Government asking IT industry to cut costs makes no sense

The Government asking the IT industry to reduce its profit margin is a bit like asking a drug user to swap heroin for fruit pastels.

The Government asking the IT industry to reduce its profit margin is a bit like asking a drug user to swap heroin for fruit pastels.

Most sensible people in Britain agree the £147bn budget deficit and £1tr national debt needs to fall and that savings should be squeezed out of every corner of the public sector with no ring fencing of departmental coffers.

Minister for the Cabinet Office Frances Maude is today meeting with 20 of the largest suppliers of goods and services to government including some household names from the IT industry including HP, IBM and BT.

Under discussion will be the massive scale outsourcing deals and other ways to expunge costly programmes that return little in the way of value.

However Maude says: "The government has not before managed centrally the relationships with the biggest suppliers to government. We have not used the massive collective buying drive down the cost of common goods and services."

More than a few resellers will take exception at that comment given the work by Buying Solutions to create online auctions that cut the cost of commodity items to the bone and forced some at least re-consider selling to the sector.

The same auctions forced HP, well according to HP, to go direct to public sector customers as there was very little margin to involve a partner.

So in this more austere spending environment, what will happen when Maude sits down with these 20 chief executives to discuss in more detail the profit margins they (and their partners) expect to make?

This was last published in July 2010



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