Public sector to outsource

Public sector has been subject of transformation in many countries for a few years. Under the pressure of tax payers, decision-makers have come to the conclusion that public institutions would deliver high-quality service at the same or even reduced tax burden if they try to act similar to private companies.

If private companies use outsourcing and are successful, also government institutions can do the same.  It is a possibility for them to reduce costs, increase quality and improve performance. Outsourcing also offers them the possibility to create new jobs or get the existing jobs remain in the private sector.

However, offshore outsourcing by public sector is a subject of discussion of many citizens who are of the opinion that one of the task of the government agencies is to contribute to job creation or job retention at least. Therefore, offshoring by public institutions can be seen as politically incorrect.

That is why it is important for the public institutions to choose the suitable vendor in their own country. Such a solution can be a supplement to traditional government measures as subsidies for companies creating jobs in regions with higher unemployment rates.

An example of Washington National Library is very interesting in this context. The Library as a public institution wanted to outsource digitalizing and archiving of documents to a national service provider. Therefore Lakota Technologies, South Dakota has been chosen. The region of South Dakota has not as good cost structure as India or China, however, it offers better cost structure than other US regions.

Magdalena Szarafin
http://www.szarafin.info

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Magdalena Szarafin is a Polish economist, residing in Frankfurt, Germany. She works as an international management accountant in a big multinational group. In her leisure time she prepares a PhD dissertation focused on shared service centers. Her research interests include insourcing and outsourcing in connection with the value chain. She is the author of many publications dealing with outsourcing, knowledge management and total quality management.

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