DVLA shows the long-overdue maturing of outsourcing in government

Former Cabinet Office minister Francis Maude once described DVLA as having the worst outsourcing contract in government – and that’s quite an accolade, given the number of terrible deals in the public sector.

So it’s not surprising that people in government technology now are quietly elated that DVLA has not only ended that contract, but brought most of its IT service provision back in-house. Over 300 staff have been brought back into public employment, and savings approaching £300m are expected over the next 10 years – after spending £1.3bn over 13 years with suppliers IBM, Fujitsu and Concentrix.

DVLA’s history of outsourcing went back even further – even Margaret Thatcher took an interest when she was prime minister. So it’s understandable that the move back in-house is seen as something of a landmark.

Outsourcing has its place, in government and the private sector, and total spend on outsourcing is on the up. But attitudes to it have rightly changed.

In the days of the multi-year megadeal outsourcing contracts, boardrooms would say that IT is not our core function, so let’s bring in outside experts whose sole purpose is managing IT. Most customers subsequently found that contracts were inflexible, change control was costly, and after a few years many of those deals became hindrances to progress, not a help.

Stories of £300 bills for changing a user password were rife. The Department for Energy and Climate Change told Computer Weekly in 2013 that its outsourcing contract was the reason it couldn’t move to the cloud. Several local councils had to abandon long-term contracts because the suppliers simply could not achieve the austerity cuts demanded. Horror stories abound.

Now that leaders in government and business have realised that digital is actually a core function, they are bringing back control. They need technology skills in-house to support the agility and customer engagement they require. The role of outsourcers is narrower, more tightly defined, and typically on shorter-term deals.

Not all outsourcing suppliers have found this an easy change. HP’s Enterprise Services division – the former EDS outsourcing giant acquired in 2008 and still one of the biggest providers to government – has made tens of thousands of job cuts.

Business attitudes to IT outsourcing have matured, and they had to. DVLA will be held up as a shining example to the rest of government as it tries to unravel itself from the costly, legacy outsourcing deals that continue to hold back its digital transformation.