The public sector is spending £12.5bn on IT this year. Do
central government IT projects fail more than private sector ones.
If so, why? And can the Office of Government Commerce reverse the
process? Julia Vowler reports
The recent war of words between senior government officials and
software industry leaders over who is to blame for the UK
government's dismal track record for IT projects has given a
long-running debate a new spin.
Is e-envoy Andrew Pinder and chief executive of the Office of
Government Commerce Peter Gershon justified in accusing the UK's
software industry, or is Dennis Keeling of the Business Application
Software Developers Association (Basda) right to blame the
government for having a flawed procurement policy?
One thing is beyond doubt: the UK government is ploughing an
unprecedented amount of money into IT. Public sector analyst firm
Kable predicts that total IT spend for the public sector in
2003/2004 will increase by nearly 25% from last year, at just less
than £12.5bn, with central government spending more than £3bn. Then
there is the government's £2.3bn national IT programme for the NHS.
Up to £3bn of government IT spending will go on electronic service
delivery since all government services have to be available
electronically by 2005. About a third of government IT spend goes
on services - typically outsourcing and private finance initiative
contracts.
But is that money mis-spent? Damning reports by the National Audit
Office of government IT projects - such as the Libra system for the
magistrates courts and the Passport Office that have overrun their
budgets by millions of pounds - have become commonplace.
However, should those chilling figures be seen in the context of IT
implementation in general? Do other sectors fare better? Some
experts think not.
"In my experience the UK government's track record is not
significantly worse than for IT overall," says Andrew Davies, who
serves on a panel of advisers to the NAO and is visiting professor
in information systems at Cranfield School of Management.
He argues that the government's IT track record looks worse than
other sectors because it is more visible. "We know more about it.
There's a whole programme of scrutiny that identifies and
investigates IT failures."
Davies adds that the private sector is simply getting away with a
poor track record - but out of the public view. "I have seen
disasters on the same scale in the private sector as in the public
sector," he says.
In defence of UK government IT, "They get an awful lot of things
right, but those don't hit the headlines. The NAO is not interested
in them," he says.
So does this mean that it is time to shrug shoulders and accept the
IT disasters as par for the course? Viewed as money displaced from
hospitals and schools, IT disasters are even less forgivable. Nor,
unlike the private sector, can survival of the fittest lead to
self-regulation via efficiency versus extinction.
But why do UK government IT projects go wrong?
The first reason is size. Very large IT projects are inherently
difficult to do, and some government IT projects are extremely
large, involving the population of the country. With such a vast
scope, the multiplier effect of a national roll-out will ensure
that any mistakes or scope-creeps are amplified massively.
Moreover, when very large IT projects are implemented in a
big-bang, one-off fashion after years of development, instead of in
discrete chunks every six months, the likelihood of failure or
overrun is greater. Even worse, the longer a project takes to
deliver, the more likely it is that the initial specification will
be changed, resulting in uncontrollable cost and time
overruns.
"It used to be the case that projects which took more than three
years were more likely to be cancelled than to go live," says IT
parliamentary lobby group Eurim in a recent report.
Now, private sector projects which take more than three months are
more likely to be canned before roll-out. And projects that take
more than six months to plan and procure are also doomed.
The second reason behind wayward government IT projects comes in
the commissioning stage. When laws change, the underlying IT that
supports those changes may be substantial. Politicians do now
consider the IT implications of legislation, although the danger is
that they receive optimistic answers from civil servants and
suppliers.
"In government departments the policy unit does not always think
too carefully about the impact of IT," says Davies. "And in NAO
reports it is pointed out that decisions are taken without
[adequate awareness] of the implications for IT."
Thirdly, government IT lacks the appreciation that there is no such
thing as a pure IT project, but only a business project with a
strong IT component.
These factors, however, are not unique to public sector IT. Indeed,
Keeling and Davies, among others, would argue that government
projects are no larger than the largest in the private sector -
such as banks, who also deal in millions of people, as well as
multimillions of pounds of IT spend.
But where the government does hit a problem not shared by the
private sector is the issue of civil service IT management. Central
government mandarins are remote from their user communities -
unlike, says Kate Mountain, chief executive of local authority IT
managers' association Socitm, council staff. She argues that local
authorities are far more successful at cost-effective IT
implementation.
"We are closer to the people who will use our systems," she says,
"and closer to the politicians [who commission them] - there is
immediate accountability. In central government civil servants
change jobs regularly and teams are never stable."
The culture of the civil service is to win promotion by moving
post, observers say, which militates against continuity of project
management or to the accumulation of skills necessary for ensuring
successful IT implementation.
This "lack of top management commitment and involvement", says the
Eurim report, can be exacerbated by "lack of experience in how to
get value for money as a customer or in how to manage the
associated change programme. This is the single most important
cause" of government IT project failure.
There is also, argue government critics, a damning lack of adequate
risk management when it comes to spending taxpayer's money on IT.
This is allied to unrealistic over-ambition, says Eurim.
Keeling agrees, "Risk assessment is not there. For example, the
Inland Revenue is proposing to change the National Insurance
numbering system in the same year as it is [reletting] its
outsourcing contract."
An essential part of risk management is managing uncertainty. This
is not something government IT is traditionally good at, says
Davies. He says the government needs to be more flexible in its
procurement process.
This means, of course, that suppliers must be more flexible too,
contractually and technically, embracing open systems and not being
focused on short-term profits and proprietary systems, says Eurim's
report.
But does government need to rely so heavily on bespoke systems,
however much they are broken down into manageable, bite-size
deliverable pieces? The lack of exploitation of packaged software
is a major reason for why government IT is so expensive, says
Keeling.
"Not everything could be package software, but I would say 80%
could be," he says. "At the moment it's more like 20%."
For Keeling it is a matter of educating the public sector just as
the software package industry had to educate the private sector
that it was unnecessary to constantly recode systems already
existing in the market.
"Some years ago the Benefits Agency was proposing to write a
financial ledger system for £5m because it thought no package
system would be large enough to handle the volumes," recalls
Keeling. "We found them a mainframe package for less than
£1m."
Bruce Hudson of Meta Group agrees, "Package software is the way to
go [for government IT], though the culture has resisted it. Over
five years a bespoke system would be, on average, about five to
seven times more expensive than a package."
Not everyone is as enthusiastic, however. "It is not an environment
that packages can ever make a huge impact on," argues Davies. "Some
systems are extremely specific, and the requirements are set by
law. It would be far more difficult to adapt them."
The main government body responsible for improving the success rate
of IT projects is the Office of Government Commerce.
However, the OGC is treading a delicate line, keen to improve IT
performance by encouragement rather than punishment. Those in
favour of this strategy would argue that the latter is
counter-productive.
"The investigatory and scrutinising process is deeply irritating to
all who suffer it, especially the negative function of the House of
Commons Public Accounts Committee," says Davies.
Even Eurim's damning government IT report, which spotted large
numbers of causes for systemic failure, says, "It is vital to
change the current negative role of the Public Accounts Committee
if we are to change the culture and attitudes to risk of public
servants."
Gershon is keen to point out that not all government IT is an
automatic disaster. "The Customs & Excise Import & Export
system, Outsourcing for National Savings and Investments, and NHS
Direct have been major successes," he says.
But without the threat of public exposure, and being demoted or
sacked for a series of botched IT projects, will government IT
projects ever get any better?
The only true test of the effectiveness of the OGC in improving
government IT will come if the NAO reports on IT projects that have
been scrutinised by the OGC start to show thumbs-up
judgements.
But the impact will not be immediate. The OGC has been granted no
retrospective powers to subject projects started prior to February
2001 to Gateway reviews. It should also be remembered that the OGC
only has limited resources - about 700 consultants from Whitehall
departments and the private sector.
In the meantime, expect more buck-passing and rows over delayed and
scrapped IT projects.
Can the OGC turn UK government computing around?
The Office of Government Commerce is chaired by Peter Gershon,
whose previous employer was Marconi in the private sector. The
agency was set up three years ago to be an independent source of
expertise, advice and monitoring of government procurement projects
- including IT.
It was given the task of taking out £1bn of spending across the
board, by "buying smarter" but without cutting projects or
services. The OGC claims it has "comfortably exceeded" that target,
and is now aiming to cut £3bn in the next three years. How much
comes from IT will not be known until the National Audit Office
makes its report this summer. The OGC is tackling the government
IT problem in at least three ways.
Procurement
It has introduced aggregated purchasing, so that departments can
get better economies of scale and more transparent pricing.
However, critics claim aggregated purchasing may do more harm than
good as it sidesteps European Commission open tendering laws.
In February a deal was done with Oracle to "secure an average
11% reduction in the cost of technology products directly and
indirectly purchased from Oracle. With transparency and
standardisation built-in, departments will be able to secure the
best possible prices," says a spokesperson for the OGC.
The agency is also tackling the assumption that government IT as
the preserve of a handful of large suppliers, as these are the only
ones able to tackle large government IT procurement, by introducing
more competition. E-procurement is, according to the OGC, making it
easier and cheaper for smaller suppliers to bid for government
work.
Framework contracts also allow the selection of a "basket of
suppliers" that departments can use. This increases choice as does
breaking up contracts to select 'best of breed' suppliers for each
component, rather than a single supplier which may be good for some
aspects of the project but not others.
The OGC has also set up a Senior IT Forum for IT purchasers and
suppliers to improve behaviour on both sides. "Are suppliers
promising more than they can deliver? We want this to stop," says
Gershon.
Have these efforts improved government IT procurement? "We are
seeing the beginning," says the OGC spokesperson cautiously.
Changes in both supplier and purchaser behaviour "won't be
overnight".
Project management
The OGC can act as an overall programme management office by
instigating centres of excellence in project management - including
vital risk management skills - and encouraging the take-up of
"lessons learnt" via its projects database. The agency recommends
that every project has a Senior Responsible Owner - a grade 5 civil
servant or above, right up to permanent secretary level (the civil
servant who heads a department) - who owns the budget and the
deadline. In this way the OGC wants to tackle the endemic problem
of lack of project accountability. "Their name is on the project,
they can't hide and they can be called to account. We want to
encourage the SROs - and the whole project team - to see the
project through to the end," says the spokesperson. "If a new SRO
has to come in we'd meet up and gauge just how up to speed he
was."
Project monitoring
Gateway review This is where the real teeth of the OGC bite.
Since February 2001 every government IT project has been subject to
mandatory review, right from assessing the feasibility of goals
through six stages to completion and delivery of benefits.
If, at any stage, a project is deemed by the review to be going
off the rails, "we can red-light it", says the OGC. "We have the
power to recommend halting the project to the permanent secretary.
He can overrule us, but if the project then goes pear-shaped it
will have his name all over it and he'll be explaining that to the
NAO. "It's rare, if ever, that we are overruled."
However, the OGC is careful to stress that "at the end of the
day it is down to a department how it spends its money. If we could
mandatorily stop a project and take power over it from the
permanent secretary, then that could cause concern in the
departments", the agency says.
Has it got all the powers it needs? "We are happy with the
current set-up," says the OGC spokesperson. It also stresses that
the results of Gateway reviews are confidential. There is no public
disclosure as to which, if any, current IT projects have been held
at yellow or red alert. "We don't want to be seen as project
police."
Naming and shaming is out - at least until the NAO report comes
along.