than the private sector or central government. So trying to hedge bets and define an all-singing-and-dancing outsourcing solution is going to be very tough. Under-estimation of the complexity of business change and the role of IT in local government is the number one killer of council outsourcing arrangements.

Don’t outsource a problem – too many council leaders think that outsourcing will be transformational in itself, propelling the organisation to a level of digital maturity that seems unachievable with the existing in-house engine. Well, it usually doesn’t work. If your in-house IT is broken, you need to understand why and know how to fix it first, even if you then use the private sector.

Magic doesn’t exist – Why do we sometimes think that the private sector holds all the answers and can take away all our problems and solve then easily and cheaply? It is very true that the private sector is often more efficient and agile, and can bring experience and skills to bear which are badly needed in the public sector. But let’s be realistic about where the costs, savings and profits lie and get a more intelligent relationship with the private sector. After all, vendors want long-term profit and that depends on delivering high value.


So what’s the answer? It is certainly not to bring everything back in-house. But there is a need for:

  • Greater sophistication in the way IT contracts are established and structured, to reflect the need for less precision and greater flexibility, without dumbing down the need for performance measures.
  • Recognition of the changing role of IT in transforming the public sector and the role IT leaders need to be able to play in supporting transformation and delivering best value. This is a real issue in the public sector.
  • Building in-house IT skills – not necessarily to deliver everything, but to understand how to build and maintain a coherent IT architecture that is fit for a digital age. This is a tough and complex business, nowhere more than in the public sector.

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