23/01/2012 – Look before you leap
As everyone knows, we're living in very tough economic times, with spending cuts being inflicted across many budgets, and many organisations struggling to cope with increased demand for their services at the same time. Nevertheless, I was alarmed to read about Charity Business shutting down last week. Their sudden closure is reported by independent news service Civil Society to have left around 200 small and medium-sized charities with a loss of all or some of their finance functions.
Charity Business were formed in 1999 and offered charitable organisations a range of services including accounting and bookkeeping, payroll, consultancies and other financial advice. Civil Society reported that about 50 charities had outsourced their entire finance function, with the remainder outsourcing some specific tasks such as payroll. They also reported on some very mixed reactions to the services previously received by some of the charitable clients.
What particularly caught my eye was a comment from Fiona Blacke of the National Youth Agency, who said that they had selected Charity Business in the first place because of their inclusion in NCVO's Preferred Suppliers list. As Lasa runs a similar service, with our Suppliers Directory for vetted technology providers, I am all too aware of how careful we need to be with including organisations, but also of the risks to our reputation should things go awry. We do everything we can to make sure our suppliers are reputable, including taking up independent references from other clients. But we can only do so much, and there is a responsibility on anyone thinking of taking up outsourced services by way of an approved list.
The first thing to state is the crucial importance of undertaking your own "due diligence" test. Speak to the suppliers and make sure they can do what you want them to. Speak to colleagues to find out whether they use, or have heard of, the service provider in question, and assess whether feedback is good, bad or suspicious. Understand the terms of your contract, what leeway there is if services don't meet your standards or expectations, and is there any kind of fall-back position if things simply go wrong?
Of course, you can never completely protect yourself from someone else going out of business suddenly, but you can mitigate risks if you done some risk assessment in advance. In the case of NCVO's approved suppliers list, their business development director Richard Williams is quoted as saying that Charity Business were removed from their list over the summer, following two complaints being received. However, Fiona Blacke responds that she didn't know this had taken place and was in the process of terminating their contract anyway.
As more technology moves to the Cloud, many charities will begin to need to make very similar decisions about where to store their valuable data. Again, the need to be prepared from the outset is crucial, which is why we have produced a guide to the top questions to ask your prospective Cloud provider. I feel that many of the points contained here are equally as relevant to any other outsourcing decision you may need to make.
I sincerely hope that the affected charities are able to sort their financial affairs out quickly - the last thing anyone needs as the financial year draws to a close is something like this taking place. I also hope that this is a reminder that life is full of risks, and whilst you cannot prevent risk, you can, and should plan for it, in case the worst happens. Given the kind offer of help from Clare Gilhooly at Cambridge House, who has copies of the data of 48 other Charity Business customers, it seems like in this instance it's four leaf clovers all round! It's also worth highlighting that Cambridge House were able to collect this data because they had already been taking protective steps because of their own concerns. Be lucky out there.
Posted by Terry Stokes
Comments
ian goodman — 16:28 on 25 January
It is vital that whenever an organisation is entering in to a development or back-office contract there is a mechanism for getting data out should the worse happen, whether this is through a third party or organisations own back-up system. The article mentioned by Terry - http://www.ictknowledgebase.org.uk/cloudproviderquestions - highlights the need for confidence in the Financial Security of company, Data backup and disaster recovery and not forgetting References, References, References.
This may not have mitigated against the problems in this case but it is important that organisations are furnished with as much information in their decision making process as possible."
John I Davies — 10:52 on 24 January
This sad case evokes parallels with commissioning of software development where contracts with suppliers often include an escrow arrangement to allow completed work to be saved from the "wreckage" if a supplier fails. Can this be applied to outsourcing more widely? I guess LASA may be just the organisation to have both IT and business-practice skills to determine this.
One thing which MAY have helped to alert users of the Charity Business de-registration from NCVO would have been to set up a Google Alert. I have a number set up to catch the appearance of critical issues. Hard to tell in retrospect if this would have helped but worth a try?