The global smart cities market looks set to reach $2.57 trillion USD by 2025, up from just 563.36 billion in 2016. However, facilitating transformation is no mean feat. This is why some municipals are looking at outsourcing as an alternative way to introduce technology.
For the sake of efficiency, councils and city planners must work with the highest skilled developers and engineers. That way they can introduce ‘cutting edge’ technologies. Due to an ever-increasing talent shortage in the tech sector, this is proving difficult.
According to consultancy Arvato, in the UK alone, 42% of the £6.2 billion worth of outsourcing contracts came from the public sector, in 2016.
Future Processing is one such outsourcing firm. Information Age recently visited their headquarters in Gliwice, Poland, to discuss some of their projects, and to explore the role outsourcing is playing in smart cities across the globe.
Why outsource a city?
According to Jarosław Czaja, CEO of Future Processing: “There is no one company or government that can solve all the issues relating to a smart city.”
Traditionally, outsourcing is considered when organisations want to shift routine operational work away from their staff to free them for more strategic, value-adding work. Another reason relates to cost-efficiency — outsourcing cuts costs related to recruitment agency fees, training, benefits and pensions. However, according to Mr Czaja, with the work that they are doing, this is far from the whole truth.
Over the years they’ve worked on numerous smart city projects. Recently, they partnered with Parkeon, the mobility and parking system provider, on a transit solution project for Helsinki, Finland. This project saw Future Processing supply software for ticketing systems as part of a city-wide scheme, including driver consuls, ticket vending machines, inspection devices and a back office system.
For Czaja, outsourcing providers are tending to win contracts because companies are looking for long-term strategic partnerships, rather than single, project-based ones.
He explained: “Whereas outsourcing providers used to ‘body lease’ employees, they are now becoming centres of innovation. An outsourcing provider is now an engine that, with its agility, provides creative ideas and technical know-how, driving slow-moving companies towards modernity.”
“Originally, when we were working with companies, we would engage solely with the IT departments. Now we take on much more responsibility, often having to engage with clients on a business level. These days it’s not unusual to speak with various department heads.”
The scarcity of local skills
Despite the broad adoption of digital technologies, according to a recent study, the digital skills shortage in the UK currently costs organisations, in both the public and private sector, £1.5 billion a year in recruitment, temporary staffing, inflated salaries and additional training.
With outsourcing, there is a potential for organisations to bypass this issues, by way of tapping into an external pool of talent.
In the field of software development, Poland looks to be one such hotbed of skills, due to a proportionally high number of tech graduates. A report from StartUp Poland recently found in its poll of over 2,400 startups, 39% were software development enterprises. Outsourcing firms in this region are making the most of this — plucking talent from local universities, while also taking advantage of the lower labour costs. Future Processing, for example, has acquired roughly 900 employees, making them one of the country’s largest software development outsourcing companies.
How to outsource
Whatever kind of smart city initiative a local government pursues, a few consideration can set the stage for successful public-private collaborations.
According to Deloitte, cities need to develop a business case that clearly sets out the value for all involved. Of course, the value can take different forms, from direct returns on investment to indirect benefits such as exposure.
Deloitte also recommends that cities should create a third-party entity which can provide role clarity, political feasibility and simplify procurement.
>See also: How to choose a managed service provider
For Deloitte: “A third-party entity can help partners and cities navigate the complex structure of both city governments and private corporations.”
Often in Smart City projects, difficulties also arise from the distance between their third-party provider and them. If the outsourcing provider is in another time zone, it is often difficult to collaborate effectively, which limits the project’s progression. This is why a close geographical partnership may be worth strong consideration.
Finally, don’t forget about considering support after the project is complete. It’s a good idea for a city planner to specify a warranty clause in order to be assured of some amount of continued support.
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