The government spending review is almost upon us so it is time to talk about government waste.
Sir Philip Green has already highlighted the amount of cash being wasted by the government and he singled IT contracts out for special attention.
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But here are a couple of stories that will bring home some of the challenges facing anyone that wants to change how government buys.
The stories come from a source of mine.
Here is the first.
A central government department was rolling out training to its staff. After a year of the contract, which was worth hundreds of millions a year, the supplier offered the department a 30% discount in return for changing the contract a bit.
The supplier said if you selected only the people that required the training for their job and career development you cut reduce the cost by £60m a year. Not everyone needed the training.
But, and it is a big BUT, the civil servant in charge said no because the department is “an equal opportunities employer.”
Here is the second story.
Government departments that use mainframes pay for services on a per MIPS. I am not technical myself and for the purpose of this story describe MIPS as a way of pricing storage processing on mainframes. I could have used some other noun, but I thought readers might be au fait with MIPS. You might even know about kIPS and MOPS too.
So when a department signs an IT contract it often agrees a cost per MIPS for a fixed period. It also generally agrees to a minimum threshold of MIPS because it does not expect demand to increase.
For the first year the supplier might take a hit and it will be a good deal, but in the remaining years of the contract probably not.
The other problem occurs when two departments want to integrate storage processing to gain huge synergies. Guess what they both have long contracts based on MIPS and both have a minimum MIPS threshold.