Is now the time for Indian suppliers to win big UK government contracts?

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This post follows a blog I wrote earlier this month which looked at the challenge the government faces when it comes to solving its offshoring dilemma.

This blog posts describes a scenario where the government may need to sort it out sooner rather than later. Or maybe the Indian suppliers will sort it out on its behalf.

The CIO of the Department of Work and Pensions made a very interesting statement when he announced an agreement with Fujitsu.

He said the department will be putting lots of IT work out to tender in line with changes across government.

If you combine this with the attendance of government CIO John Suffolk at the annual Nasscom event this month and you have a potentially interesting future trend.

The big Indian IT suppliers do not have that much in terms of UK government contracts. Although they are focused on applications rather than hardware the changes in government procurement and the interest in them from the government CIO means now could be the time to increase their presence.

There is a lot of application development and maintenance work to do for government and then there is BPO.

Just over a year ago I attended the first meeting of an All Party Parliamentary Group (APPG) focused on improving the UK's economic relations with India.

The first group of companies from India to meet the APPG were IT companies. Not surprising when you consider that TCS and HCL have thousands of people in the UK.

A spokesman for the APPG said at the time: "With the economic downturn companies are trying to make cost savings and this is a way of seeing what role Indian IT companies can play in this. It will also look at how public sector procurement can be improved," he said.

So the government wants to cut costs and, in the DWP's case anyway, departments are looking at refreshing their supplier agreements.

Will the Indian suppliers step forward and take on some of the most contested IT agreements in the land?

Or will the need to offshore work scare the government off?

Offshoring jobs is very unpopular in the private sector but in the public sector it could be suicidal for a government. The costs of paying for redundancies in the public sector is massive and the unpopularity is politically dangerous.

Also the civil service has a habit of making it difficult to make changes that could cost civil service jobs.

Douglas Hayward, an analyst at IDC specialising in outsourcing, says now could be the time for the Indian suppliers to win big in government. He says the application development and maintenance work that government requires suits them. He also said there are BPO opportunities.

He says companies such as HCL and TCS are becoming more local with thousands of UK staff so they are resourced to support local government.

But he says due to the political unpopularity of offshoring work and the huge costs associated with making public sector workers redundant  Indian companies are more likely to win "green field work" rather than legacy contracts.

He says sending existing work offshore would be difficult but new projects could be more easily sent offshore.

It will be interesting to see how the Indian ID card project runs. The project will provide 1.2 billion Indians with biometric ID cards. The man who is heading it is Infosys co-founder Nandan Nilekani. If it is a success, in a country where millions upon millions live in remote areas, the UK government might look at Indian delivery capabilities differently.

Here Robert Morgan of Hamilton Bailey describes the challenges of the Indian ID card project. 

11 Comments

There is no justification whatsoever for the UK government using UK taxpayers' money to subsidise the export of skilled jobs from the UK to the Indian IT industry. Any moves to do so would destroy career opportunities for UK-based IT staff, eliminate skilled jobs, reduce tax revenues from people working in those jobs, increase the numbers of unemployed IT workers having to claim benefits, and contribute to the permanent long-term decline of the IT skills base in the UK.

Nobody who has seen the colossal amounts of money already wasted on government IT projects managed by New Labour's favourite consultancies, much of which has already flowed offshore to the Indian subsidiaries of those same consultancies, would believe that any savings on salary costs through yet more outsourcing to India will be translated into genuine savings for the end client - the UK taxpayer. After all, it's never happened in the past, despite plenty of offshoring and onshoring by government-subsidised consultancies.

So I'm damned if I see why our taxes should be used to support the Indian IT industry instead of our own. Any government that pursues this path had better count on losing a lot of votes - and tax revenues.

You no longer need to send application development offshore. Coding for any business application is no longer required with new and proven technology. The Government is the dumb buyer as they have no knowledge of application developments and rely on their main suppliers to do the best for the taxpayer - ask John Suffolk! The result is the appalling failure rates with tax payer paying a high price for ignorance. An example I came across a £50m contract to Indian outsourcer but using this new approach would have been no more that £5m all carried out in the UK - it’s the tip of the iceberg......Time the politicians asked some awkward questions like "is it really true we rely on suppliers with huge vested interests to maintain complexity thus high sales and maintenance values to do the best for the tax payer?"

Any "architect" of business technology, would do well to appraise the whole business ecosystem involved in its delivery. Equally and codependently, the DWP operations need to be viewed in the same way, together with the psychological profiles of those who need to interface with the systems. For resilience, phrases such a "interconnected orchestrated service networks" should abound.

Usefully, the value network perspective (www.openvna.com ) paves the way for applying intelligence to these challenges and scrutinising the stakeholder interests before projects and programmes commence.

We need a win-win-win from all this investment and a minds set that thinks out-of-the-box to increase dramatically the cost effectiveness of solutions, David Chassels points to above.

With the UK bordering on the edge of chaos (a technical term) we can afford to challenge conventional thinking and be "generative."

Karl:
Yes, I think any government IT contract should be restricted to UK/EU-based staff. Any genuine "skills shortage" can be addressed through an individual work permit application, where the worker must demonstrate more than e.g. 8 years' experience to qualify. That ought to exclude a large proportion of the current rubber-stamped ICT-type imports, while still allowing the deployment of genuinely skilled specialists where necessary.

David Chassels:
Fair point about the dumb buyers in government, but I'm not sure if we can realistically hope to meet all the needs of major government systems easily with COTS software or standardised enterprise solutions.

This is partly because of the sometimes unique nature of what governments have to achieve with their IT systems, but also to a large degree because government buyers rarely understand their own business processes well enough to map these onto standard solutions, and they all tend to suffer from a high dose of "not invented here" syndrome. That is why it is so easy for the consultancies to persuade them to spend ludicrous amounts of money on gold-plated bespoke solutions, rather than e.g. modify their business processes to take advantage of standard solutions. This added complexity also increases the government's dependency on the consultancy's (usually imported) staff for future maintenance and development of the system, creating a nice long-term earner for the consultancy at vast cost both to the UK taxpayer and to the strategic interests of the UK IT industry.

But you're right that government IT contracts should be placed under far closer scrutiny, both in terms of value-for-money compared to reasonable alternatives, and in terms of their impact on the UK IT industry. The huge sums of money funneled into the major consultancies by the government in recent years has allowed them to dominate the UK IT sector and use their grotesquely over-subsidised leverage to shift a large slice of the industry offshore, with a disastrous impact on the long term sustainability of the UK IT skills base.

Sadly, I suspect the politicans are not going to ask any awkward questions, given the ease with which these consultancies can cultivate friends in high places, and the fact that most politicians understand even less about IT than most senior civil servants.

Indian IT suppliers are already involved in many big government IT projects, often as junior partners with cap gemini, hp/eds, capita etc.

There are plenty of ICTs at sites in Telford etc

The Indian IT companies are often there just to provide cheap IT resources to work on the projects.

TCS had a big part of the NHS fiasco. Mastek did the congestion charge system. TCS will be doing the new child maintenance system.

Karl
Interesting you mention "COTS software or standardised enterprise solutions". Actually there is a third way that can address the needs of government. The technology in question has been described by no less than Bill Gates as the holy grail of software! This innovative approach starts with the thinking process in how to tackle solving the problem - think people and business logic forget data and technology that is all taken care of. Add a pluggable content handler architecture using a tag library and of course embedding the resultant mash up into the end to end people process – all embraced in one tool and you have a whole new paradigm that ensures no need to code any applications offshore - now we just need an intelligent buyer - that's the real challenge!


http://www.lieffcabraser.com/lawsuitagainsttata.htm

This is a link to a major CLASS ACTION LAWSUIT filed on TCS in U.S for serious unethical and fradulent employment practices. This is just one of the many shameful facts hidden inside the TCS's closet, which depict the real UNETHICAL practices of providers like this. I hope the customers/clients take cognizance of serious ethic related issues like this and not just get blinded by the excessive hype created by firms like TCS on their growth numbers etc.

It looks like TCS have won the £600million contract for the new national pension scheme. The majority of the staff will be offshore.

ArgieBee

Yes I have just had it confirmed 60% of the workers will be in India. I am writing a story now.http://bit.ly/bHqrfu

Karl

I love the way holding the data in the UK and making it accessible from India gets around the issue that India still does not have adequate data protection legislation and enforcement.

I don't know if data is more or less safe if it is made available to workers in India as opposed to the UK, but there will always be risks:

http://chaisamosa.net/index.php/latest-news/200911111749/indian-police-arrest-boss-of-outsourcing-firm-for-selling-medical-records-of-british-patients/menu-id-363html

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This page contains a single entry by Karl Flinders published on February 17, 2010 2:46 PM.

Find out what the BskyB/EDS court case means to outsourcing contracts. was the previous entry in this blog.

How can Capgemini's outsourcing do well as consultancy and IT services do badly? is the next entry in this blog.

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