The public sector IT industry has a tough few years
ahead of it, as the government plans to rehaul some of its biggest,
most
inefficient IT programmes to make savings of
£7.2bn.
The plans were detailed in the
Operational Efficiency Programme (OEP), published the day
before the budget. It was written by five independent advisors and
recommends £15bn of efficiency savings, half of which are to come
from IT.
Martin Read, a former Logica chief executive, was in charge of
reviewing government IT costs. He identified £4bn of potential
savings in back office processes by April 2012. A further £3.2bn in
savings could be gained by cutting annual government spending on IT
projects from the current £16bn.
IT staff in the public sector will have to watch their spending.
The government will take these estimated achievable savings into
account when deciding on budgets. Suppliers can expect scrutiny too
- all existing contracts will be poured over for potential savings,
and renegotiations will be tough.
Bigger savings required
But some say the OEP does not go far enough. Mike Zealley,
associate partner at Atos Consulting, says, "Given the current
economic climate, and the associated increase in demand for and
expectation of government services, we believe that the OEP may not
fully meet the challenge."
Procurement, including IT procurement, will be analysed too, as
the government seeks to make a further £6bn savings. Suppliers will
need to ready themselves for the public sector to flex its muscle
in an attempt to drive prices down.
But analyst firm Ovum says it will take some time for the
changes to trickle through. Tomorrow's budgets will pay for today's
recession, with supplier revenues expected to feel the effects in
2011 or 2012.
Much of the savings will need to come from local government,
with some central government departments being slightly ahead in
outsourcing IT and taking into account Transformational Government
policies. Transformational Government aims to improve public
services by encouraging public bodies to share IT services, merge
disparate government websites into one, and measure customer
satisfaction.
The Gershon example
This is not the first time the government has attempted to
improve financial efficiency in the public sector. The
Gershon Review generated £26.5m of savings between 2004/5 and
2006/7 - 20% above the £21.5bn target.
But Ovum analyst Georgina O'Toole is sceptical. She views the
Gershon initiative as "largely a numbers exercise".
The OEP goes over familiar ground, she says. The main
differences are the economic and political contexts, which add a
sense of urgency. But unless the government convinces the whole
public sector of its arguments, the savings could simply remain a
goal.
"Authorities in local government take a pragmatic view. They do
not need to be told that their financial situation is dire. They
are already adept at maintaining front-line services, despite the
pressure on resources, without seeking radical expedients. What
must happen now is for the treasury to convincingly win the
argument for shared services and IT-driven transformation," O'Toole
says.