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Outsourcing is now front page news. Tony Blair is committed to expanding the involvement of commercial expertise in the public sector. He has set tough targets to cut expenditure — value for money gains of £1bn by March 2003 — and to make the UK government a 'global exemplar' for e-commerce.

Yet predictably, the opponents of private sector involvement point to countless recent examples where they say this partnership has failed to deliver.

Similarly in the commercial arena the jury still appears to be out on outsourcing. You don't have to look hard to find sceptics who believe that, like many previous grand management initiatives, the hype surrounding outsourcing, far exceeds the benefits. So why has this particular dog gained such a bad name?

In my opinion it is hardly a coincidence that over this period the terms outsourcing and contracting-out have been used interchangeably. It is not surprising therefore that results have fallen far short of expectations. In addressing the problem of how companies should deal with their non-core activities more efficiently, the two solutions are, in my view, fundamentally different and should not be confused.

Contracting-out occurs when a company purchases goods and services from a third-party company — a service provider. Under this arrangement, the company continues to own, dictate and control the business process that is being purchased, defining in prescriptive detail what it wants, and how it wants the service provider to deliver it. Within contracting-out therefore, the service provider has little scope to move away from the written instructions.

In my experience, much of what has passed for outsourcing in recent times has in fact fallen well short in this way. It is little wonder therefore that the result has been much the same as before.

Under outsourcing the company hands over complete control and ownership of the outsourced business to the service provider, specifying only what outputs it wants from the arrangement. The responsibility for deciding how these outputs are achieved lies solely with the third-party service provider.

Switching the onus for continuous improvement in this way opens the way for radical change and can add real value. The service provider can choose to depart from the time-honoured way of doing things and is able to bring market experience and expertise to the delivery of targeted cost and quality improvements.

Put simply, if the purchaser overspecifies, bad internal practices are perpetuated, third-party accountability is reduced and the ability to leverage the service provider's industry expertise is minimised.

Essential though this distinction is, today we have gone a significant step further. With business process outsourcing, the service provider adds value at a strategic level within the business, through a rigorous and methodical review of existing processes and by improving the way they are delivered.

This is much more than just changing who is performing the process. Taking on responsibility for the process and re-engineering the way it is done will also often include introducing new technologies or applying existing technologies in new ways.

It is a total sea change from contracting-out, and can deliver real cost and efficiency improvements.

If you must give the outsourcing dog a bad name, make sure you have the right dog.