UK Government needs to change more than IT suppliers to cut costs

Since the government dragged its main IT suppliers into a room to talk about cost cutting, I have been on the phone to many industry experts as well as suppliers themselves.

I wrote this analysis about how the government and suppliers can achieve the IT cost cutting targets.  

From what I see on this occasion it looks like the feeling is that the suppliers should not just cut the costs by doing things like stripping services and offshoring work to low cost regions. Rather they should harness technology to change the public sector for ever and for the better.

There are lots of ideas floated in the analysis. These include shared services, cloud computing and flexible service levels. 

But what do you think?



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I'd echo many of the ideas that were on your original article, but I think that the majority of significant IT cost savings will come from just 3 areas:

- scope/service level changes: the removal of overspecified and underused services from the suppliers' cost base

- replacing collaborative procurement with a presumption of shared use: mandating that all departments and agencies first seek to buy commodity hardware/software and comms from shared framework agreements, before allowing the to place their own contracts

- applying a consistent risk-based approach to setting the security requirements for services. Security requirements drive a significant part of the costs of public sector IT, but the way in which the requirements are set and applied varies widely from department to department. As a result, additional cost and duplication is built into many of the services from the outset.

As regards the idea that significant cost reductions are automatically going to come from reduced margins - well - it seems to be driven by an assumption that the current suppliers are all making super-profits, and that they will just cough with embarrassment and cut their prices as soon as anyone notices.

This is nonsense. There are many problems with the market for ICT services to the public sector, but a lack of competition between the major suppliers isn't one of them (Microsoft and Oracle excepted, I should say). The margin that any supplier makes is driven by the balance between supply and demand, not by the customer's preferences.

In the government's case, they have the advantage of being a single large customer. So, they can temporarily clamp back on demand (which they have) to squeeze the market. But, if they continue to do this then supply will dry up so that margins come back to the average for the rest of the IT industry.

Public sector IT deals with extremely sensitive data - are we sure outsourcing the service desk is the right solution to cut down costs?