Outsource, then backsource

by Harry Heidelberg

Sometimes you have to wonder about the intentions of government policymakers.

The intentions are really important because as a citizen, who admittedly can’t vote, I’d like to know the real background of stuff ups and major debacles. If we find that the intentions behind policies such as going soft on financial regulation or outsourcing are to cosy up to big business, then we have the right to feel defrauded.

The role of the policymakers should be to assure our long term interests. The broad interests, not the narrow ones. The other side of it is ideology. Policy driven by ideology is some of the most dangerous of all. We’ve seen that all over the world.

In Britain, the privatised rail system is dangerous, unreliable and outrageously expensive. No one understands why all that had to happen. In continental Europe many countries have railway systems with near perfect safety records, trains that run so exactly to time that you could set your watch by them and fares that are well priced in relation to local living costs. These systems are in government hands where the mission is to provide safe, reliable and fast transport for the community as a whole. Everyone understands that and loves it. It is even a source of pride for the community. A symbol of a country that works.

This is where I lose interest in ideology. I do support a lot of the neoliberal agenda – but I want safe trains that I trust. I want a working community, not a shambolic mess. Let’s just do what works and toss the ideology out the window.

This doesn’t mean reforms shouldn’t be made, and nor does it mean that the government always does it better. What it does indicate is that a little less slavish addiction to the fads and a little more measured analysis would go along way.

I’m in business, not government so my fear is of fads. Outsourcing was a big one. Like all fads there’s something to it, something a little bit hard to resist. Suddenly you feel that it’s all so obvious. I mean, it seems to make sense that some large company specialising in providing IT services would be able to provide a cheaper service (because of scale) and free your business to worry about real issues such as the core business. IT is just a service after all, and it would be nice to take it off the minds of management and give it to a professional outfit to organise. Besides, everyone is getting sick of the IT people. Let’s stop taking up so much time on IT issues and focus on more important things.

This is where it starts to become dangerous. The outsourcing company will most likely be a gigantic multinational filled with slick PR people and compelling presentations. People will sit in darkened corporate conference rooms watching PowerPoint, slide after slide. People will nod knowingly when they see projected cost savings. Then all are convinced and the negotiations start.

First of all, if you are really big you have to figure out the cost of making your own IT people redundant. No worries, says the gigantic provider. To ease the pain of killing off your own, they will even agree to take some of them. Wow. It’s almost even socially responsible.

The contracts will be drawn up with service levels agreed. This is the assurance that you will get service exactly as you expect and that it really is so much better than you could do yourself. And all at lower prices!! What a great deal!! The hand then signs the paper and the fate is sealed.

Pretty soon you find out you’ve lost some control. In fact you’ve lost a lot of control. Some of it is even intangible. You don’t control a third party employee as you would your own. It all becomes so messy and complicated. IT users start complaining that things aren’t as they were and the gigantic outsource provider starts cheating.

Yes, cheating. For every service issue you have they say they will open a “ticket”. The ticket shows what the problem was, how it was solved and how long it took to sort out. The combined data of the tickets proves how well the outsource provider is doing say on a help desk function. They always cheat with the tickets though. Opening and closing them at times at a variance to reality. Always to make themselves look better. The pressure becomes more and more.

Then you have to bring it all back in and hire new IT people. You have to backsource it. You realise that the article you read in the business magazine about the latest fad actually had some pitfalls. You gather people in a darkened corporate conference room. You turn on the Powerpoint projector again and start, “Today people recognize that IT is a strategic part of the business, an element that is so critical for our future strategy is one we should clearly have in house and have full control over”. Then everyone nods knowingly and you get out of the mess of the IT outsourcing fiasco.

I’m sceptical of outsourcing, even in the business context. If someone asked me about government, I would say that only in rare cases should it be outsourced. IT is not the same as who does the gardens or who takes out the garbage. It’s a little more strategic than that, and it becomes dangerous to give it to outsiders.

In my own company we are backsourcing something right now. For some reason it was decided that an aspect of customer service could be outsourced. The outsourced company was to evaluate complaints and where necessary process refunds or take corrective action to satisfy our customers.

At first glance it seemed OK, because we are totally dedicated to ensuring that if something goes wrong the customer has somewhere to turn and is well treated. The problem became that the provider started making mistakes. Angry customers became angrier. The whole purpose of it was supposed to make customer service SMOOTHER!! Refunds were going astray and some were even being made twice. The worst part was, as with IT outsourcing, the loss of control.

This only happened over the space of a year but we know now it was a mistake. We started to lose contact with the customer and really dig deep into the reasons why some were dissatisfied. We had much less idea of what was really happening and felt we couldn’t trust the provider. When a third party is doing it it is never the same. So now we are bringing it back to where it belongs – inside the company. They are our customers and we’ll deal with them directly. It seems simple, but someone forgot that part.

You mentioned the basket case of Coles Myer (HIH: Will Costello be nailed?, webdiary17Jan). My mother lives interstate and used to have a Myercard. She was a long time customer and remained reasonably loyal. One year, Coles Myer thought it would be clever and cool to have GE Capital do their store card business. It’s not technically an outsource but it is the company passing an internal activity to a third party.

GE Capital is global and knows how to run things efficiently. They know it is cheaper to host customer service in India. Then the day comes that my mother has the only significant problem she has had in 20 years with them. She calls customer service and gets into a debate about what should be done. Strangely, the person in India seemed distant and unable to address the local concern my mother had. She closed the account and doesn’t shop there anymore.

I don’t particularly care if Coles Myer is a basket case. Other companies will take over the things they do so poorly. Business is allowed to experiment. If they get it wrong, they’ll lose profits.

In government it is different. I don’t think experimentation there is so wise!! When government mismanagement creates a basket case scenario, then it affects us all. Those responsible should be held accountable.