1. MINISTRY OF FINANCE 1 Seppo Kurkinen, Counsellor State IT Management Unit Ministry of Finance seppo.kurkinen@vm.fi Baltic IT&T 2006 Forum, Riga “Business models for Electronic Government- Outsourcing and Beyond” Experiences from ICT outsourcing in the Finnish public administration

2. MINISTRY OF FINANCE 2 The breakdown of the presentation - Finland in general - Finnish public administration - Definition of outsourcing vs purchasing external services - State expenditures on information technology - How state agencies are using external services - Interviews on outsourcing in public administration in Finland

3. MINISTRY OF FINANCE 3 Finland 5,1 million people, 337 000 km 2 Two official languages (Finnish 94%, Swedish 6%) Member of the European Union since 1995 13 Ministries and some 120 agencies under ministries – state government 125 000 empl. 432 Municipalities with high autonomy

4. MINISTRY OF FINANCE 4 ICT in Finnish Government PC penetration in government is >130% nearly 100% of employees have external e-mail and access to public WWW IT costs are about 600 million Euros per year IT costs are 1,3% of state budget (5% of operational costs) 4 000 people work in government IT (3,2 % of wf) All offices are connected with TCP/IP

5. MINISTRY OF FINANCE 5 The service has been earlier provided by the organisation itself Providing the service by the organisation itself Outsourcing Buying the service from external service provider Changing the service provider Buying the service from external service provider Insourcing What is outsourcing compared to using external service providers?

6. MINISTRY OF FINANCE 6 Outsourcing is a strategic question in the state administration Especially in the future when the outsourced information can be processed anywhere in the world and the expertise can be located anywhere in the world it is wise to make a difference - which information has to be available - which expertise has to be available in the case of international crisis when the borders are closed or the communication does not work. ”When buying services it has to be assessed that what consequences outsourcing brings about for the state functioning and for the state security in the normal conditions but especially in the abnormal and unusual conditions” (new IT strategy 2006)

7. MINISTRY OF FINANCE 7

8. 8 The growth of expenditures from 1998 to 2004

9. MINISTRY OF FINANCE 9 Proportion (%) of state agencies that have solely used external service providers

10. MINISTRY OF FINANCE 10 The interviews on outsourcing in 2000 - target 1: state agencies (8) - County Governement of Western Finland - IT unit of the Ministry of Justice - National Road Agency - Ministry of Labor - State Accounting Office - State Estate Agency - Office of the Council of the State - Population Register Center - target 2: municipalities (7) - Helsinki, Education - Helsinki, Social Security - Seutukeskus Oy (Hämeenlinna) - Janakkala - Lahti, Technical - Oulu - Tornio

11. MINISTRY OF FINANCE 11 - usually the experiences about outsourcing were positive - there were different ways of outsourcing - centralizing inside the agency - centralizing among the municipalities - outsourcing to the private companies - different reasons for outsourcing - normally lower expenses are not the main target - availability of skilled staff is the main reason - but also the variations in the service needs can be a driving force - new services are more often outsourced than old ones Main findings

12. MINISTRY OF FINANCE 12 1) Is outsourcing an obligation or development with objectives 2) It has to be made a difference between IT management and IT services 3) Outsourcing demands a strong and capable purchasing organisation 4) Outsourcing and data security 5) Assessment of alternatives should precede the decision on outsourcing 6) The solutions and arguments for outsourcing is worthwhile searching inside the public administration 7) Alternatives should need a wider assessment 8) Supply of services is progressing (market supply) Observations

13. MINISTRY OF FINANCE 13 9) Outsourcing is an individual means of development 10) Outsourcing is not a one time action 11) Organisation has to be ready to develop its own ways of working 12) Outsourcing presupposes the development of own expertise after the decision of outsourcing 13) Outsourcing has to be managed 14) The purchaser and the service provider should grow together 15) The purchaser needs negotiation power 16) The purchaser has to be able to carry out things by himself, also Observations...