Big IT vs SME IT in government - it's really about changing IT suppliers' behaviour

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The Cabinet Office plan to bring in more SME IT suppliers and reduce dependence on the old "oligopoly" of big systems integrators (SIs) was always going to come under greater scrutiny once some of those SIs saw their lucrative outsourcing deals come to an end.

The Financial Times ran a strange article recently featuring unattributed claims that ministers including business secretary Vince Cable were telling David Cameron that the pro-SME IT policy was wrong, after his department suffered email problems soon after it transitioned away from a Fujitsu mega-outsourcing deal.

The story claimed that the email and network issues were down to moving away from a single supplier to multiple smaller suppliers, using the "tower" model now recommended by the Government Digital Service (GDS), whereby several suppliers are contracted for different elements of the service, under an over-arching "service integrator" (which could also be the in-house IT team).

The Cabinet Office countered that the deals that replaced Fujitsu saved many millions of pounds.

Former government IT chief Alan Mather wrote a very good put-down of that story here.

My instinct was similar to Mather's - that the story smacked of a leak from the ejected incumbent after losing its 15-year outsourcing relationship with the departments in question. But that's purely speculation - I have no evidence to suggest that is the case.

Contract transition is never easy and rarely straightforward - as Fujitsu itself is extremely well placed to confirm. The supplier, which was paid £415,393,510 by the government in 2013, according to the Institute for Government - was thrown off a £300m DWP desktop support contract in 2011 barely a year after taking over from HP, after it failed to meet its transition targets.

Fujitsu and the DWP are still in legal dispute over the cancellation of the deal. So any SI would therefore be correct to point out that contract transitions are risky business.

But that FT story was just part of a theme that is growing fast as the 2015 general election approaches - you can absolutely sense that SIs that have seen their new business from government decline in recent years have their eye on a change of government and hope it brings a re-embracing of "Big IT".

That's not to say those SIs have been struggling for cash - that Institute for Government report shows that six IT providers took home £4.6bn between them from the public purse in 2012.

But the Cabinet Office "red lines" that prevent any IT deals above £100m in total value, and encourage 50% of spending to go to smaller IT firms, mean that new business has been harder to come by.

There has been plenty of bleating about this of course - "They'll learn, they can't do IT in government without us", that sort of thing - so there was always going to be a backlash.

In the next couple of years many of the biggest outsourcing deals in government are up for renewal - not least the £850m a year HM Revenue & Customs (HMRC) contract with the Capgemini-led Aspire consortium (which also includes Fujitsu).

HMRC has already said it will not sign another mega-deal with a single supplier, and government CTO Liam Maxwell has repeatedly promised that none of the other existing outsourcing deals will be renewed or replaced by a single supplier.

So it is no surprise if there is plenty of spin as the first of those old deals is passed instead to several smaller companies. Anything to stop the strategy in its tracks before the really big deals come up for grabs.

But there are concerns from many observers - this one included - that Labour is courting those big SIs - and being courted by them in return.

Chi Onwurah, Labour's shadow minister for digital government - and kudos to Labour for having a shadow minister for digital government - told me at the launch of Labour's digital government review in March that it was an "exaggeration" to say that big IT suppliers are "the bogeymen of IT". While Labour supports competition and creating opportunities for SMEs, she said that large suppliers "shouldn't be locked out, but neither should they be locked in".

Some people have taken that as evidence that Labour will invite back in the big SIs that - let's be honest - served them so badly when they were last in power.

Computer Weekly blogger and former Conservative Technology Forum chairman Philip Virgo wrote this week that the suppliers "who have run UK public sector ICT for the past 20 years still expect to be able to recoup their recent losses after a Labour victory" in the election.

After reading this, Onwurah described Virgo's claim as "scaremongering" on Twitter. It seems Labour are sensitive to such suggestions, as well they should be.

My view is that the current government have been absolutely right to hammer the big SIs for their complacency and for their cosy relationships over too many years. There is no doubt that government has spent too much on IT for too long, and made its IT far more complex than it ever needed to be.

Of course, government takes its share of the blame for that - the Civil Service outsourced its IT expertise and left itself vulnerable to suppliers who will, inevitably, look to make as much money as they reasonably (and sometimes unreasonably) can.

The best change that GDS has introduced is to re-skill government IT and to place the emphasis back onto bringing in the best digital and IT management staff that it can. Forget Labour's attitude to suppliers - the real scandal would be if they reversed that recruitment policy. I've seen no suggestions that they will.

But the reason the big SIs deserve that hammering is not because they no longer deserve to win any government contracts. It is because they have not changed their behaviour, or seen any need to do so - and I think that behind all the rhetoric from the likes of Liam Maxwell and Cabinet Office minister Francis Maude, that is the real agenda.

Those suppliers showed no evidence of changing, nor of recognising that they had to change, so they had to be shocked into doing so.

They have to compete on a level-playing field - not one in which contracts are so big and requirements so complex that there are never more than a handful of companies capable of competing for the deal.

If Fujitsu or HP or Capgemini or Atos or IBM or Accenture or anyone else can prove they are the best supplier to meet government needs, they will continue to win contracts. But those contracts will be smaller, more tightly defined, and (hopefully) better managed by the Whitehall departments that pay the bills.

That's not easy for a lot of big SIs whose business model and budgeting is predicated on a small number of very large, long-term contracts. But they need to work out how to make money from multiple, smaller deals - and deals which may only last two or three years, not the five, 10 or 15 they used to.

The "Big IT" versus "SME IT" argument is a smokescreen and if the Cabinet Office policy lasts, it should eventually become redundant anyway.

What really matters is genuine competition, with government sourcing IT products and services from the best suppliers for the job, without commercial or technical lock-in, without undue complexity or cost, in a broad and diverse supplier universe that best serves the needs of taxpayers.

If the old oligopoly is ready to win business in that world, they don't need to spin stories or lobby Labour. They just need to focus on their customer's needs, and deliver.

3 Comments

But how do we bring about "genuine competition". The essential (and still missing) components include enforcable (and enforced) open inter-operability standards and the skills to embed these in system and application architectures and incremental change programmes across organisational boundaries. Until such "boring" topics are addressed the "oligopoly" will remain able to credibly ask "Sir Humphrey", with support from a army of well paid lobbyists (and the implicit offer of a lucrative consultancy after his retirement) whether the minister wants the promise of a working system from a well known organisation or to rely on suppliers of whom no-one in teh Westminster Village has ever heard.

It is all about balance its not SIs v SMEs and neither is it SMEs v SIs, it's about us all working together, respecting each others strengths and weakness and sharing or balancing the work amongst ourselves! Some SMEs can and are able and willing to work with Government Direct and they should have the opportunity to do so. Others want to work within the supply chain, provide innovation and lean methodologies where the SIs cannot. SMEs can make decisions and react quickly to meet the end clients needs and often do not have to have a trail of paperwork, several meetings and charge £1,000s to change something that is quick to do. Yes the SIs will lose some margins initially but in the big scheme of things and in time they will actually win more business if they can provide an innovative ecosystem that actually delivers what it says it can, on time and to budget, in addition to creating a few more jobs within the SMEs along the way so everyone wins!

The big SIs certainly aren't playing by the rules, as I wrote here http://www.flax.co.uk/blog/2014/06/26/why-gcloud-search-is-badly-broken-how-to-fix-it/ - Atos have been keyword-stuffing their entry on the GCloud CloudStore (disclaimer: we're a small supplier on the same service). Luckily the people who run the CloudStore are aware of this and are trying to fix it in the next iteration.

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