Outsourcing in Government: Pathways to Value

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The study also taps into the experience of the executives who are helping drive their agencies toward one of these two strategic endpoints.

Outsourcing in government is growing dramatically, and will likely keep growing as increasing fiscal pressures, citizen demands and workforce attrition force governments to explore new operating models. Government outsourcing is particularly challenging; the political sensitivities around the subject can stand in the way of agencies' using outsourcing to achieve their objectives. Attitudes are changing too—executives are beginning to view outsourcing as more than just a blunt tool to wring costs out of noncore functions. Increasingly, governments are looking to outsourcing to drive additional value.

Despite the challenges, some governments have used outsourcing to achieve remarkable results. However, outsourcing success does not have the same meaning for every government. Rather, countries seem to be following one of two distinct paths of increasing outsourcing maturity. One trajectory leads to greater efficiency of existing operations and is marked by extensive use of conventional forms of outsourcing, such as IT infrastructure. The other leads to organizational transformation and is marked by more extensive use of higher value-added outsourcing forms, such as business process outsourcing.

This study is designed to help all government executives improve their outsourcing effectiveness, no matter their ultimate outsourcing objective.

It distills their leading practices, with stories of their successes and stumbling blocks, for government executives embarking on their own outsourcing trajectory. Outsourcing in Government: Pathways to Value shares insights and innovative practices related to mastering the six critical elements of successful outsourcing:

• Shaping the relationship to the situation
• Negotiating and contracting effectively
• Managing workforce issues
• Managing the ongoing relationship
• Ensuring strong performance
• Institutionalizing innovation and flexibility