Information Technology Outsourcing at the BBC

Introduction

The BBC (British Broadcasting Corporation) is the largest broadcasting corporation in the world and holds international respect. In the UK alone it employees over 26,000 people and has an annual budget of £4 billion. It is renowned for its impartial and reliable reporting by broadcasting without political and commercial influence. [1] However the BBC like any other business is always striving to become more efficient and reduce its operating costs. This led the BBC to outsource its technology sector (BBCTL) in October 2004.

Outsourcing is the transfer or delegation to an external service provider the operation and day-to-day management of a business process. [2] In this case SBS (Siemens Business Services) bought the contract from BBC and agreed to provide the company with IT services for the following 10 years. Outsourcing occurs when a company calculates that selling off sections of the business to a external party can reduce operation costs. In addition outsourcing allows employees to concentrate on the core (‘value adding’) functions of the company. By allowing SBS to provide all IT services the BBC expected to save around £35 million per year. With extra funding and employee hours, new and innovative programmes were to be developed during the ten year contract.

The supplier selection process at the BBC.

The process of selling BBCTL began in November 2003. As stated by the European Union Procurement Process (EUPP) the sale of services worth over £154,477 must be advertised on the OJEC (Official Journal of the European Communities) website. By doing so the contract was open to all bidders. The contract stated that the purchasing company had to provide technology support and services to the BBC for ten years. This part of the contract was criticised. Committing itself to ten years with the purchaser the BBC would leave the corporation in real trouble if the service received were poor. A more sensible approach may have been to allow the termination of the contract if the agreed standards were not met, perhaps even including some compensation sum for the BBC if the situation occurred. Due to this ten year deal, the BBC had to be sure they picked the right company for the job.

The sale of BBCTL attracted the interest of 80 companies; these companies were to be evaluated by a team consisting of 26 BBC employees. The bidding companies were sent a questionnaire that looked to analyse the suitability of each firm to the roll. As the BBC historically works to high standards this was an essential step as it allowed the BBC to decide if the purchasing company could continue these standards. By evaluating their financial position and knowledge of the broadcasting market the BBC was able to highlight the firms that were best for the job, not just the firms with the highest bid. After an extensive review of the returned questionnaires a short list of eight bidders was selected.

The nominated eight then had to provide even more information relating to their plan for outsourcing the IT services and their knowledge of broadcasting technology and changes taken place in the market. The purpose of this again was to evaluate how suitable each firm was but instead looking more closely at how the company operates and what beliefs it upholds. This extra information allowed the BBC to cut the list down to three companies (Accenture, SBS, CSC). To make the final decision on who would win the contract the BBC increased the evaluation team to over 100 employees from many different departments. By doing the BBC were able to decide what purchasing firm could be integrated into the BBC and work with their values and standards.

In the end the BBC decided that SBS was most suited to supply the IT services. SBS understood what the BBC was trying to achieve but also had an understanding of the BCC’s culture and values. It took just over 6 months to decide that SBS was the firm for the job which is a relatively short time considering the size of the contract (£1.9 billion). This seems rather hasty due to the complex IT systems being transferred and the length of the contract. The BBC should have maybe spent longer evaluating the different bidding firms to ensure they selected the best one. However according to the BBC’c CTO John Varney “it’s possible to do a complex outsourcing programme rapidly if enough people are put on it”. [3] By increasing the evaluation team to 100 the BCC must have felt they analysed the situation enough to pick the winner of the contract.

Was the outsourcing a success?

The outsourcing to SBS has had mixed results. By transferring over IT services to a technology specialist the BBC has became a forerunner in technology broadcasting in Europe. Working with SBS has allowed the BBC to engage in forward-looking technology projects. [5] Examples include the highly successful 2005 General Election coverage and sports coverage using broadband technology. SBS is meeting almost all of its performance targets showing the switch over has been carried out relatively smoothly. This has resulted in the BBC being able to concentrate on programme development and improving efficiency. Technologically the outsourcing seems to have been a success and this looks to continue and improve over time.

However, according to a report by the National Audit Office financially the contract has not quite delivered. Prior to accepting the project guaranteed savings of £35 million a year was quoted. During the first year of the contract savings of only £22 million were recorded. [6] This has been blamed on higher than expected expenditure and inaccuracy in calculating the variable costs. The use of the word ‘guaranteed’ was in the end not appropriate when putting the contract to the board. That said savings have been made, if not to the calculated rate, and the BBC have forecasted that these savings will increase over the forthcoming years. Another criticism of the contract was that the BBC did not include a clause to allow them to receive a share of SBS’s profits if returns exceeded a certain level. [7] In future the BBC should include a provision in any contract to permit the sharing of profits and the right to open book access of the contract purchaser.

References

[1] Wikipedia article on the BBC. http://en.wikipedia.org/wiki/BBC

[2] The Outsourcing Management Zone http://www.theoutsourcerzone.com/index.htm

[3] BCC taps Siemens in $3.7B outsourcing pact http://www.sharedxpertise.com/file/1954/bbc-taps-siemens-in-37b-outsourcing-pact.html

[4] Information Technology Outsourcing at BBC (2006) by M Vinaya Kumar

[5] National Audit Office: BBC Outsourcing: The contrast between the BBC and Siemens Business Services for the provision of technology services. (2006) http://www.bbcgovernorsarchive.co.uk/docs/reviews/vfm_outsourcingreport.pdf

[6] BBC’s £1.5B outsourcing costs under fire (2007) by Andy McCue http://www.silicon.com/publicsector/0,3800010403,39167659,00.htm

[7] House of Commons Committee of Public Accounts: BBC Outsourcing: the contract between the BBC and Siemens Business Service (2007) http://www.publications.parliament.uk/pa/cm200607/cmselect/cmpubacc/118/118.pdf