| What is outsourcing? Just as the acronym 'IT' | | | | sure you have examined everything."The EDS |
| embraces anything from the electronic display | | | | contract spans a wide range of functions from |
| system on a Boeing 737 to a Blackberry, so | | | | the maintenance of the building fabric to |
| the generic term 'outsourcing' is an | | | | managing office functions such as reception, |
| ever-expanding suitcase of options and | | | | the switchboard and reprographics. It |
| opportunities. It's a term that has moved | | | | includes landscaping, catering, project work |
| into normal business nomenclature without any | | | | and all of the management services. It takes |
| very distinct definition. Even the Penguin | | | | a Helpdesk with seven operators to manage and |
| English Dictionary struggles: 'to obtain | | | | issue requests out to the appropriate |
| components, services etc from outside | | | | department for actioning. Timescales, as set |
| suppliers.' Insofar as there exists a | | | | out in each client agreement, must be |
| consensus among the experts, there is | | | | strictly adhered to. Monthly meetings are |
| agreement that the key to successful | | | | used to report back on service delivery and |
| outsourcing lies in differentiating a | | | | ensure client satisfaction.Client |
| company's 'core' operations from those that | | | | expectations can sometimes be unrealistic: |
| could be easily contracted out to a third | | | | "You may need to manage expectations to an |
| party and be managed elsewhere with little or | | | | extent," says Gordon Duffy. "Sometimes a |
| no strategic impact.Back in the mists of | | | | client's perception is that it'll start on |
| time, this meant punch cards and the Payroll. | | | | Day One and on Day Two everything will be |
| Later, it was the public sector that took the | | | | just fantastic, but that's not real |
| lead in outsourcing catering services and | | | | life."What Alfred McAlpine does deliver, and |
| waving goodbye to the lovely ladies in their | | | | this is repeatedly and independently verified |
| black and white uniforms who used to wheel | | | | by its clients, is: "its own culture of |
| the tea trolley along the corridors of | | | | passion and integrity, of openness and |
| Whitehall power.From there, we moved on to | | | | collaboration, a willingness to be flexible |
| contracting out IT maintenance and | | | | and to change and evolve alongside the |
| management. When you don't know your HTML | | | | client's needs and plans," as Noel Clancy |
| from your JavaScript, it makes absolute sense | | | | puts it.In the marriage between outsourcer |
| to hand the responsibility on to a company | | | | and outsourcing supplier there is a dynamic |
| that does. Outsourcing could mean anything | | | | that must work, and which needs constant care |
| from contracting in Costa to run a coffee bar | | | | and attention. That does not mean it is going |
| to selling off all of your corporately owned | | | | to be 100 per cent problem-free, "but it |
| properties - as the Department of Work and | | | | means we tackle problems immediately. We |
| Pensions and the Abbey have done - and | | | | don't just do routine customer satisfaction |
| creating a deal where you pay a rent to lease | | | | surveys. Instead, we provide a list of 10 |
| back the premises you need to run your | | | | questions every six months and our clients |
| business while the owner bears responsibility | | | | score us against them. We then act to make |
| for maintenance and infrastructure.From | | | | sure we close any gap between those crucial, |
| landscaping to energy provision, waste | | | | client-specific questions and the service we |
| management to transportation services, | | | | are delivering," says Duffy. "As the client's |
| plumbing to painting, engineering to | | | | business changes and develops, those criteria |
| electronics, there is probably no business | | | | will change as well. What was important in |
| support function that cannot be successfully | | | | January may not be so much so now, and we |
| packaged out.The decision to outsource | | | | need to be able to react to those changes |
| non-core functions can be very liberating for | | | | with flexibility and adaptability."A decade |
| a company. Passing on the responsibility for | | | | ago, no one in the UK had heard the term |
| problems previously perceived as irritating | | | | 'outsourcing.' Now it's normal business |
| distractions that pulled people away from a | | | | nomenclature. The world outsourcing market is |
| business's main activity is profoundly | | | | estimated to be worth around 58 billion euros |
| attractive. If there's a burst pipe or the | | | | and the breadth of just what can be |
| offices all need repainting, you phone your | | | | outsourced has gone from straightforward, |
| account executive or Helpdesk rather than the | | | | self-contained functions such as the payroll |
| plumber or decorator. Someone else has to get | | | | to full property outsourcing deals. The |
| it sorted and sorted quickly.Making it work | | | | potential for growth is vast and the |
| is rather more subtle. Success or failure | | | | opportunities to expand are substantial.The |
| will make or break the outsource supplier, | | | | first major outsourcing of real estate in the |
| and getting it wrong could also cause | | | | UK private sector caused a stir. The Abbey |
| irreparable damage to the client company. A | | | | decided to sell its 1,500 properties to |
| few major crises like that and the concept of | | | | Mapeley in a deal worth £457 million in |
| outsourcing could collapse faster than the | | | | October 2000. Abbey handed over its entire |
| technology bubble burst. Mutual trust is | | | | property portfolio of 603,900m2 to the |
| central.Bill Locke is Group Director of | | | | Bermuda-based company with a range of |
| Strategy and Communications at Alfred | | | | structured leaseback deals from a year to 20 |
| McAlpine plc: "If there is a failure, it will | | | | years long. Ernst & Young estimated at the |
| probably be the result of an error in the | | | | time that the deal would save the Abbey |
| approach. Outsourcing must avoid rigidity and | | | | around £200 million in its lifetime.Though |
| be flexible about change in a company's | | | | the deal clearly put profits on Abbey's |
| needs. What is appropriate at one stage in | | | | books, raising cash wasn't the driving reason |
| the contract may not be so later on after the | | | | for outsourcing. Rather, it was to match the |
| initial set-up period. The values and culture | | | | portfolio to the business plans. Abbey might |
| match between the client business and the | | | | require fewer local branches but more |
| outsourcing contract is crucial. We must be | | | | customer-friendly ones. It would become more |
| able to understand what is important to that | | | | reliant on e-commerce and web activity. It |
| client and be able to adapt and fit those | | | | probably wouldn't need to be saddled with |
| demands into our approach. It is almost | | | | 1,500 properties.The Abbey deal rapidly led |
| chameleon-like."McAlpine recognised that it | | | | on to other companies looking at various |
| was well placed to develop its offerings | | | | levels of outsourcing to streamline their |
| within the growing outsourcing marketplace. | | | | core business operations and make for better |
| Already long established major players in the | | | | management structures. If floodgates hadn't |
| provision of a whole range of different | | | | exactly opened, there were certainly new |
| functions from roadways to power, high | | | | opportunities for companies able to provide |
| pressure pipelines to domestic meters, water | | | | the kind of range of outsourcing services |
| to traffic management, the company began to | | | | being sought.While few operating companies |
| extend into providing an integrated, | | | | could take on an entire real estate portfolio |
| one-stop-shop service for clients.In the | | | | on the Mapeley scale, or like Land Securities |
| early 1980s, the City began responding warmly | | | | Trillium with the BBC's White City estate, |
| to this new business model. With limited | | | | the servicing and facilities management (FM) |
| capital investment, relatively low risk and | | | | arena was wide open.That Alfred McAlpine was |
| the promise of long-term regular contractual | | | | able to spot the potential and act to meet a |
| revenues, outsourcing holds appeal for | | | | new market need is a testament to management |
| shareholders."We were already the market | | | | intelligence and the characteristic |
| leader in utilities services," points out | | | | willingness to respond to opportunities with |
| Bill Locke, "and we had an enviable | | | | purposeful innovation.BOX OUT |
| reputation on health and safety, integrity, | | | | |
| honesty and customer care. We could see that | | | | The Nationwide Building Society |
| providing a day-to-day service that our | | | | |
| clients could rely on was crucial, but we | | | | Robert Cock, Operations ManagerThe |
| wanted to do more than that. We wanted to | | | | outsourcing contract with Alfred McAlpine |
| excel."The capacity to install the | | | | involves all of the engineering maintenance |
| infrastructure, to lay the pipes and build | | | | at the Nationwide's headquarters in Swindon. |
| the roads, to pump water and maintain power | | | | Here, Robert Cock, the Nationwide's |
| systems, was all in place. What had to be | | | | Operations Manager, explains why McAlpine was |
| developed was the centralised management of | | | | chosen to fulfil the contract."We had a |
| it all for each client. All would have | | | | fairly lengthy and well planned procurement |
| distinct and separate requirements, not only | | | | process, once we had agreed the decision to |
| in practical terms but in cultural and | | | | go down this route. We short-listed three |
| business ethos terms too."Companies want more | | | | companies and chose McAlpine for a number of |
| than cost reductions when they consider | | | | reasons. Broadly speaking, McAlpine's |
| outsourcing," says Noel Clancy, who manages | | | | business aligned with ours better than any of |
| McAlpine's contract with the Nationwide | | | | the other candidates. They not only talk well |
| Building Society. "Outsourcing has to be | | | | about what they will do, but they actually |
| viewed as an enabler, allowing a company to | | | | deliver it as well."We had experience of |
| focus in-house business resources and | | | | them. We knew they would take appropriate and |
| management on core functional | | | | necessary action as and when it was |
| areas."Achieving this combination of service | | | | required."During the interviews and pre-award |
| level and customer care is fundamental. "It's | | | | stages, when we were making site visits and |
| all about understanding your customer's | | | | looking closely at management issues such as |
| business," says Gordon Duffy, who manages the | | | | planning, motivation, innovation, dealing |
| account with Electronic Data Services (EDS), | | | | with staff, we found McAlpine showed a |
| an interesting example of an IT outsourcing | | | | coherence right across all levels, from the |
| company itself purchasing outsourced | | | | shop floor to senior management. Their staff |
| management services! "We must of course | | | | management, the interaction with clients, |
| deliver on the key performance indicators, on | | | | provision of information, keeping us fully |
| the excellence of service, but it is much | | | | informed, was all very well managed and |
| more than that. This is about what is | | | | handled. There is an enormous level of |
| important in your client's culture; their | | | | commitment required to mobilise a contract |
| goals, objectives, values. You need to | | | | that achieves a reduction from 37 to a single |
| understand their priorities."It's very clear, | | | | one. McAlpine delivers on that."Openness in |
| when we speak to potential new customers, | | | | these conditions can be tricky and the fact |
| that there needs to be an alignment of the | | | | that we had an existing relationship with |
| cultures, a mutual understanding that is open | | | | McAlpine helped. Our main HQ in Swindon has |
| and honest right across both the measurable | | | | over 3,000 people and with outlying offices, |
| elements and the more elusive ones."The | | | | another 1,500."McAlpine has full |
| run-up, or mobilisation period, before an | | | | responsibility for all the engineering |
| outsourcing contract actually begins is when | | | | maintenance, reactive and planned, the |
| the personal relationship management is most | | | | ongoing maintenance and upkeep of buildings |
| significant. Gordon Duffy spent two weeks | | | | and the responsibility for providing the |
| visiting EDS's 30 sites from Taunton to | | | | quality of service that allows us to focus on |
| Aberdeen initially. Now there are 30 more | | | | our core activities and not on the minutiae |
| sites in the portfolio. "The contract has | | | | of facilities management."Maggie Stanfield is |
| been reset recently, adding 30 more sites and | | | | a highly experienced journalist with immense |
| 90 staff. Assessing each site specifically is | | | | knowledge of business issues. She writes |
| important and is part of getting to grips | | | | regularly for national and international |
| with your customer's business. It can be | | | | publications including The Financial Times, |
| difficult, financially and operationally, but | | | | the BBC and on business in the Middle East. |
| you have to be relentless and make absolutely | | | | |