Less than a third use a formal measurement system, compared with 53 per cent of public sector organisations, research shows
11 December 2003 - The public sector is more stringent in measuring the benefits and value for money of outsourcing IT projects and services than the private sector, according to the second volume of research into the differences between the two sectors, conducted by Benchmark on behalf of IT services supplier Steria. Yet high profile public sector IT project failures are in danger of overshadowing the significant number of successes in the sector and the sharing of best practice, warns Steria.
High profile failures not the full story
A combination of evidence shows the public sector to be better and more rigorous at managing IT contracts. Whilst over half of public sector organisations have a formal measurement system in place, just 32 per cent of private sector organisations measure the benefits of IT outsourcing in a systematic way.
“These findings may come as a surprise to many, given the number of recently publicised IT project failures in the public sector,” says John Torrie, CEO, Steria in the UK. “Yet the research, as well as our own experience, points to many successes within the public sector as a result of good measurement and management. These tend to be overlooked because of the general perception that the public sector is a single entity, handling IT outsourcing in the same way across the board. Far from mismanaging such projects, the majority of public sector organisations not only measure service delivered by an external service provider, but also develop contracts with measurable SLAs far more effectively than their private sector counterparts.”
The research also shows that the public sector takes a far more holistic view than accepted stereotypes would suggest. When gauging the effectiveness of an outsourcing investment, 60 per cent of public sector organisations use Total Cost of Ownership (TCO) as a benchmark, in comparison with 40 per cent of private sector companies. This demonstrates the public sector’s concern not only with the outcome and timescales of IT projects, but also with monitoring and subsequently controlling the cost of their external service provision.
Evaluation is the key to success
John Torrie, CEO, Steria in the UK, advises: “Effective evaluation, as well as supplier selection, is the key to outsourcing success - we urge those who contract with an external service provider to build clear measurement tools into the contract with a supplier for regular review. Benchmarks are virtually worthless in measuring outsourcing success without a formal measurement system in place to validate them.”
As a result of the research, Steria is publishing a guide for both sectors to creating successful and long-term relationships with IT suppliers, entitled ‘The Maxim for Best Practice Outsourcing’. The guide will be available in January 2004.
•The public sector cites customer satisfaction as an important measure, with 58 per cent of organisations giving this as a benchmark, compared with 51 per cent in the private sector.
•A greater number of public sector organisations enter into a pay by results agreement with their external service provider – 29 per cent, versus 22 per cent in the private sector. The private sector is likely to redress the balance – 40 per cent of private sector respondents intend to adopt a pay by results arrangement in the future.
•In general, the public sector expects a narrower range of business benefits as a result of IT outsourcing, whereas the private sector has very high expectations of a wider range of business benefits:
•53 per cent of the private sector aimed for lower costs of IT, as opposed to 36 per cent of public sector organisations
•42 per cent of the private sector aimed for the ability to control costs, as opposed to 31 per cent of public sector organisations
•56 per cent of the private sector expected improved service levels of IT, in comparison with 36 per cent of the public sector
•53 per cent of the private sector expected access to specialist support, compared to 42 per cent of the public sector
•53 per cent of private sector companies want the ability to concentrate on their core business, in comparison with 29 per cent of public sector companies
•42 per cent of private sector companies hope to free up IT staff for other projects, in comparison with 20 per cent of public sector organisations.
Notes to editors:
•Survey conducted by Benchmark Research on behalf of Steria Limited during the Summer of 2003.
•Results based on one hundred structured telephone interviews conducted with organisations using external service providers for IT applications. The interviews were split equally between public sector organisations and private sector firms.
•These results are from the second half of a two part report. The first half of the research was released on 4 November 2003. Full copies of the research are available from Steria in the UK.
About Steria Limited (www.steria.co.uk)
Steria in the UK delivers a full services portfolio, combining consulting, systems integration and managed services, with a focus on major business areas including the public sector, finance and transport. Steria employs more than 1,500 people in the UK.
About Steria (www.steria.com)
With 2002 revenue of 1.018bn Euros and over 8000 employees, Steria is one of the top ten IT services companies in Europe. Present in 12 countries worldwide, the Group is positioned as an end-to-end IT services partner thanks to the mastery of its three core businesses: consulting, systems integration and managed services.
Its acknowledged expertise in managing large-scale projects and its range of industrialised solutions in Europe enable Steria to offer its customers a reliable service with commitment to cost and risk control. The Group has strong sector-based expertise in the Public sector, Banking and Insurance, Industry/Utilities/Transport and Telecommunications markets.
Created in 1969, the Steria group is a pioneer in employee shareholding, with nearly 30% of its capital being held by employees.
Steria is listed on the Premier Marché of the Paris Stock Exchange and in the SBF 120 index.
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