If Lottery Corporations Outsource, How does this Impact you?

The impact of outsourcing really depends on your interests and which group you identify with as a player, resident or find employment associated with the lottery corporation.

If you are a player of lottery games, outsourcing is not really a concern. The lottery provider is accountable for delivering the services you enjoy and outsourcing can provide you with better, faster and more types of services. With possibly better and more services provided at a lesser cost, maybe the lottery corporation can boost payouts for their games… I bet your province/state would have other ideas for these savings. Your ability to play – read “pay” – is in everyone’s interest as long as you do it responsibly.

As a resident, the cost savings could mean more money for the state and less pressure on taxes. The model used for outsourcing would also become more important. Outsourcing has a bad reputation of sending jobs to cheaper costs centres around the world; this is often referred to as off-shoring. In this model, local jobs are lost and the impact to the local economy is high. Cost savings from service delivery pale in comparison to the loss of jobs and erosion of taxes. Inefficient delivery should not be supported but the impacts of an off-shored model are locally severe.

Another model for outsourcing is called near-shoring. In this model, local jobs are shifted to regional low cost centres. The cost saving potential is less than an off-shoring model but the local impact is reduced. There may be job losses as a goal of the outsourcer is to reduce costs and those affected by outsourcing may not see an initial impact to their salaries but their benefits are impacted. As a state sponsored agency, lottery corporation jobs pay well and offer good benefits such as health, dental and pensions. There may be an agreement to preserve salaries for a period of time and the outsourcing agreement also has a limited duration. The unknown factor is what happens after the agreement is signed?

With each year, the outsourcer has a target for saving on routine operations, this also puts pressure on higher paid resources to deliver more or be replaced with less expensive resources that are also less experienced. For those working for a lottery corporation and impacted by outsourcing, this change is very disruptive. The outsourcer will apply its own standardization and delivery model of services in which the transitioned staff will need to follow. The new standardization and delivery of services may not integrate with existing lottery processes and these result in conflicts, rework and increased costs. The outsourcer also has a profit motivation and will explore any option to reduce the cost of delivery by overlooking undocumented requirements, using less expensive resources or incrementally billing the lottery corporation for work that is an “enhancement” instead of being “operational” – i.e. fixed cost.
For those working in the lottery, there will be changes in how they do their work and the transition period success will depend on:

• How well the lottery corporation has prepared for outsourcing,
• How up-front and honest about service delivery the outsourcer has been,
• The ability of those transitioned to the outsourcer and those of the lottery corporation can adjust to the new working relationship.

There is much a lottery corporation can do to prepare for an outsourced delivery and will be later discussed.
If your organization is considering outsourcing or if you have questions about what you need to do to prepare for an outsourcing agreement, please do get in touch with us.