Outsourcing – a door half open
How big is outsourcing, and how large will it get?
Even in the UK, an outsourcing pioneer, the NHS remains near-virgin territory. Serco reckons that outsourced cleaning, catering, business process outsourcing and facilities management came to just £2 billion in 2011. That is set to grow at 12% per annum – but it is not a large figure.
Given that the English NHS alone had a total 2011/12 budget of £106 billion and spent £13.5 billion on these areas, it’s clear that there is a long, long way to go.
The same is true for the rest of Europe.
If classic FM/BPO outsourcing remains small, then medical outsourcing remains tiny. Functional outsourcing of hospitals is worth €0.7-1 billion in Spain through the Alzira model. Elsewhere, we know of a single hospital in Italy, Circle’s brave Hinchingbrooke venture and Capio’s Karolinske hospital in Sweden.
Imaging and lab outsourcing also remains small. The most advanced market is Germany, where a third of all hospitals have outsourced labs.
People often say that restrictive employment laws and VAT traps are what hinders the development of outsourcing. UK outsourcing expert Andrew Dunlop at Burgess Salmon, however, reckons that fears around control, safety and risk are the main impediments to outsourcing. These are particularly big issues for healthcare, but his analysis suggests that the answer is that operators need to sell harder.
The door may look shut, but it is half open.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
