What defence organisations should consider when insourcing

This article was first published in Defence IQ

For many years outsourcing has been the main option for IT provision in large organisations in the defence sector. This has been very successful in driving down costs and improving performance but there is now a growing recognition that insourcing can sometimes offer a better approach.

In particular, it can support innovation, improve organisational agility, protect intellectual property and bring IT closer to the business, and do so in a way that provides value for money.

The insourcing model

The Defence Learning and Management Capability (DLMC) Programme has recently undertaken to bring in-house the delivery of the ICT enabled training service for the Armed Forces, at the expiry of the current contract, to reduce annual service costs and reclaim control of an IT service that had been outsourced for over two decades.

The service has over 4,000 users and provides business-critical planning, management, and reporting capability across Defence training. The DLMC programme underlines how these kinds of approaches are now being embraced by the defence sector.

However, for insourcing to be successful it requires careful preparation and a detailed understanding of what the operating model for the insourced service should look like and, crucially, what the teams in it need to be capable of. The existing outsourced team could be used as a blueprint, and any skills gaps in the insourced organisation can be identified and a plan to fill these can be made.

The capability plan

This capability plan must align with the technical migration and needs to reflect the maturity of the existing platform to allow your organisation to maximise the benefit of the underpinning technology. An organisation with an established Platform as a Service (PaaS) environment, with clear service levels, will simplify the migration.

The longer the service has been outsourced, the greater the chance that it’s being delivered in ways that were not expected or agreed in the contract – service delivery evolves over time, cost pressures drive change and human nature often leads to corners being cut. That means the migration needs to start with a detailed investigation into what the exact contractual position is and what is actually being done to deliver the service. 

That should include checking intellectual property ownership and restrictions, who has access to design documentation, if any third-parties are involved and what restrictions there may be around early termination of the contract. There will also be key considerations around data ownership and security, and responsibility for integration with external systems.

Managing negotiations 

It is also important to manage the negotiation of the end of the contract carefully, developing a shared plan and, potentially, agreeing to pay for the supplier’s time. These negotiations can be difficult as the supplier will not have the incentive of future work. It is important to ensure all the termination arrangements in the contract are fully utilised and to bring the full weight of the broader relationship with the supplier to bear.

This should lead to a jointly produced and agreed Service Transition Plan including any Transfer of Undertakings (Protection of Employment) (TUPE) Regulations and future recruitment, making it important to involve HR early.

These plans have long timelines and uncertain outcomes and so must be addressed early. Defence organisations cannot afford any service interruption and any failure to deal with issues early is likely to lead to a contract extension, and the perpetuation of the belief that the supplier is irreplaceable.

This all needs to be underpinned by information discovery and due diligence to uncover problems as early in the process as possible. The proving and testing phases are vital in identifying issues and risks, and it is important to maximise the time to deal with them. This should include interfaces and technical, organisational and programmatic dependencies as they’re likely to introduce change and uncertainty into the migration.

Having identified the issues, the insourcing team will need to be ready to allocate resources to work with the outgoing supplier to resolve them, because the supplier will have the domain knowledge. Insourcing a large IT service from a well-established supplier is unlikely ever to be simple.

The supplier has an incentive to make what they’ve provided seem complex, difficult or expensive and to drag out the transition, but given the right resource, it is possible. Working with the supplier to fix things is the best way to transfer knowledge. It is also important to work with the supplier on transitioning system design, maintenance and administration documentation.

While the insourcing process can be challenging, the rewards are clear.  It can help defence organisations gain a new understanding of their services and how to alter and improve them. This can help to inspire the innovation the defence sector will increasingly need if it is to keep up with the demands made on it.