Outsource nation: 01 / Global
Outsourcing has a bad name – a way of cutting labour costs by employing people in India and China (over three million US jobs will be lost to this trend by 2015). But there’s also a growing move for nations to outsource everything from their military to postal services that, properly harnessed, could raise standards and redefine what makes a country. This is who we would employ.
As a headline, it was eye-catching: “US Postal Service To Outsource 50,000 Jobs To India”. The article went on to quote America’s assistant postmaster general, Claxton Honeyball, on this trial programme: “What we did was do away with some mail carriers in a few selected cities and had the mail delivered to Bombay. There it was sorted, and the recipients were called on the phone and had their mail read to them by staff. At first there was some resistance. But, after a while, the folks grew to like it.”
That the article was a joke and appeared on a satirical media website didn’t make it any less timely. Outsourcing is big news, and the US Postal Service (USPS) is just one organisation learning to adapt. Over these past five years, the volume of first-class mail has dropped significantly. At the same time, a law prohibiting the increase of stamp prices above inflation has come into play that has forced cost-cutting. Since labour represents 80 per cent of USPS’s expenses, it is having to evolve. Most Americans may be unaware of the fact but contract workers already handle 2 per cent of their mail, or some 7,600 routes. A small number now but one that’s likely to grow.
Now, globalisation has shown that all sorts of services once considered to be the preserve of the state may be catered for better elsewhere. As such, we’re becoming a collection of Outsource Nations. Yet this need not just be about cost-cutting, but also about raising standards and tapping into other countries’ skills and knowledge.
While consumers might bristle at the “O” word because in the private sector it has come to mean job losses in developed markets and frustrating conversations with call centre outposts in India, governments have been farming out work for centuries. The Gurkha regiments of the British Army are a perfect example of buying talent while also making savings. A feature of the British forces since the start of the 19th century, the Nepalese fighting men have sent many foes running from their hideouts in terror, looked after the security of Hong Kong while it was still under the Crown, and been part of British operations from the Falklands to Sierra Leone.
Jordan recently initiated a five-year strategy to attract €4.2bn of foreign money by enabling investors to manage the kingdom’s ports, postal services and public transport. Israel, Denmark and the UK have looked at privatisation of their postal services. If they could get it to turn a profit, Washington would jump at the chance to follow many other countries and privatise its national rail network, Amtrak. It was once said the railroad built America, but the boom in cheap airfares means it currently costs the Bush administration €769m a year in subsidies – little wonder the government recently threatened to cut off funding altogether. Perhaps an early call to Deutsche Bahn might be a good idea.
Analysts predict that by 2015 more than three million white-collar jobs in the US will be farmed out to other countries, up from around 300,000 today. And not all of those will be private sector jobs. Even education isn’t immune: BrainFuse, an online tutoring firm based in New York City, hooks up students with tutors as far afield as New Delhi. Counties from Jersey to Montana with crumbling education systems might soon call in more than private sector consultants to improve results – they could hand over the entire school board to a private firm.
“It’s definitely a trend rather than a fad,” says Leslie Willcocks, professor of technology, work and globalisation at the London School of Economics and Political Science. “People see outsourcing as a solution to everything. How do you manage growth when there’s an up-swing in the economy? Start outsourcing. How do you cut costs in a recession? Outsource because, in practice, what can’t be outsourced? One demonstration of this is how the US government has, in many respects, outsourced government. What it has put into the private sector since 2001 is remarkable. And this includes fighting wars.”
We traditionally think of outsourcing as the West farming out work to countries with more efficient (ie cheaper) labour and infrastructure – the Philippines, China, India. But Liechtenstein outsources many public services – including defence and customs – to Switzerland (see Monocle issue 8).
It’s a trend many other nations should be – and are – investigating. But it should not just be private companies that get the contracts – there are several other nations we would like to see developing a global remit (it would be good for their national kudos and also a useful revenue stream). But there could also be some more daring thinking here: does a country even need to run its own police force or schools, for example?
Much of Europe could certainly benefit from the expertise of France’s insurance-based health service, currently ranked the best by the WHO. The EU has implemented compulsory liberalisation of Europe’s railways by 2010: how much happier would the UK be if their often dilapidated privately owned services were taken over by Germany’s Deutsche Bahn, currently ferrying five million passengers a day with the utmost efficiency? And Finland has the best education system in the world, with only a 4 per cent difference in achievement between the best and worst schools, despite Finnish students paying nothing for their education at any level and not starting school until the age of seven. Why not simply ask the Finns to take over your nation’s schools?
“Education really matters in Finland,” says Ilkka Turunen, special government adviser at the Finnish Ministry of Education. “We were a very poor country in the 19th century and it was a survival strategy; part of the strategy of nation building. The national consensus is to offer equal opportunities for education, irrespective of sex, economic situation, linguistic situation or background. It’s all free – including materials, school meals, healthcare and special needs.”
Would they consider farming out their specialist knowledge to other nations? “That idea has been raised. Should we market and promote our best products?” says Turunen. “I don’t think so. Marketing and profit-making are not the only reasons to work with the best colleges in the international arena. It’s more beneficial for us to build long-term cooperation between countries.”
While that’s a very inclusive, Finnish, view of the world, there are certainly large pockets of national expertise and interest that could be deployed to countries lacking the skills to manage certain ministries effectively. While some might claim that this is already happening under the name of foreign aid, this is not just about developing nations. Even countries with seats on the Security Council might swallow their pride and look elsewhere in the UN HQ for a bit of assistance.
Would UPS ever take on the challenge of delivering an entire nation’s mail and parcels (such as Britain’s, which is beset by industrial relations problems, or Italy’s, which is less than reliable)? “We never say never,” says Kathleen Marran, director of marketing for UPS Europe. “But we’re not as interested in becoming the post service. Our objective in the market-place is to service a variety of aspects of logistics – anything from mail to freight. But do we watch the [British] Post Office? Without a doubt – and opportunities do come up.”
Martyn Hart, chairman of the National Outsourcing Association, is less circumspect. “There’s no reason why a company such as UPS shouldn’t handle the post for a whole country. The problem might be that public services usually have a public-service obligation – you’re doing it for the good of the people, not merely for the profit.” But there are many who would consider a diminution of such ethics in return for services that work.
Outsourcing of the military in Iraq has been more controversial, most recently with private security contractors Unity Resources Group and Blackwater facing a grilling in Congress after civilians were killed in Baghdad. (Such security companies have immunity from Iraqi law). “You have to be careful with those criticisms,” says Keith Hartley, professor of economics at the University of York, an expert on military outsourcing who has advised the British government. “You can’t assume that were it still done in-house by the military there would be no such issues. We know the military makes mistakes – it just doesn’t come to the fore so much. There are groups opposed to contracting who will cry foul as soon as they see the slightest evidence of failure.”
Professor Hartley notes that, in the UK, military outsourcing has proved effective beyond just the Gurkhas, such as the contract handed out for the refurbishment of the Ministry of Defence in Whitehall, and British Telecom’s overseeing of military telecommunications services. “The military will move towards more outsourcing,” he says. “In the UK, the Ministry of Defence is faced with a major funding problem. It will not go away. Increasingly, we’re seeing quite radical public-private partnerships in which, for example, the MOD buys 15 air tankers from a private company, uses seven of them and allows the other eight to be used by the private company, with both parties benefiting from the profits. The proviso is [those reserve eight] are ready to go if war breaks out.”
Concerns over the viability of private contracts have been encountered in Finland, where many businesses have outsourced their post, incurring the concern of the Office of the Data Protection Ombudsman, which believes outsourcing introduces privacy issues. “Problems arise when you think you can apply outsourcing to anything,” says Professor Willcocks. “Aside from security issues, there are national and cultural issues. There’s a different argument in Finland, where it’s not culturally easy to argue for outsourcing – why would they expect a company, or another country, to do it better than they can?”
So if you were a prime minister, who would you want to run your nation’s embassies, borders posts and police stations? From Finnish PE teachers to Norwegian diplomats, this is our Monocle league table of national and business partners we would like to see on the job.
Hold out for a hero to deliver your mail
FedEx and UPS both deliver millions of packages to millions of customers in hundreds of countries every day. What’s more, unlike many national postal services they function as “hero brands”: we feel good about signing for packages from them. They even have good uniforms. In the Netherlands, TNT already operates the national postal service under the name TNT Post. Could FedEx or UPS do something similar? If we ever got to run a country, we would certainly entrust them with our nation’s missives.
You need to welcome visitors and rebuff the troublemakers
A snazzy uniform, a ball-breaking attitude and a history of dealing with the Mafia make Guardia di Finanza – the Italian military police – a good choice for no-nonsense border guards in Monocle’s outsourcing league table. Then there’s the Swiss border guards who are tipped to watch over the EU’s southern flanks as part of its Rapid Border Intervention Team (Rabit). One great advantage of outsourcing border guards: you don’t have to personally offend unwanted visitors.
Let Austria’s well-equipped troops fight your battles
Known for its “everlasting neutrality”, the military of Austria recently added S-70 Black Hawk helicopters, Eurofighter Typhoon combat aircraft and Pandur infantry fighting vehicles to its arsenal. Already a supplier of service personnel to France, Italy and Germany (which also uses its training facilities), we’d like to see Austria outsource more troops. It’s not a new trend: the British already have the Nepalese Gurkhas, while the Pope utilises the Swiss Guard.
May the force be with you, no matter where they are from
Formed in 2004, the Vicenza-based European Gendarmerie Force has taken the best-of-all-worlds outsourcing idea to heart, combining members of the French Gendarmerie, Italian Carabinieri, Portuguese National Republican Guard, Spanish Civil Guard and Dutch Royal Marechaussee. Set up in 2003 by then French defence minister Michele Alliot-Marie, 900 cops are available, at 30 days’ notice, for peace-keeping missions worldwide. The Swedish police force is also respected and, as you can see, has a good uniform.
Neutral Norway can talk the talk
When it comes to diplomacy, the Norwegians have it sewn up. They’re seen as neutral, they’ve helped broker several Middle East peace deals and they run the Nobel Peace Prize. Plus, they tend to be young, good-looking and well-dressed. Instead of spending fortunes on tiny embassies in the dodgier parts of diplomatic capitals, small, fledgling nations should simply pay the Norwegians to represent their interests.
Be a class above the rest with Finnish-ing school
By training more musicians, encouraging people to use libraries and producing a higher number of bright kids per capita than any other nation (while spending less than most), Finland’s education system is top of the class. In 2003, Finnish 15-year-olds came first – worldwide – for reading literacy, mathematics and science, while ranking second in problem-solving. Exporting such teaching talents to lower-achieving countries would reap dividends. Even if they only sent their physical education teachers.
Let justice be done by going Dutch on the legal costs
All countries need an effective judicial system to function, and its neutrality and swiftness is of particular importance. We would turn to the Dutch, who have already cornered much of the market in international legal work – The Hague being home to the International Court of Justice, the International Criminal Tribunal for the Former Yugoslavia and the European Police Office. A Dutch judge epitomises firm, but fair, justice.