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More selective use of outsourcing urged

WHILE the WA Government is expanding its outsourcing agenda through new public-private partnerships, Perth’s academics believe the pendulum is shifting.

Murdoch University inter-national business and strategic management lecturer John Krasno-stein said an uncertain economic climate was leading to a rethink of the merits of outsourcing work at both the political and business levels.

“There is a lot of rethinking going on because when it is done to the extreme it can cause a lot of problems,” Mr Krasnostein said.

“The pendulum has swung as far as it can. I think outsourcing, like privatisation, may be reconsidered.”

Australian Institute of Management deputy executive director Shaun Ridley agrees.

“Its reached a point where people are getting to see what out-sourcing works and what doesn’t,” Mr Ridley said.

“But I don’t think it will ever go back to the old days when it was all done in-house.”

Mr Krasnostein believes one of the things both the private and public sectors need to consider is continuity of supply.

He said outsourcing relied on re-liability of supply and efficient sup-ply chains. When this reliability was put under risk, outsourcing loses its sparkle, Mr Krasnostein said.

More than anything else, the un-certain international situation has put the whole issue of privatisation and outsourcing under the spotlight.

This was because outsourcing meant companies surrendered control over the supply of materials and services, while governments that sold their energy, fuel or food left themselves wide open during uncertain times.

Mr Krosnostein said one of the reasons the US preferred to import oil rather than exploit its own oil supply was so it could have security of supply when it was most needed.

Mr Krasnostein said this was an increasing concern for governments in Australia because out-sourcing services and manufacturing overseas meant skills were lost.

“Specialisation is great when you live in a stable world, but it can leave you wide open,” he said.

Curtin Graduate School of Business director Margaret Nowak said the academic literature was also increasingly scrutinising the effectiveness of outsourcing.

“Compared to the first instance when everything was outsourced, there is now a growing questioning of what are the things that should be outsourced and whether outsourcing is appropriate or not,” Dr Nowak said.

“Its really about knowledge management and keeping the key skills and expertise in the organisation.

“There is also a questioning in business as to whether the benefits have been as large as expected.”

Curtin Business School fellow Lynn Allen, who worked for 12 years within the public sector as CEO of the Library and Information Service of WA, said outsourcing in the public sector had reached a point of no-return in many areas, but the management of outsourced contracts would continue to improve.

“The approach I took is that there is nothing wrong with out-sourcing. It is probably here to stay,” Professor Allen said.

“The challenge for the government departments is to negotiate good deals because they have a higher level of accountability and transparency.”

She said it also meant that departments were beginning to realise that they could not abdicate responsibility by out-sourcing

“If you are going to have a partnership with the private sector you have to make sure it’s an equal partnership,” Professor Allen told WA Business News.

“It starts from the ideology that anything that can be done by the private sector should be done by the private sector ... to the other side of the spectrum were the government should be spending the public purse in-house.”

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