UK: Computer services - Why outsourcing is the "in" word. (1 of 2)

UK: Computer services - Why outsourcing is the "in" word. (1 of 2) - Is outsourcing just facilities management by another name? Di Palframan looks for some distinguishing features.

Last Updated: 31 Aug 2010

Is outsourcing just facilities management by another name? Di Palframan looks for some distinguishing features.

Nearly 30 years ago Electronic Data Systems (EDS), now a $6 billion-a-year company, coined the phrase "facilities management" to describe its fledgeling business. The expression has been used ever since by EDS and many others offering to manage organisations' computer systems. Now EDS would like to lay the words to rest (except when aimed at its rivals). It says that "outsourcing" is the service of the 1990s.

Cynics see this as a repackaging exercise, common enough in the computer industry and, arguably, long overdue in the case of facilities management. Not so, says EDS. Outsourcing is "a much more sophisticated service", insists Tom Butler, EDS UK's director for manufacturing. It goes beyond facilities management to include a range of other services like network management, application software development, hardware and software maintenance, and staff management and training.

There is, of course, nothing new in this list of services. Many companies, for example, offer to maintain hardware or software. They, too, can reasonably lay claim to being in the outsourcing business, and a lot of them do. EDS would rather they did not.

The leaders in outsourcing in the UK prefer to distinguish themselves as providers of a total service package to their customers for, they hope, many years. They are looking for medium-sized and large organisations as their clients. EDS, for instance, will not consider anyone with less than £1 million a year to spend on its services or a contract shorter than three years.

The company has recently won what it says is one of the biggest outsourcing contracts in the UK - from Midland Bank. Andersen Consulting, one of EDS's rivals, points to its recent £13 million, five-year deal with the Yorkshire Regional Health Authority for systems management (Andersen's equivalent to outsourcing). Hoskyns, another major in this business, quotes Imperial Tobacco and Hoover as two of its facilities management clients (Hoskyns would rather stick with the established term).

According to Peter Lines, vice-president of Input, a research company specialising in computer services, outsourcing is growing at 20% a year in the UK but from a very small base. The total UK market was estimated to be worth less than £300 million last year.

The mounting interest, he says, is partly a result of the recession in the UK. In the 1980s many companies realised that computers were essential for their business but they believed that THEY must own them and run them, not some third party. They tended to buy discrete services. Now, as costs go under the microscope, these companies are questioning their need (and their ability) to manage increasingly complex computer systems.

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