IT Outsourcing and The BBC

The following are some of the main benefits that the BBC can expect from outsourcing their IT:

Estimated savings up £30m per year including savings on the consolidation of 800 servers and networks and the management of 30,000 desktops
300+ job cuts no longer necessary
Allow BBC freedom to concentrate more on developing content for TV programmes

At present, the BBC’s cost to procure IT services and telephony was 2% more than other comparable broadcasting companies. This is a reason in itself for BBC to exploit the benefits of outsourcing. BBC no longer has a monopoly on TV programmes as it did until September 1955 and it no longer competes only with ITV and Channel 4 – satellite television now offers viewers a choice of hundreds of channels and television programmes to choose from. BBC now finds itself in an extraordinarily competitive industry and it simply cannot afford for other broadcasting companies to enjoy such a cost advantage over them. Therefore, something must be done and there does not appear to be any other reasonable alternative which can offer savings of the magnitude (£30m per year) which outsourcing can. Taking this step can allow the BBC to regain a competitive advantage on its rivals as far as costs are concerned and as mentioned it will also free up time to devote to better programme making. Nelson (2007) demonstrates how outsourcing IT responsibilities can free up workers' time so they can focus on the business of doing business.

General Motors (GM) in the US provide an excellent example of the possible benefits of outsourcing having spent $1billion less on IT in 2003 than in 1996. Although GM did experience problems initially and only found success at the third attempt, a loss of management control was one of the problems they originally found (Olson 2007).

Indeed, a loss of control should be a concern for the BBC. Barker (2007) believes that outsourcing can be good but warns that companies often mistakenly assume that outsourcers know best and should be left to it whereas they should stay well involved to lend guidance. Whilst part of the BBC’s criteria for evaluation of would-be outsourcers was that it was a cultural fit – there is no explicit mention of someone being hired to help the BBC maintain a certain element of control.

Another concern is that a sell off would distance the BBC from the latest technology innovations whilst the broadcasting industry are increasingly using IT for developing and managing content.

On the whole I believe that in the absence of any realistic alternatives the BBC has made a wise decision to outsource it’s IT as action had to be taken to restore BBC’s cost advantages over its rivals. This had to be done regardless of government pressure to meet savings targets. The main opposition question Siemens’ ability to provide high quality IT services for a 10 a year period but the main point is that BBC will have made a wise decision if they implement the outsourcing in the correct way. Selecting the outsourcer is key to ensuring this.

Garrett (2003) asserts that one of the success factors of successful outsourcing is to “exercise appropriate due diligence in selecting the vendor”. The BBC appeared to have taken heed of this. The selling process was initiated in November 2003 and a winner wasn’t actually announced until July the following year. They also showed a degree of ruthlessness in trying to find the most suitable supplier cutting the shortlist from 80 companies, then to 31, then 9 and finally 3 before Siemens was chosen as the winner. Indeed, the BBC stuck so rigidly to their criteria for evaluation that CSC were withdrawn from the race to supply at the final negotiation stage because they could not meet expectations. They made sure that if its IT division is to be outsourced that it is done on their terms. So thorough was the selection process that the BBC were able to assure their expectations could be met by the winning supplier.

One of the main positives was that the BBC remained true to the criteria for evaluation throughout the selection process. The criteria outlined what the BBC would expect from the contract and importantly, it was kept realistic – this would help attract more interest, particularly from leading firms such as IBM and Siemens. Also, the BBC appointed an evaluating team consisting of 26 core members, this ensures that the responsibility of such a major decision would not be left in the hands of only a few people and that a sufficient number of opinions could be represented. Rodriguez (2007) claims that before exploring outsourcing, business owners should know what they are trying to achieve, the BBC made clear what they were trying to achieve and took sufficient care in finding the right company to help them achieve this.

There are areas of concern regarding the selection process however. The BBC offers a 10 year contract to the eventual winner. I would indeed share the feelings of a union member who worries that should poor services be rendered by the contract winner then 10 years is a very long time to be locked in. BBC could fall so far behind in the industry as a result that the damage could become irreparable.

The initial stages of the selection process involved the 80 interested companies completing a questionnaire for evaluation purposes. It can be observed that only 31 out of the 80 actually returned the questionnaire. This leaves the possibility of a better candidate being lost among the 49 unreturned forms. Also, the questionnaire is a highly structured, impersonal and non-flexible form of evaluating. The answers provided may be unclear or completely irrelevant. This could mean that the BBC may be drawing up a shortlist using data which is unrepresentative of the companies involved. Site visits or interview may have been more appropriate especially given the magnitude of the decision.

One final negative aspect is that the BBC neglected to involve the British government in the selection process. The result was that completion of the sell off was delayed as the government deliberated on endorsing the contract. In the end though, the contract was given the seal of approval.


REFERENCES

Barker 2007 Outsourcing The Right Way
Computerworld. Framingham: Vol. 41, Iss. 35; pg. 39, 1 pgs

Garrett 2003 Four steps to successful vendor management
ABA Bank Compliance. Washington: Vol. 24, Iss. 9; pg. 32

Nelson 2007 Get IT Together
Commercial Investment Real Estate. Chicago: Vol. 26, Iss. 6; pg. 18

Olson 2007 Evaluation of ERP outsourcing
Computers & Operations Research. New York: Vol. 34, Iss. 12; pg. 3715

Rodriguez 2007 Choose the Right Partner
The Practical Accountant. Boston: pg. 15, 1 pgs