What you need to know
Stakeholder management is becoming a much more critical part of forming an outsourcing deal. Poor handling of people and organisations with an interest in any agreement will create problems for service providers and service recipients, and quality of service and industrial relations will suffer.
Analysis
On 7 July, 2004, the British Broadcasting Corporation (BBC) announced that Siemens Business Services (SBS) had been selected as the preferred bidder for a new technology framework contract for the BBC.
The framework contract requires SBS to acquire BBC Technology, an organisation that provides content and broadcasting products and services to its parent organisation and other broadcasters. BBC Technology was established as a wholly owned subsidiary of the BBC in 2001. It has 1,400 staff and achieved £230 million revenue and £19 million profit in 2003.
The sale is subject to the approval of the BBC governors and the UK government, and must be cleared by the European Commission. Subject to the necessary approvals, SBS's contract is for 10 years and is worth up to £2 billion. Revenue from the contract will improve SBS's position in the UK IT services market, where it is currently ranked 15th.
SBS is expected to pay more than £100 million for BBC Technology. It will use the acquisition as the basis for building a competency in broadcast and media solutions. The technology framework contract involves supporting IT systems and applications for 25,000 users, as well as telephony, project and consulting services and broadcast system services.
During July, more than 80 percent of the 370 BBC IT staff affiliated with the Broadcasting Entertainment Cinematograph and Theatre Union voted in favour of industrial action in reaction to the agreement. Strikes in July and August were called off after the BBC threatened to take the dispute to court. The UK government's Department for Culture, Media and Sport, which needs to approve the deal, announced it would begin its scrutiny in early September. This means the sale will not be completed by 1 September, as the BBC had hoped.
These problems reinforce the importance of engaging with all stakeholders in outsourcing engagements. Industrial disputes have marred other outsourcing deals. IT staff at Swansea Council in Wales recently went on strike over a planned 10-year outsourcing deal to support an e-government project. In March 2004, staff at Co-operative Financial Services in the UK walked out in response to a deal with SCC. In August 2003, Hewlett-Packard's outsourcing agreement with Bank of Ireland provoked industrial action by bank employees. In March 2002, Computacenter's outsourcing agreement with BT sparked staff unrest.
Outsourcing agreements, especially those involving offshore services, have provoked more union activity in recent years. Service providers should aim to manage the relationship with unions during outsourcing deals and seek innovative approaches to the terms of agreements that involve a transfer of staff. Firms that do this can set themselves apart from their competitors. In the business process outsourcing market, some service providers have established joint ventures with their customers.
