It is hard for charities to provide IT services economically, efficiently and
effectively. Even large charities are often too small to enjoy sufficient
economies of scale. That is why many are looking to outsourcing and offshoring
in to attempt to reduce costs.
But a new joint venture between NSPCC and The Children’s Society is offering
the two charities the best of both worlds – the economies of scale that
outsourcing could provide while retaining the benefits of an in-house provider
who understands their needs.
In a first for the charity sector, the two have merged all operating services
including helpdesk, training, purchasing and technical support (both field and
centrally based), but not confidential databases and have set up a limited
company called Charityshare to manage the joint venture.
The rationale behind the move is clear. As large national charities
practicing in associated fields, their administrative infrastructures have many
points of similarity. Combining their
IT functions offers them greater ability to respond to changes in technology
and the added benefit of a reduction in administrative costs, meaning that
greater funds are available for charitable objectives.
The initial combined Charityshare budget was £3.26m – this includes the cost
of 56 full-time equivalent staff and the servicing of 2,830 desktops across the
two organisations. The breakdown was roughly: NSPCC two thirds, The Children’s
Society one third of the budget, staff and desktops.
But the charities are confident of the financial cost savings and IT service
quality improvements that the co-sourcing setup offers over operating
separately. They estimate a 25% saving over three years, equal to £800,000 per
annum across both charities.
Several months into the venture, and the anticipated savings are
significantly ahead of schedule. Charityshare now hopes to achieve those savings
within 18 months to two years of launch. Savings have been achieved by upgrading
to broadband, eliminating duplicated IT infrastructure and telecommunication
links, and the merger of services and a reduction in staff levels.
But economies of scale aren’t the only benefit. Measurable service quality
indicators are also improving, as the benefits of combining forces enables the
use of better tools and techniques for service delivery. Initial research and
informal feedback about service quality has, so far at least, been largely very
positive and encouraging.
In practical terms, the significant savings and service improvements achieved
through co-sourcing mean more money and better IT services to support children
and families who need help. In commercial organisations, an equivalent venture
would mean cost savings and better IT services for the business.
Co-sourcing requires management to retain an active interest in the venture
throughout its life. This might sound like a ‘con’ rather than a ‘pro’, but in
fact outsourcing arrangements often go awry as a result of management
indifference once the deal is done. A properly constructed co-sourcing
arrangement requires you to manage properly and build collaboration into the
But the flipside is that it is usually far harder to extricate yourself from
a co-sourcing arrangement than from an outsourcing deal; a problem if the
arrangement is ill-conceived or goes sour. Both outsourcing and co-sourcing
arrangements should only be entered into with a good stock of goodwill for
The Charityshare initiative has been welcomed by the Charity Commission as
demonstrating the sector’s ability to actively collaborate for the benefit of
those they seek to serve. In September, the venture was highly commended for
Best Use of Technology at the Charity Awards, and the judges took pains to state
that ‘the rest of the sector should take note of what has been done here’. I
believe all sectors should take note of this approach.
Nonetheless, the decision to outsource and/or co-source is a difficult one,
which depends on the particular circumstances of your company or organisation.
Co-sourcing is not a quick fix. Quite the opposite, it is a medium to long-term
commitment and you need to be in a position to take time to structure it and
plan it right and you need to choose your co-sourcing partners carefully.
The Charityshare joint venture has prompted several other organisations in
both the charity and commercial sectors to monitor its progress with a view to
either joining Charityshare or forming a similar consortium. Co-sourcing is rare
in the UK, compared to other countries so it is good to see the charity sector
leading the way in this field.
Ian Harris is a director of risk/reward managers Z/Yen Ltd
- Economies of scale without losing the befefits of an in-house feel to the IT
- Charityshare’s co-sourcing structure, agreed specifically with HMRC, is VAT
neutral between the parties. Conventional outsourcing creates a VAT charge
- Easier to win the hearts and minds of staff who will TUPE into a co-sourcing
venture than when you TUPE staff in conventional outsourcing.
- Agreeing a co-sourcing structure with the desired business and fiscal
outcomes requires up front investment of time and money, probably to a greater
extent than outsourcing
- Harder (and/or slower) to achieve culture change and business change among
staff transferred in a co-sourcing rather than conventional outsourcing
- More time consuming to plan, establish and get right from scratch than to
outsource – important if you seek a speedy route to quality improvement.
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