Public Service by the Private Sector: Examining the Government Services Market (Strategic Focus)

• Provides an overview of how government agencies are engaging government services providers to improve service delivery
• Analyzes data from an end-user survey of government agencies on BPO and ITO drivers, challenges and priorities
• Provides recommendations to agencies and vendors navigating the government services market

• Learn about how government agencies are engaging the private sector to improve services and increase efficiencies
• Understand the drivers and inhibitors behind the government services market
• Identify strategies which agencies and vendors should adopt for future success in outsourcing

Overview

Catalyst

Summary

KEY MESSAGES

Economic, business and technology factors are driving government outsourcing

Regulatory and political barriers are the key challenges to government outsourcing

Outsourcing in government is concentrated in the larger markets but is likely to expand

Outsourcing helps agencies reduce operating costs and allows them to focus on core tasks

A number of issues make government business processes more likely to be outsourced

As the outsourcing market develops, governments have become better-informed buyers

Vendors must invest in a vertical go-to-market approach with strong strategic planning

Table of Contents

Table of figures

MARKET OPPORTUNITY

Economic, business and technology factors are driving government outsourcing

A lack of sufficient and appropriate staff resources is the leading factor for outsourcing in government

Governments are continuously faced with the challenge of 'doing more with less'

When resources are strained, organizations tend to re-evaluate operations

New and modern technologies are required to make BPO more feasible

Shared services environments laid the groundwork for outsourcing in the public sector

Regulatory and political barriers are the key challenges to government outsourcing

Privacy and security issues prevent agencies from taking advantage of outsourcing as does the private sector

Navigating the political landscape is a challenge for governments considering BPO for public sector jobs

Institutional culture and government concerns about giving up control are a key barrier to outsourcing

Outsourcing in government is concentrated in the larger markets but is likely to expand

The public sector has seen substantial growth in outsourcing in recent years

The US and UK public sector make up a significant portion of the industry

The US is the largest government services market opportunity in the world

The UK's early adoption of shared services has led to a mature market for government outsourcing

The market for government services will spread to regions outside the US and UK in the coming years

CUSTOMER IMPACT

Outsourcing helps agencies reduce operating costs and allows them to focus on core tasks

As the market becomes more sophisticated, governments must define what constitutes a 'core task'

A number of issues make government business processes more likely to be outsourced

Resource-intensive processes provide the most opportunity to reduce costs by outsourcing

'Non-core' functions are generally the preferred areas which governments will look to outsource

Business functions with potential for automation will deliver the greatest savings

Government services providers are slowly evolving from strictly back-office functions to frontline service delivery

Basic administrative functions and IT consolidation are the first step in government services provision

Core administrative functions not at the core of agency mandates are higher on the value chain

Constituent-facing functions are the next frontier for government services providers

As the outsourcing market develops, governments have become better-informed buyers

Vendors have faced challenges meeting the demand for BPO services

Long-term deals are - and will likely remain - rare occurrences

The economic downturn has led to new approaches to procuring and delivering BPO

COMPETITIVE LANDSCAPE

The US market is dominated by a small number of major vendors

Vendors in the UK have benefitted from a focus on increasing efficiency in government

Vendors in India have a domestic presence, and a limited but expanding presence abroad

GO TO MARKET: ADOPTING A VERTICAL APPROACH TO GOVERNMENT

Vendors must understand the unique intricacies of the public sector outsourcing market

Be prepared: government contracting can be risky

Vendors must be prepared to invest a significant amount of time and resources into meeting regulations

Vendors must adopt both short- and long-term approaches to the government sector

Vendors must adopt a strong vertical strategy for providing government services

Vendors should hire managers with experience in government contracting to navigate complex processes

Opportunities for vendors lie in common programs which exist across multiple jurisdictions

Successful vendors will wait patiently, and remain active while they wait

Agencies have become more prepared buyers; vendors must become more prepared as well

Dialogue with government decision makers will lead to more outsourcing wins

Vendors that can provide concrete figures around ROI will be most successful

APPENDIX

Definitions and abbreviations

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Figures

Figure 1: Lack of human resources is the key driver for outsourcing in government

Figure 2: Over 75% of government agencies have seen their budgets remain flat or decrease

Figure 3: Quality control, regulations and security are the leading concerns for agencies

Figure 4: Global outsourcing spend by vertical, 1994 - Q1 2009

Figure 5: Total outsourcing spend by vertical, 2006-2009 Q1

Figure 6: Public Sector Outsourcing Spending as % of Top 5 Markets, 2008-2013

Figure 7: Compound Annual Growth Rate (CAGR) in outsourcing spend, public sector, 2008-2013

Figure 8: Strain on internal resources is driving agencies to consider outsourcing

Figure 9: Application and website hosting are the key areas for ITO in government

Figure 10: Evolution of outsourced functions in government over time

Figure 11: Vendors must adopt a vertical offering and take a strategic approach to government