What is the the future of public sector and public sector outsourcing? Here are 12 trends to keep a close eye on.
Across Western markets, the rise of public sector outsourcing is prevalent. In late 2013, UK’s the Guardian published a piece titled Public sector outsourcing is here to stay while Raconteur contributor and government advisor Colin Cram shares “outsourcing will continue to increase, whatever colour of the government after the 2015 general election” in a post titled Continuing rise of public sector outsourcing? He notes that outsourcing “has become accepted as one of the key means of delivering public services”. So with the popularity of outsourcing rising across all levels of government, understanding key trends from innovation to task management will be key to FMs success. Here are twelve trends identified from ISS’ 2020 Vision: Future of Public Sector Outsourcing whitebook – which are not independent, but rather influence each other reinforcing their importance.
- Managing demographic bulges: Governments around the world will have to focus and adjust the delivery of services to the demographic profile of their populations. In high income countries, an ageing population increases the fiscal burden while decreasing the immediate capacity to respond to the general challenges of ageing. Most countries, however, find themselves dealing with the youth “bulge” challenge.
- Responding to growing customer expectations: Residents now see themselves as consumers of public services; residents, as a group, are becoming an increasingly complex, individualised and diverse population, with growing, shifting and contradicting expectations.
- Personalisation of services: In line with growing customer expectations, a recent survey shows that citizens also expect governments “to better understand the needs of citizens and communities,” and to “make sure that services are tailored to the needs of people who are using them.”
- Harnessing technology and other innovation: In order to fulfil the personalization of the services ambition, among other things governments and public sector organizations need to invest in technologies and innovations to improve processes and outcomes. This requires a transition “from S-government (S-government is characterized by large-scale, standardised solutions) to I-government” (I-government solutions focus on developing more intelligent, interactive solutions that focus on individual needs).
- Consolidation towards larger, integrated contracts: In many domestic markets, governments and service providers are consolidated into larger, integrated or “bundled” contracts, which are entered into with local authorities. Earlier this year, LocalGov in the UK reported that the public sector welcomed a threefold increase in contracts since 2007 while emphasizing “steady drop in smaller contracts while the number of large contracts continues to rise.” Governments see this solution as a means for “finding new, efficient ways of delivering services rather than simply cutting [them].”
- Task management: While the public sector is seeking economies of scale in the consolidation of larger, integrated contracts, managers are keenly focused on improving the efficiency and effectiveness of single tasks and services. The ongoing challenge for public sector managers is driving efficiency from an increasingly complex working environment.
- From providers to commissioners: Governments are transitioning from being a provider of services to an entity that predominantly commissions, facilitates, or brokers services. This transition requires new skills in governments – such as agility, innovation, transparency and connectedness – and new capabilities for facilitating relationships with external partners – such as flexibility, co-venturing, co-creation.
- Outsourcing across levels of government: Governments have turned to outsourcing as a way of accessing external expertise and delivering services more cost-effectively. Outsourcing of activities includes sourcing services from the private sector but also from other government entities.
- Profits contingent upon outcomes: Outcome-based payment models for services delivered by external providers is a concept that is growing in popularity among outsourcing providers. The challenges for both outsourcing providers and government entities in transitioning towards an outcome-based model are many, but are primarily an issue of defining and measuring outcomes.
- Increased involvement of the not-for-profit sector: Public sector organizations are increasingly being configured to involve such external partners and including voluntary, charity and non-profit organizations.
- Affordable government: Making government affordable is the new reality for current and future public sector organizations to ensure continued delivery services for its citizens. Demographic ageing, increasing customer demands for personalized services, and growing sustainability challenges will create the biggest challenges for governments to meet expenditure gaps or shortfalls of billions of dollars.
- Empowerment vs. Shadow state: There is a risk that a “shadow” government could emerge in many economies. Shadow government refers to markets for public services that are controlled by a small number of large, predominantly private companies that have great influence in how these markets work.
Like the nine megatrends in FM, these twelve trends in public sector outsourcing should provide as a framework to help outsourcing partners, including FM providers, understand the strategic issues facing the public sector and to develop their role in helping facilitate service delivery. Do you have thoughts on other trends? Share in the comments section below.
This blog post is based on the ISS 2020 Vision: Future of Public Sector Outsourcing whitebook.