The Varney Report: An ideal or a blueprint?

The Varney Report will encourage the public sector to become a more service-oriented animal but it will still need outside expertise to accomplish this task, says Paul Bentham.

Merely from the title of the report: Service transformation - a better service for citizens and businesses, a better deal for taxpayers... you would be forgiven for thinking Sir David Varney is telling us what we already know. Improving efficiencies and customer service effectiveness through service transformation is a no-brainer of a concept. On closer examination, is the Varney Report insightful or simply a statement of the blindingly obvious?

The recommendations include the development of centralised services, such as a 'change of circumstance' service, so citizens will not have to notify multiple public services about bereavements, marriages and births. Improving public sector contact centre performance is another key target area - this would involve improving the flow of communication, whilst reducing operating costs by 25 per cent at the same time. This strategy signals the government's recognition that services have an increasingly important role to play in public sector delivery.

The public sector is a complex beast and tends to lumber years behind private companies in the take-up of practices and technologies. So although government organisations have been slow to embrace the service sector, it is hardly a surprise that services have eventually become a focus - the commercial world made this discovery a long time ago.

Of course one of the key drivers behind this is the ambition to improve customer relations with citizens. From the Varney Report's pledges on identity management and improving public sector contact centre performance, the public sector is realising that to truly win over the electorate, it needs to start communicating with them in a more effective way. And again, this is a practice that has been common in the private sector for years.

From suppliers over-promising on what they are going to deliver, to government agencies trying to nail suppliers to the wall in terms of cost and delivery, there are multiple reasons why the outsourcing relationship can go belly up.

Just look at companies like Tesco. Canny customer relationship management, targeted marketing and successful customer profiling has ensured that the retailer has become one of the most trusted brands in the UK, with customer loyalty at a premium. For such a huge organisation, covering a massive range of services - from groceries into financial services and new media - they still manage to have a streamlined approach to customer service and the organisation is fully joined-up. When you consider how successfully they do it, it's easy to see why the public gets frustrated with the public sector maze.

So although the ambitions of the Varney Report seem lofty to say the least, it is not beyond the realms of achievability. The public sector just wants what the private sector has already got.

The fundamental difference is that in the past, the government has never needed a strategic approach to customer management - after all, unlike private sector companies, where else are the customers going to go? Not to the competitor, that's for sure. But with increasing demands for transparency and taxpayers expecting a better degree of service for the money they are spending, the government is having to toe the customer - or citizen - relationship line.

However, the report, despite being lauded in many circles, has also been heavily criticised. Socitm (the Society of IT Management) has applauded the scope of the report and its recommendations and the robustness with which Varney approached his brief, praising the report on its "healthy mixture of political, emotional and technological intelligence". But they have also fingered the report as failing to acknowledge the difference between local and central government agencies and the contexts and circumstances in which they operate. Therefore public sector organisations have to tread carefully in terms of how they interpret the report and what it means to them.

But the real crux of the report, what Varney really needs to start looking at, is not what the public sector has to do but how it is going to do it.

The use of partners to help deliver these services will be crucial in achieving its objectives. This means a heavier reliance on partners to build shared service centres, or engage with partners on large scale outsourcing contracts. And the thought of outsourcing can often raise the hackles on the necks of many public sector executives. Just look at the disasters. One that springs immediately to mind is the debacle at the Department for Work and Pensions and the Tax Credit scheme, where the IT system seemed to perpetually fall to its knees and call centre operations ground to a halt.

The common denominator here is outsourcing and engaging with external partners. The troubles were undoubtedly down to manifest problems in the relationship. From suppliers over-promising on what they are going to deliver, to government agencies trying to nail suppliers to the wall in terms of cost and delivery, there are multiple reasons why the outsourcing relationship can go belly up. The sheer scale of some public sector projects is yet another reason - outsourcing massive projects to a single supplier can be a recipe for disaster. A case of putting all your eggs in one basket.

Whatever the reason, in light of the Varney Report and the fact associated public/private partnerships are due to soar, government organisations must start to think laterally about how they can structure effective outsourcing deals. From a contractual perspective, they need to become very smart cookies indeed.

Outsourcing can be very beneficial but only if done well. Thorough due diligence is required before any relationship is agreed. The main benefit of using an external supplier is that they should be experts in their field. But even when a relationship is forged, tight management of process and results ensures that if there is a problem it's spotted immediately. Service level agreements (SLAs) ensure the supplier doesn't let you down and contractual reviews ensure that as circumstances change, the agreement does too.

The Varney Report will kick start an even bigger outsourcing surge over the next year or two. Organisations need to bear in mind that when public sector outsourcing goes wrong, it can have catastrophic fallout. But the benefits of successful outsourcing can be substantial. Public sector organisations have much to gain by a smart approach to outsourcing. They need to be on their toes from a contractual perspective - a watertight contract with a healthy approach to the ongoing relationship is imperative to make it work. And in line with Varney's objectives, they are going to have to make sure it does.

Paul Bentham is a partner in the technology and outsourcing group at legal firm Addleshaw Goddard