Top 6 Reasons Why Local Authorities Should Micro Outsource
UK government funding of local authorities is being severely cut. Micro outsourcing can help bridge this funding gap. But micro outsourcing offers more than just cost savings. This article describes the top 6 reasons why local authorities should micro outsource.
What are the UK government’s local government plans?
As part of the Coalition Government’s deficit fighting measures, it announced that local government funding would be reduced by 28% over four years. In 2011-12, 9.9% would be cut with a further 7.3% cut in 2012-13.
The Local Government Authority, which represents councils in England and Wales, has calculated that the real cut in 2011-12, once the police grant was excluded, was closer to 12.1%, meaning that central government funding for council services was being reduced from £28.3bn to £24.9bn.
What does this mean?
In short, local authorities are being challenged to provide the same quality of frontline services, e.g., domestic waste collection, but with much less money from the Government. To bridge this £3.4bn funding gap, local authorities are exploring various measures that could help them reduce their costs. Could micro outsourcing be one such measure?
What is micro outsourcing?
Micro outsourcing, or micro sourcing, allows organisations, e.g., small and medium-sized enterprises, public sector bodies and third sector organisations, to outsource work to highly skilled freelance workers or independent businesses (service providers) based locally, nationally or anywhere across the globe.
This is distinct from traditional outsourcing where organisations engage in mega deals over several years with global outsourcers for multi-million or more contract values.
Why should local authorities micro outsource?
Micro outsourcing shares many of the benefits of outsourcing but also offers some new ones, too. The following describes the top 6 reasons why local authorities should micro outsource:
1. Make processes more efficient
As with outsourcing, micro outsourcing allows organisations to gain process efficiencies and increased effectiveness, as activities and processes are carried out by experienced service providers with specialist skills, know-how, best practices and up-to-date technology & equipment.
2. Deliver cost savings
Micro outsourcing has a positive effect on an organisation’s cash flow by reducing overhead costs and capital expenditures. For example, by micro outsourcing, an organisation could save on not only salary costs but also pension and other benefit costs. With a reduced headcount, other cost savings could include office space and equipment costs.
3. Ensure the deployment of competitively priced resources
With micro outsourcing, service providers competitively bid for your jobs ensuring that costs truly reflect the service provided. Essentially, it is like eBay but in reverse, as prices go down rather than up! Thus, organisations are able to deploy competitively priced resources, sourced locally, nationally or globally, after considering not just price but other factors such as the skills and experience of the service provider.
Note. By deploying competitively priced resources, organisations should be able to achieve cost savings of between 50 and 70%.
4. Allow “on-demand” access to skilled resources
Many organisations cannot afford to employ certain specialist skills or need certain skills only on an irregular basis. This has been exacerbated by the recession and the period of uncertainty that has followed it. Micro sourcing provides access to specialist skills and expertise enabling organisations to “plug in” skills and expertise on an as-needed basis.
5. Enable greater focus on core operations
Business theory and experience indicate that organisations do best when they focus on the core business activities, which gives them an advantage over their competitors. By micro outsourcing non-core activities, an organisation can use more of its resources, e.g., management, staff and capital, on value-adding activities.
6. Allow jobs of relatively small duration or cost to be outsourced
Outsourcing offers a number of benefits, but these only materialise when organisations contract for several years for multi-million contract values. With micro outsourcing, service providers can work on jobs that might require only a few months work or only just a few days. Moreover, “deals” might be relatively small and valued in the thousands or hundreds of pounds rather than millions.
What can be micro outsourced?
Activities include Website development, IT support, debt collection, bookkeeping and accounts preparation, report writing, translation, payroll, clerical work, budget forecasting, data entry and training. As can be seen, outsourced jobs can cover a wide range of business activities and tasks.
Summary
With reduced funding from central government, local authorities have been challenge to find effective ways to deliver existing front-line services without raising local taxes, such as council tax and business rates. Micro outsourcing provides an effective way not only to reduce back office costs but also to improve the efficiency and focus of local authorities.