Time to to prepare for the "insourcing spring" of 2013

The difficulties experienced at Mouchel has triggered a series of reviews which will lead to many, perhaps most, of its local government service contracts (run by companies which it had taken over) being taken back in house rather than left to tender mercies of Treasury-owned banks. That process will gather pace next spring as Councils seeking to get re-elected by cutting costs without cutting services stop renewing inflexible outsourcing contracts and start bringing services back in-house so that they can be restructured and shared. 

Meanwhile the collapse of health care across South East London , in the wake of a series of disastrous PFI and Outsource Contracts (particularly those for the Princess Royal and Queen Elziabeth hospitals, will hopefully trigger legal action against those responsible (including the law firms and consultancies) for contracts which not only flew in face of good practice at every level (clinical, management etc. etc.) but may have been in breach of legal requirements (e.g. for the emergency lighting in the operating theatres) as well as ultra vires.   

Bryan Glick makes some good points in his blog on the lose-lose contracts to implement the NHS National Plan for IT but was wrong to point the finger at Granger for pushing the balance of risk “too far the other way”, when he set about enforcing the small print of the crass contracts he inherited in order to bring about renegotiation. He was merely following private sector good practice. His former employers. Accenture, saw what was about to come and walked away: writing off only a £hundred million or so. BT, CSC and Fujitsu should have done likewise – in the interests of their shareholders as well as of the patients and taxpayers. 

Now the coalition parties face electoral melt-down in the council elections next year as officials continue to cut front line services in order to fund redundancy payments. We can therefore expect to see attention turn towards making real cuts in IT costs, not just the nominal 10% offered up by the current incumbents to Cabinet Office, in return for an inside track on future business. 

The LGA statements in this area are mostly generic but evidence to date is that co-operation with regard to ICT procurement can lead to costs of less than half the central government average for equivalent products and services. Meanwhile co-operation in service delivery (including from sharing communications networks and back offices) has enabled savings of over 50% at the same time as service improvements (e.g. by giving mobiles to midwives and carers to do the paper work from the patient’s home).

However, ongoing savings as needs and technologies evolve require a flexibility that is missing from most outsource (let alone PFI) contracts. Hence my view that the zenith of outsourcing was during the run up to Y2K. That does not mean that it will take a long time to fade out of fashion. The zenith of the British Empire was probably before the Boer War, even though more of the world was painted pink (League of Nations Protectorates) after the Treaty of Versailles in 1919).

I think we can expect to see others to follow suite if Milton Keynes is successful in making significant savings by bringing services back in from Mouchel. Meanwhile the Local Government collaborative procurement strategy is likely to gather pace with services increasingly delivered by local co-operatives and SMEs within inter-operability frameworks (like those for PSN). The challenge will be to help Local Authorities to deliver savings on positive cash flow, because few, if any, still have cash balances to invest up front and their suppliers cannot afford to borrow to fund risk investment. That requires innovative thinking on the part of those IT and Communications suppliers who are not in the process of quietly withdrawing from UK public sector markets.

How can major IT and Communications suppliers re-engineer their operations to work more profitably through local partners, with lower sales and support overheads, when those running them usually got to the top by running big sales campaigns (whether or not the subsequent implementation was profitable or successful)?   

The good news is that a number of suppliers (large and small) are looking at how to adapt, using the new Digital Policy Alliance as an umbrella for co-operation with Local Government and SME consortia. One of the cornerstones to that co-opeation is the move towards mandating open standards for inter-operability. This not only preserves  competition, avoiding lock-in to proprietary solutions, it also means that if a supplier fails, for whatever reason, the contracts can be picked up by others (albeit not necessarily at the same price) without the need to write-off a dead-end investment. 

[The DPA is a relaunch of EURIM. I am getting quite jealous of the commitment being shown by major players towards the exercises planned by my successor. The key to his success is that he is making the members do the work – dropping exercises where he cannot see the necessary commitment. My failure was because I tried too hard and they thought they could leave things to me if they were “too busy”. I learned my lesson too late. But now I am also free to advise some of the DPA members on how to reap direct short term business benefits from working together.

That is important because those who do not help Local Authorities achieve their cost-cutting objectives next spring are unlikely to still be serious players in the UK public sector come the time of the next General Election. Waiting for this government to go away is not a serious option. If it fails, the next one will face an even harder job – in a world where IT is used to ration demand at a every level – and therefore under systemic attack from all sorts of “freedom fighters” and not just copyright pirates.]  

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