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Government inconsistency on ERP costs is 'inexcusable'

Kathleen Hall

Some Whitehall departments are spending up to three times more than others for the use of near-identical software, a Computer Weekly investigation into IT spend across government has revealed.

IT spend on enterprise resource planning (ERP) systems has seen wildly inconsistent figures paid across government, according to Freedom of Information requests sent to 20 departments.

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Our research found that:

  • The Treasury is spending £60 per user on ERP licences, the Department for International Development pays £127 per user, but The Department for Communities and Local Government pays just £38 per user.
  • The Department for Work and Pensions has ERP software licenced for 130,000 users, despite only employing 120,000 people.
  • Departments are paying huge sums in maintenance and support costs. For example, of the £1.2m annual spend on the Department for Food Environment and Rural Affairs ERP system, £755,873 goes on support.  

ERP systems are used across Whitehall for finance, accounting and HR functions, and as such use broadly the same features of the software regardless of department.

Bernard Jenkin, MP and chairman of the Public Administration Select Committee, which has itself examined public sector IT contracts, told Computer Weekly that the huge discrepancies in ERP spend across government are “inexcusable”.

He said, “It’s seemingly inexcusable to pay top prices for software where they are buying thousands [of licences]. The Cabinet Office ought to be able to block deals so if they want a piece of software they go and buy it at a special government discount rate."

The Department for Work and Pensions (DWP) paid an initial licence fee of £14.3m for 130,000 licences, despite having total full-time staff of 120,000. The department also pays an additional £2.4m in annual support and maintenance costs.

DWP's spending takes into account the fact that both the Department for Education (DoE) and the Cabinet Office also pay yearly support costs to DWP for the use of its ERP system - the DoE paying £3.3m, which includes service and licence costs to Oracle; and the Cabinet Office paying total yearly costs of £1.8m to DWP.

However, it would be highly unusual for a private sector firm to purchase ERP licences for every employee of an organisation, instead of just the smaller number of users requiring regular access. 

Jenkin said that breaking up the dominance of IT contracts by large system integrators would bring greater consistency to IT spend across government: 

“We are appalled by the size of IT contracts that create these kinds of lock-in," he said. 

"Commodity products need to be centralised so departments get the benefit of buying in scale. And departments themselves need to be intelligent in their procurement and employ people with the right expertise. We cannot outsource our procurement, otherwise government will be taken for a ride. In the case of complex systems and equipment there is no substitute for expertise within a department," he added.

In a statement to Computer Weekly, The Cabinet Office acknowledged the inconsistencies in pricing and cited Oracle and SAP as the worst culprits.

The government IT strategy aims to increase the number of IT suppliers and to reduce the size of contracts to allow smaller firms more opportunities to win business. 

“We welcome the IT strategy as far as it goes but we need to move further and faster in the way described. It particular that means bringing in more SMEs," said Jenkin. 

"The IT sector is a dynamic and fast-moving sector, with most of the innovation taking place in small companies. Open source software, open data systems, and agile procurement will in the end prove inimical to the traditional very large system integrators"

Despite the Cabinet Office’s commitment to transparency and opening up spending information, only 14 departments have so far responded to Computer Weekly’s request for details of their ERP costs. Three departments are yet to reply and three said they were unable to provide the information on the grounds that it could damage commercial interests.


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