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The new UK government’s decision to reduce the huge budget deficit by cutting £6.25bn of expenditure immediately, while tackling social problems such as long term unemployment, calls for radical thinking and action. The real challenge though is to figure out how to do this while improving the services delivered to tax payers.

While I may be expected to espouse the outsourcing of the UK government’s back office operations as part of the proposed solution to this challenge, I fundamentally believe that simple wage arbitrage will not deliver the long term results they need. Nor will it guarantee the provision of what citizens are demanding; effective government services that are delivered efficiently.

Doing more with less is a problem that the private sector has been familiar with for many years; but never more acutely than through the recent recession. In fact, the downturn forced businesses to rethink every element of their operations and take unprecedented steps such as organizational restructuring, process standardization & centralization and increased globalization to manage their financial health. Businesses that adopted such measures, with the CFO most often driving the charge, emerged stronger and leaner with more effective operations and enhanced business performance, while continuing to deliver higher customer satisfaction.

The Chancellor, like a CFO in the private sector, faces the same complex situation of cutting expenditure, increasing savings and reducing debt, as well as increasing efficiency of existing departments to deliver more effective services to the citizens, thereby meeting the Governments’ stated objectives.

This may sound like management school talk, but it is something best in class companies do achieve. In the process of analysing over 3000 business processes that we have managed for more than 400 clients since 1996, it has become clear that the only way to achieve true long term business outcomes is to make the leap from seeking ‘efficiency’ to seeking ‘effectiveness’. What I mean by this is changing the mindset to think about maximizing output and delivering superior quality by looking at a process end-to-end, fixing gaps and leakages and achieving a desired outcome such as decreasing cost, increasing revenue or improving customer satisfaction vs. simply maximizing output of a particular process.

This shift in thinking can deliver not just incremental savings but up to 5 times the value in terms of the defined outcome. For businesses this translates into millions of pounds worth of top-line or bottom-line impact for businesses. For a government it means money and resources saved. In public services for example ‘effectiveness’ could equate to cutting waiting time for diagnostics and treatment in the healthcare system , thus delivering better patient care and long term savings by reducing the need for more aggressive treatment later.

Let me take a few examples to better illustrate what I mean.

A real world example of how the NHS, with a budget of £94.5 billion, may be able to learn from best practice is the Miami Children’s Hospital (MCH) where a recent redesign of processes, achieved by working with the staff, enabled MCH to achieve a 4x return on investment through increasing utilisation of equipment and infrastructure, thus generating additional capacity and decreasing in-patient wait times by 18%.

Proving the transferability of the approach, this model has been replicated successfully in two Indian public sector hospitals, where the projects were aimed at enhancing patient access to the hospitals’ casualty departments. The process improvements led to a 30% increase in patient flow and a 20% increase in doctors’ capacity over a period of 12-14 weeks.

Procurement & supply chain functions across government departments can no doubt similarly benefit from consolidation and better processes. If you visualise the government as a group of large enterprises, business experience looks immediately relevant. When you consider how a $5 billion turnover manufacturing company, reduced its purchase spending by $50 million from $150 million over three years, applying this approach to even part of the £6.1 billion of spending on military equipment, or the £18.91 billion of NHS supplies, let alone the rest of the central and local government administration, it is clear optimising purchasing practice could significantly contribute to ongoing savings. Reducing waste helps meet environmental targets too.

Income as well as expenditure needs to be tackled with fresh thinking. As the taxation system is revamped, improving collection efficiency could cut both administrative and borrowing costs. Using the latest business analytics techniques to deploy citizen-specific collections strategies based on their payment behaviour could improve outstanding cash due rates by about 20%. Currently the treasury estimates that it is owed £15.8 billion in income tax and national insurance revenue, £8.9 Billion in corporation tax and £15 Billion in indirect taxation benefits (i.e. VAT, Diesel duties etc).

In every area of public services, there are private sector parallels where commercial pressures have led to the refinement of operations. Optimizing deeply entrenched ways of working is not as simple as it sounds in concept. It requires deep knowledge of the domain , focused technology solutions, targeted analytics ,pragmatic re-engineering and a clear roadmap to be able to attain the desired benefits. It also requires artful management of change. And most importantly an experienced partner who can not just identify the solutions, but help implement them.

The UK today faces an almost unprecedented challenge to cut fat, not muscle from its public services. However, with a new coalition approach to politics and recognition of the absolute imperative to reduce the deficit, there is a unique opportunity to reinvent its thinking and redesign its services. The government needs to think like a business that is facing tough times. There should be no lines in the sand; centralising & sharing functions such as human resources and payroll through all departments - mirroring the shared services model that several European business giants have so successfully deployed, unifying purchasing and deciding to stop providing some services at a national level, all need to be evaluated. Old style bureaucracies need to be challenged, staff empowered with knowledge through better systems and analytics, and given the authority to make decisions.

In my opinion, if the UK government can carry through its commitment to change by learning from the many new, innovative and tested lessons from the best companies in the world; it can emerge with a lean, effective public sector and achieve the herculean task of cutting the budget deficit down while keeping citizens happy. Is outsourcing the best answer? Only if that is the most effective way to achieve long term effectiveness in public services. If the UK government were to outsource just one thing, I believe it should be the re-design of its processes and services.

Pramod Bhasin is President and CEO of Genpact (formerly GE Capital International Services) which, under his leadership, pioneered the Business Process Outsourcing industry in India, China and Eastern Europe. The company is acknowledged as a global leader in business process and technology management. Mr. Bhasin also served as the Chairman of India's National Association of Software & Services Companies (NASSCOM) for the year 2009-10.

António Horta-Osório, the new chief executive of Lloyds Banking Group, has angered unions by announcing plans to cut 570 jobs and outsource up to 600 roles.

The upcoming plans by Lloyds will increase total job losses since HBOS rescue to 27,000 as the management cuts staff to reduce costs and try to bolster profits.

António Horta-Osório stated that the job cuts were a direct result of the integration of Lloyds and HBOS. Jobs in the wholesale, retail, insurance, group operations and human resources divisions will be lost.

Unions said that up to 600 jobs were to be outsourced. Lloyds announced 450 of those positions when it said roles inside its cheque and credit processing division would move to iPSL, a joint venture set up a decade ago by Unisys, Barclays and Lloyds TSB. HSBC is also a part-owner. The outsourcing specialist already handles such tasks for the bank and it is understood that another 110 people are likely to be transferred to other outsourcing companies shortly.

CSC has announced that a U.S. life insurance company ranked in the top 20 by A.M. Best, according to assets and net premiums written, has licensed CSC’s nbAccelerator to manage its new insurance business. This license marks the fourth nbAccelerator contract signed by CSC over the past nine months.

nbAccelerator is a complete new business risk assessment and process management system that enables straight-through processing to speed underwriting and issuing new life insurance and annuity contracts.

“In a competitive and uncertain life insurance market, anything that can mitigate the time and cost of issuing a policy but maintain the appropriate level of risk will provide an advantage for insurers,” said Karen Monks, analyst with Celent’s Insurance Group. “Insurers are looking at new business and automated underwriting systems to help address growth, fulfill service and distribution mandates, and reduce the cost per policy issued.”

“Quick response times are critical to closing new life insurance sales, and profitable new business is essential to achieving carriers’ growth objectives,” said Michael W. Risley, president of CSC’s Life Insurance and Annuity Division. “nbAccelerator positions life insurance and annuity companies to close new business faster by automating repetitive steps and integrating work management, sales and service activities. Intelligent e-App ensures the right information is captured at the point of sale by guiding producers through the data-gathering process.”

Serco shares jumped as it was described as a “winner” in the hunt for public sector outsourcing deals.

Serco was up 10p at 566p as broker Panmure praised its retaining of a £42million per year prisoner escort contract for London and the East of England from the Ministry of Justice.

Panmure said: “This will help underpin future organic growth while decisions in the world of public sector outsourcing appear to be gathering pace. Serco is well placed to benefit from greater levels of outsourcing.” Security services group G4S rose 3½p to 256½p.

MindTree Limited, a global IT Solutions and Product Engineering Service company has announced that it has secured its first major SAP support deal in the UK having been selected by 2e2, Europe’s fastest growing ICT lifecycle services provider, as a long term applications outsourcing partner. MindTree will provide SAP helpdesk, support and development work for 2e2’s clients.

The appointment of MindTree will allow 2e2 to redirect employees in the UK into more customer facing and consultative roles, providing a sharper focus for the business. A formal inauguration of the 2e2 offshore centre at MindTree Bangalore will take place in April.

“This will increase MindTree’s reach and ability to service local requirements in the UK and perfectly complements our experience of providing offshore expertise in SAP and other enterprise applications,” said Tridip Saha, MindTree’s UK Head. “Partnering with 2e2 also gives us the opportunity to work with clients in areas new to us such as the construction industry. The complementary nature of MindTree and 2e2’s service offerings in the UK market should mean significant benefits will flow through to both companies.”

“Partnering with MindTree will improve delivery of our SAP services and will also lead to increased customer satisfaction, said Nick Grossman, Business Development Director of 2e2. “Our experience of working with MindTree has been very positive and we are already looking at expanding the footprint of the offshore development centre into other areas of our business.”

The NOA has responded to Channel 4’s 'Dispatches' critical report of the UK public sector outsourcing industry.

The programme called ‘Britain’s Secret Fat Cats’ raised questions surrounding the restructuring of the delivery of public services in the UK.

Adrian Quayle, Board Member, the National Outsourcing Association (NOA), commented: “The National Outsourcing Association welcomes the interest shown by Dispatches on Monday, 14th March into the relationship between the public sector and outsourcing suppliers, but feels that the outsourcing industry has much more to offer UK business than was suggested.

“The programme was aired on the eve of the announcement of a major report on public-sector pay and highlighted the multimillion pound pay packages being earned by heads of private organisations which provide public services, and questioned why they should be the ones to benefit, with no reference to the millions of pounds saved by organisations in this country each year as a result of outsourcing and shared services providers.

“The NOA believes that if private sector companies can achieve cost efficiencies for the public sector, and relieve the financial burden on the tax payer, whilst ensuring that these services are run effectively, then wages of the heads of private sectors are, to a large extent, irrelevant. One of the government’s responsibilities is to cut the cost to the tax-paying public, and stimulate growth in the private sector to help take this country out of the choppy financial waters, and outsourcing can be an effective means of achieving this.

“Dispatches also asserted that the government’s ‘Big Society’ flagship policy could benefit big business and cause the public and voluntary sectors to feel the strain. However, it made no mention of the government’s recent initiative aimed at ensuring that small and medium-sized organisations are able to bid for government contracts, with a view to increasing transparency and ensure that big businesses are not the only ones to benefit.

“Outsourcing is a multi-billion pound industry in this country, and leading British suppliers of outsourcing services are amongst the world leaders in their field. The NOA’s view is that as long as deals are tendered, and carried out in the correct way – as the government seems intent on doing – there’s no reason why outsourcing service providers in the private sector should not play their full part in ensuring the government’s success – after all, they could be the most viable and effective solution for us all.”

Stoke based eGaming operator bet365 has announced the launch of its latest In-Play betting system using the latest cloud technology.

In-Play betting enables users to bet on the outcome of specific events that take place while a sport is in progress, e.g. the next point in a tennis match or the next goal in a football game. As such it requires the delivery of a continuous stream of real-time information, whilst simultaneously receiving and processing a huge amount of incoming customer data.

“We could not achieve the scale we have without our Systems teams,” said Martin Davies, Chief Technology Officer, bet365. They have enabled us to take the pressure off of our databases and storage systems and increase the scale and flexibility of our systems through the creation of our own personal cloud.”

Capgemini and the Finnish Customs have signed a four-year contract for infrastructure services related to Customs’ information technology environment. The contract is worth €14 million, covering a wide range of server hosting and workstation services, plus related network and data security services.

The contract between Finnish Customs and Capgemini will deliver a versatile solution for Finnish Customs’ requirements, helped in particular by Capgemini’s Security Services portfolio which is continuously developing. The year-long transition project, from the incumbent IT service provider, will start in March. Capgemini’s services will be provided entirely from Finland.

“Finnish Customs has a significant role in the Finnish foreign trade logistics chain, collecting a great amount of tax income. The majority of our offerings are delivered through e-services, which is why real time operations must be secure. Finnish Customs also has a role in inland security, which sets special requirements for the IT service provider. Capgemini’s offering fulfilled our most strict standards. Finnish Customs’ IT based services have developed and the trend is still growing. We expect our partner to deliver stable IT services and the ability to carry out development initiatives with a quick response,” says Arja Palo, Finnish Customs Chief Information Officer.

Amazon Web Services has announced several updates to its Virtual Private Cloud service including a wizard for easier VPC creation, improved access controls and the ability to access VPC resources without a VPN connection.

"You can now create a network topology in the AWS cloud that closely resembles the one in your physical datacentre including public, private, and DMZ subnets. Instead of dealing with cables, routers, and switches you can design and instantiate your network programmatically," Amazon Web Services' Jeff Barr said in a blog post. "This means that you could store your entire network layout in abstract form, and then realise it on demand."

The VPC Wizard feature allows a VPC to be configured with four network architectures, ranging from a VPC purely accessed by virtual private network (VPN) to a VPC with a single public subnet.

The public discussion about the banking industry has been so dominated by bonuses, regulation, the LIBOR rate and the current status of cash reserves that it's been easy to forget that banks have also been restructuring operations that have nothing to do with pay scales or nationalisation. Indeed, a quiet outsourcing revolution has been taking place behind the scenes in the world of banking, driven by the need for cost saving and the desire to take advantage of the changing market.

Increasingly, banks have been looking to outsource a wider range of functions as a response to the challenges of the global market. It's therefore no surprise that according to the World Retail Banking Report, 77 percent of retail banks now outsource at least one part of their business. Common industry estimates show that outsourcing provides banks with a saving of 20-40 percent, depending on whether processes are located locally or abroad.

High street banks have long embraced outsourcing in order to focus on their core business strategies. But now, the independent expertise of an outsourcer has become even more valuable as the established banks face opposition from new competitors such as Metro - the first new high street bank to be set up for a hundred years – as well as the likes of Tesco and Virgin, who have grown by using their reputation in other areas to enter the financial services market.

Another cause for concern is that over one in ten customers aged between 25 and 34 moved their bank accounts within the last year, according to a YouGov survey on banking behaviour. Gone are the days when customers could be relied upon to stay with a bank for life. Improving the consumer experience is now vital to retaining longstanding customers.

In this highly competitive market, where financial services businesses are fighting it out to secure market share and keep hold of their customers, new and innovative products are now a constant requirement for banks – and outsourcers can help to get these products to market more quickly.

Even for an established bank, the cost of developing and launching a completely new product and/or distribution channel can be very high. It is also a sizable medium to long-term commitment, as staff and premises will often need to be employed for up to five years, even if the initial campaign might only last for one or two years.

By outsourcing this function, however, banks are now able to launch new products within 30-60 days. In addition, by using an outsourcer for third party administration, banks can now delegate the responsibility customer communications, product distribution, complaint handling, customer communications and more by partnering with a skilled outsourcer that is able to embed itself in the heart of the bank's operations.

Outsourcing important areas like these can radically speed the time to market for news products, and also help to increase customer satisfaction in an environment where consumers are shopping around for financial products more than ever before – and are also willing to leave if the service isn’t up to scratch.

The future success of banking lies in the ability to improve business agility and to alter working practices. Though much in banking is uncertain, one thing seems highly likely: strategic partnerships with outsourcers will soon become the standard practice across the industry.