Local government outsourcing shrinks workforce 35%

The number of staff directly employed by a fifth local authorities will reduce 35% by 2020 as a result of more outsourcing, according to research.

The research of 267 council CEOs, carried out by the Local Government Journal and Hay group, revealed that 51% of councils intend to outsource more, compared with 10% that said this in 2013.

Other findings of the research found 7% of council CEOs think their organisations would outsource all their services in the future, with the council itself he provider of last resort. Five percent of CEOs said they expected the council to outsource between 80% and 100% of its services by 2020, while 16% said their authority would bring more services in-house.

But will this overall appetite to outsource mean more IT will move to third-party suppliers?

The research refers to the outsourcing of council services in total but the trend can also be applied to the outsourcing of internal IT. Cash-strapped local authorities are looking at ways to cut costs and IT is often a prime target. According to research from NelsonHall, local government increased spending on IT outsourcing by 58% in the first three months of this year.

One former IT head in local government said that, although it is unlikely that all IT will be outsourced, new technologies are making it easier for councils to do so. “It is unlikely that you would see all IT outsourced, because you do not want to outsource your ability to plan for the future of IT,” he said.

“The role of the IT department will be to decide what you outsource, who you outsource to, and how that will affect your business.”

He said most applications today are available through the cloud and technology from different suppliers works together, which makes it easier to outsource. “People are buying lots of different technologies from lots of different suppliers, which lends itself well to outsourcing,” he said.

Traditionally, software was highly bespoke and authority-wide to cater for a local authority’s needs, but now councils buy from a much larger pool of suppliers and, with fewer bespoke systems, can even share IT with other authorities.

For example five local authorities saved £31m by moving to shared services arrangements, according to a recent report.

The study, commissioned by public sector lobby group the Local Government Association, and produced by consultancy Drummond MacFarlane, found five separate shared service arrangements made total savings of nearly £31m over a five-year period.

The local authorities included Cambridgeshire and Northamptonshire county councils; Devon and Somerset fire and rescue authority; Herefordshire council, Herefordshire primary care trust and Wye Valley NHS trust; Procurement Lincolnshire; and Vale of White Horse and South Oxfordshire district council.