STRAIT to the future

8th Asia-Pacific Specials, Health and Law Librarians Conference

Using external service companies to improve an information service - a positive view of outsourcing

Sue Henczel
CAVAL Limited

Keywords: outsourcing; contracting out; strategic management

Abstract

As we've all discovered, things can't remain as they were 10, 5, or even 2 years ago. Whether due to economic rationalism, declining budgets or bad management decisions, we've all seen, and many have personally experienced, the downsizing, amalgamation and closure of corporate libraries. Many of those that are busy with surviving are not looking very far into the future as their existence is tenuous, to say the least.

There have been many articles, papers etc. dealing with how to survive, but most of them deal with coping with changes, planning, being proactive, etc.These are all viable methodologies, but how about considering a total change in mindset? Try to imagine your corporate library as a service point for information, and your role as one of 'information facilitator' within your organisation.

The challenge for information managers is to optimise the use of the finite, and often diminishing, human, financial and physical resources whilst providing a quality information service. The clever and creative use of the specialist skills and expertise available outside the organisation can enable them to focus on information delivery, service development and proactive marketing within the organisation.

Strategic outsourcing is discussed as well as how to choose an external service provider, which processes can be outsourced successfully and which ones should remain inhouse, and how relationships with service providers can develop into valuable partnerships and strategic alliances.

Introduction

Economic rationalism, declining budgets and bad management decisions have led to the downsizing, amalgamation and closure of many corporate libraries in both the public and private sectors. The information professionals who remain are busy with the day-to-day business of surviving and many are not looking very far into the future as they realise that their existence is tenuous.

This paper suggests that a move from the traditional model of corporate library services to an information services model can increase the value of information professionals in an organisation. By discarding their traditional views of library services and changing their role to that of information facilitator using both inhouse resources and the specialist expertise of external service providers they can provide the information that the organisation needs to conduct business.

The transfer of the support, or 'backroom', tasks and other non-core services to an external service provider will enable focus to be directed towards the provision of 'business critical' information and value-added services that align with corporate goals.

This paper examines the important issues associated with outsourcing services to external service providers. These include the decision-making process involved when deciding what to outsource, how to choose a service provider, cost and quality, and how to maintain and enhance the relationship.

The challenge

The challenge posed to corporate libraries today is unprecedented. Information is recognised as the most strategic resource in the business world, yet because it is no longer seen as the domain of the corporate library the survival of libraries in this environment is threatened. The overhead costs associated with maintaining a traditional library within an organisation, the difficulty in accurately determining the 'value' of the information it provides and the growing perception that all one needs to access global information is a computer and modem are leading to amalgamations, staff and budget cuts, and closures. This became evident in Matarazzo and Prusak's 1995 survey of 103 top managers in the United States[1], and has been more recently reinforced by the recent ALIA Market Research Report [2] which looks at the value placed on corporate libraries in the top 100 Australian corporations. The ALIA report found that many senior executives regard their libraries as having no value at policy level.

During the 1960s, 70s and into the 1980s the measure of the importance of a corporate library was based on the size of the collection (number of volumes, subscriptions etc.), the number of staff it had and its physical size...and sometimes even what floor of the building it was on! The 1990s have brought considerable changes to the role of the corporate librarian. The exponential growth of the Internet and electronic information resources has enabled us to provide information efficiently and effectively directly to those who need it. Technology has enabled us to manage a 'distributed' library collection and to communicate with, and provide information to, our users regardless of their physical location.

Taking all of this into account it becomes clear that the traditional corporate library structure is not only inappropriate in today's dynamic business environment, but an overhead that most organisations are unwilling to support. It has also become an obstacle to information professionals who want to establish themselves as key players within their organisations by overcoming preconceptions that the library is a quaint but obsolete repository of books. We must secure a strategic position within the organisation by identifying the information needed by the organisation to achieve its objectives and providing it efficiently and effectively to the right people.

Frank Portugal's[3] 1997 study of the outsourcing of library services in the United States identified three ways in which information professionals can improve their chances of securing a place within the corporate environment:

1. aligning library operations to the corporate goals and objectives
2. becoming an internal information facilitator/consultant
3. exchanging traditional services for the management of proprietary information activities.

Many prominent Australian librarians have supported these views in the years since. Helen Hayes, Vice-Principal (Information), University of Melbourne, advocates that librarians 'move out of their traditional roles and become service driven, subjective, problem-oriented, value-adding and network-based.'[4] Although her focus is on librarians in the academic arena, her views relate to information professionals across all sectors.

Rather than constantly reacting to changes within the organisation and to its changing information needs, the information professional must develop a strategy to secure their own future by optimising the contribution that they make to their organisation. This may be possible by adapting the suggestions of Portugal and others to your own situation.

In order to align library operations to the goals and objectives of the organisation, those services that directly contribute to organisational success must be identified and customised to suit the particular needs of the users. Conducting an information audit and developing an organisational information policy can identify 'critical information' resources. Once they are identified you can develop methods for adding value to their delivery by evaluating, customising and re-packaging them to ensure that they meet the specific needs of the users. Traditional library services may not be the services that are identified as vital to the organisation's success, but the provision of critical information that can be used to give your organisation the competitive advantage, or to operate more effectively, may help to secure your future.

Despite its negative portrayal by both the profession and the media, the strategic use of outsourcing provides an opportunity to shed the traditional but costly support services and take on new ones which are of greater value to your organisation.

The outsourcing option

As early as 1992, Drucker[5] recognised that 'downsizing and outsourcing are inevitable outcomes of the competitive service economy and indicative of the trend for the future'. Although the concept of outsourcing is not a new one for libraries the growth in consultancy services and information brokerage is leading to an increase in the perception that total outsourcing is a feasible option. The infamous Hawaii State Library and the Baker and McKenzie experiences (the Chicago-based law firm who fired their 10 person library staff to outsource library and research needs) show that total outsourcing is possible, but may not always have the desired results. The focus of this paper is not on total outsourcing, but on the use of selective outsourcing to improve the quality of an information service within an organisation.

The issues that will be addressed include:

1. the outsourcing decision-making process
2. choosing a service provider
3. quality control and performance measurement
4. contract management
5. communication with the service provider

The outsourcing of library services continues to receive negative press, generally because it is blamed for the closure or downsizing of libraries, poor quality products and services and the demise of the library profession. In reality if the provider of the outsourced service employs skilled and dedicated professionals there is no difference whether these people are inhouse or not.

Outsourcing can reduce costs. External service providers can offer more services at a lower cost because it is their core business. They have the flexibility to source staff with specific skills and expertise when needed, and to adjust their staffing levels according to demand. They are "free of most of the bureaucratic entanglements that ensnare, if not strangle, many libraries and must be efficient and effective to win future contracts"[6].

There are concerns that cost savings come at the expense of service quality; this needn't be the case if the right services are outsourced to the right external service provider. A recent survey of outsourcing practices in the Victorian public sector has shown that cost savings can actually increase with the achievement of other goals including increased service quality, better access to technology and expertise and improved accountability.[7]

Outsourcing can improve the focus on business information. The transference of non-core tasks to an external service provider enables the information professional to focus on the provision of critical information.

Strategic outsourcing

"do what you do best and outsource the rest" (Tom Peters, 1991)[8]

Outsourcing is a mainstream business strategy and is not new to libraries who have been using the specialised expertise of external service providers for a long time for tasks such as subscription management, book supply, translations, retrospective conversions, indexing, binding, etc. The decision to outsource these tasks has enabled librarians to focus on information delivery and service development while placing their non-core services into an environment where they are core.[9]

Unfortunately the decision to outsource specific services or tasks is often made by middle or top level managers who base their decisions on their own perceptions of the value of service or task.

The outsourcing decision-making process
The decision-making process involves three main questions:

1. Is the service core or non-core to our business?
2. Does this service rely on structured or non-structured decisions?
3. Will service delivery be improved if a specific service/task is outsourced?

Core versus non-core services
Before considering outsourcing as a strategic option, you must have a clear picture of which information services contribute to the achievement of organisational objectives. These services are core to your business and that of your organisation and are often not successfully outsourced. Non-core, services are those which are usually performed in the background, often in support of the provision of the core services. Technical services such as cataloguing, acquisitions, end-processing, current awareness services, database development and management, etc. are all non-core services that can be successfully outsourced.

Structured versus unstructured decisions
Services can be differentiated by the structured or unstructured nature of decisions they support. As few fall neatly into either category they are categorised according to their relative 'structuredness'. Structured decision problems have clearly defined options, resources and tasks and can be resolved with routine, repetitive and programmable decisions. They are transactional services that require no service provider/client interaction. Library technical services fall into this category.

Services that support unstructured decisions are diagnostic in nature and rely on extended personal interactions between the client and service provider. These include strategic planning and policy development. Although many organisations do outsource this type of activity, they are not appropriate services to outsource, as they require a high level of analysis, interpretation, synthesis and evaluation. They also require indepth knowledge of how the organisation operates and its culture and politics.

There are many services that fall somewhere in-between that are reactive and require a moderate level of service provider/client interaction. Many of these can be successfully outsourced if appropriate guidelines and communication channels are established. Examples include reference services and document delivery.

Improved service delivery
Using an external service provider can improve service delivery through:

1. access to better qualified staff and ability to adjust staffing levels to meet demand
2. access to technology without capital expenditure
3. the ability to streamline processes
4. the ability to maintain consistency and continuity
5. the ability to perform non-traditional, complex, urgent or labour intensive tasks without disruption to inhouse activities.

Selecting an external service provider
External service providers offer a variety of services to libraries, often at a lower cost and higher quality than could be achieved using inhouse resources. They are specialists in what they do and it is their core business. As they are usually not restricted by the bureaucracy that hinders large organisations and government departments they:

1. have the flexibility to pay higher salaries to ensure a higher quality of work
2. can develop work practices that suit each specific contract
3. can recruit staff with specific skills and expertise
4. must be effective and efficient to maintain existing contracts and win new contracts

Some important considerations when selecting a service provider include their willingness to establish procedures for your specific project, an agreed timeframe for service delivery, quality control and performance measures, and the nomination of a contact person for your organisation.

The careful choice of an external service provider will avoid huge amounts of time being spent in establishing and administering the outsourcing contract. Whether you find an external service provider by word-of-mouth, advertising or the tendering process, try to find someone who has already used them for a similar service. Although each contract has different requirements, the service provider's skill in communication, flexibility, customisation and quality control are important. A reputable service provider will, with the client's permission, provide contact details on request.

There are problems inherent in the tendering process that many libraries are forced to use. Often generic tender documents are used. Many have ambiguous questions and don't provide sufficient information for adequate responses to be given. Service providers are asked to provide costs for services that are ill defined, and organisations are asked to select a bid without knowing what the trade-offs are. The absence of links between cost and quality, combined with the lack of opportunity to negotiate, means that the library is unlikely to get the service they need and the service provider is unable to adequately bid for contracts.

Research suggests that a fixed-price contract leads to higher cost savings than a variable price contract[10], so negotiate a fixed price contract and secure it for a fixed-term. This is advantageous for both organisation and service provider as it contains your costs for the duration of the contract and allows the service provider the security to commit resources (human, physical, financial and technological) to develop customised and streamlined procedures.

Request a trial contract for either a period of 3-6 months, or for a specific volume of work. This gives both parties the opportunity to assess the advantages and disadvantages of the arrangement, assess the quality of the work and also allows an opportunity to clarify requirements, fine-tune procedures and adjust expectations.

Evaluating an external service provider
An external service provider can be evaluated on the cost and quality of their services and also on the level of internal effort required to supplement their services.

Issues relating to quality include how well the service provider understands your requirements, how well the work is performed in accordance with instructions, and the timeliness of delivery. Cost issues are a little more difficult as it is often impossible to compare the costs of services performed by an external provider with the costs associated with providing the same service inhouse due to the variations is calculating internal costs. The advantage of outsourcing is that the costs charged for outsourced services are direct costs that can be contained for a specified period of time, and therefore more easily managed. Outsourcing reduces overheads by reducing the need for physical resources such as space, furniture, heating, lighting etc.; and technological resources such as computers, printers, online connections etc. as well as the considerable salary on-costs and training costs.

Quality control and performance monitoring
The maintenance of quality relies on the development of detailed and comprehensive procedures that set out exactly how the work is to be done. To ensure that quality remains consistently high, ensure that the service provider has quality checks built into their processes, and that spot checks are carried out on delivery of the services. Research has shown that performance monitoring leads to cost savings and improved contract performance that in turn leads to increased service quality because of increased cooperation and communication between the client and the external service provider.[11]

Contract management
The success of an outsourcing operation depends on both the service provider and client jointly developing their business strategy so there is a shared fit of business direction. A successful contract takes time to negotiate, but once the parameters have been agreed upon the service provider must be trusted to fully manage the service.

Maintaining the relationship
For the client to optimise the benefits of using an external service provider, efficient and effective communication channels must be established. These will facilitate discussion about procedures, processes and common goals as well as feedback about issues such as quality control. Many projects require modifications as they progress, and it is only by ensuring that appropriate communication channels are in place that the changing requirements can be discussed.

The primary aim of the service provider is to do your work well so that you will renew the contract or recommend them to others in need of their services. If your expectations are not being met, or you have concerns about the procedures and processes being used by the service provider, take the time to discuss them with the appropriate person. Don't delay this until the problem becomes unmanageable or until bad feelings develop against the people doing the work.

Short-term outsourcing projects can facilitate the development of strategic alliances between clients and service providers. Take the time to discuss your business with the service provider, as it is possible that they can offer suggestions about additional value-added services that they can provide.

Conclusion

Things can't remain as they were. The economic situation we're experiencing will not allow the traditional corporate library to survive unless it can be seen to be contributing to organisational success. Our future survival lies in being able to identify the information that is critical to our organisation's business, supply it efficiently and effectively using our own professional skills and the skills and expertise of external service providers. The move from the traditional corporate library model to the information service model will facilitate the development of a value-adding information service that can take your organisation 'Strait to the Future'.

References

1 Matarazzo, J.M. and Prusak, L. (1995) The Value of Corporate Libraries: Findings From a 1995 Survey of Senior Managers. Washington, D.C.: Special Libraries Association.
2 Rundle-Thiele, S. 1997 ALIA Market Research Report. Adelaide: University of South Australia.
3 Portugal, Frank (1997) Exploring outsourcing: case studies of corporate libraries. Washington, DC.: Special Libraries Association.
4 Hayes, Helen (1998) 'New missions of academic libraries in the 21st century', http://www.anu.edu/caul/caul-doc/beijing-hh.htm (updated 25 Nov 1998), downloaded 1 Dec 1998.
5 Drucker, Peter F. (1992) Managing for the future; the 1990s and beyond New York: Truman Talley.
6 Dubberly, Ronald A. (1998) 'Why outsourcing is our friend', American Libraries 29 1 Jan. pp 72-74.
7 Mitchell, Alan (1999) 'Outsourcing no cure for costs', Australian Financial Review, 24 Mar. p.21.
8 Peters, Tom (1991) Thriving on Chaos New York: Harper.
9 Pryor, Graham (1995) 'Information management in the oil and gas sector: the new credibility of outsourcing', Journal of Librarianship and Information Science 27 3 September pp 131-136.
10 Mitchell, Alan Op. cit.
11 Mitchell, Alan Op. cit.

Author

Sue has over 20 years experience in academic, state, public and special libraries and is now Technical Services Manager at CAVAL Limited, a Victorian academic library co-operative. Sue has recently completed her Master of Business (Information Technology) and has been signed by a major publisher to write a book on the information audit process.