The Budget, the cuts and IT

"Osborne’s kill or cure budget". That was the Financial Times headline this morning. If that sounds apocalyptic, even the cure could well be the death knell of public sector IT as we have known it.

Socitm, the public sector IT directors’ organisation, is absolutely correct to say “If IT is seen as just a support service, then we will miss huge opportunities. Arguably, technology is the only ‘silver bullet’ in the armoury of the new government.”

That means investing in technology to improve the efficiency of public sector in general and to drive down the cost of front line services in particular. Whether we get that investment, whether the silver bullet is fired, is though in doubt.

That is not simply because the chancellor tells us the cupboard is bare, it is also in doubt because of past performance.

Jos Creese, the president of Socitm has a vision of an IT-enabled future:

“This … is about automation, self service and a more flexible and efficient workforce. Initiatives need to be scaled back, overheads reduced and assets freed up.

“A stronger commercial drive is also needed to increase income and create better value arrangements with the private sector.”

That last point may be an understatement, but it is still a direct challenge to IT suppliers. It should mark an end to bloated IT contracts which have seen some suppliers operating a “fill your boots” approach to the public purse.

Too many over-priced, under-performing projects have been palmed off on the public sector. Some blame for this clearly lies with ministers, civil servants, quangos and local authority chief execs for their inability to act as intelligent customers.

However, those who build a business model on taking advantage of the gullible, get caught out when their victims wise up, and that is going to happen in IT

IT suppliers will find that over the next few years, either their public sector customers get savvy, or the public will stop them spending money on IT projects.

The implications will be profound. Genuine partnerships will survive, while those organisations that have operated smash-and-grab raids on the public purse will find there is nothing left to plunder.

Martin Rice, CEO of software company Erudine and co-founder of the UK Innovation Initative, didn’t pull any punches in his post-Budget comment.

“The IT industry should be apologising today,” he said. “After years of profligate self-interest to protect the government-fuelled gravy train, the industry delivered for the taxpayer a host of projects that have run massively over-budget, were completed years after they were promised, or in some cases have totally failed.

“The vested interests of incumbent suppliers, often masquerading as best practice, have become a straitjacket on government, with the taxpayer left to pick up the inflated bill.”

Compass Management Consulting has put some figures on this, concluding from an analysis of UK IT outsourcing contracts that the public sector is paying 40% or more above the market rate for outsourced services.

Compass arrived at the 40% figure after comparing the prices paid by government departments in their outsourced contracts with the market price paid by the private sector for a comparable bundle of services.

According to Compass the public sector could save up to £6bn on its annual IT spend of around £14bn without affecting front line services, if it got its procurement and vendor management right.

Gary Bettis, Compass’s UK president said, “This poor performance reflects a combination of questionable procurement practices and inadequate management of the demands that public sector clients make on the service provider for extra services and customisation which drive up costs.”

Putting it right means IT leaders stepping up to the mark, showing vision about how IT can support front line services and having the guts to say “No” to stupidity from politicians and chief executives and also to greed from suppliers.


Copyright © 2010 IDG Communications, Inc.

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