CIO warned to keep IT spending high to retain influence

A CIO has revealed that he will lose his informal membership of an unofficial high-spending, high-influencing club within government if he cuts his department's IT budget too much.

A CIO has revealed that he will lose his informal membership of an unofficial high-spending, high-influencing club within government if he cuts his department's IT budget too much.

Phil Pavitt, CIO at HM Revenue and Customs (HMRC) - which has the third biggest annual IT budget among central departments, at about £800m - said he was visited by senior officials at the Office of Government Commerce soon after he was appointed in September 2009.

"In that conversation with me they mentioned I am in the top purchasing club... That means you have tremendous influence on buying power, buying ideas and management and so on.

"I said, 'If I reduce costs by 50%, what happens?' 'You leave the club,' I was told.

"So here I am, relieved of my ability to influence government's ability to purchase if I am clever and do my job. It is one of the most perverse things that I have heard."

Pavitt's disclosure at the Govnet Government IT conference was reported by silicon.com and was not denied by HMRC, whose spokesman told Computer Weekly: "Our job is to deliver value for money to the department and our customers, and that does not mean artificially ramping up our spending to be regarded as a player.

"The bigger your budget, the more leverage you have, but HMRC is not driven by this consideration. The scale of our IT needs alone ensures that we have sufficient presence in the IT market to engage meaningfully with any supplier we choose to achieve maximum service delivery in tandem with value for money."

The spokesman added that HMRC is focused on cutting its IT spend. "In October, we announced a further £110m reduction to the Aspire [outsourcing contract with Capgemini], which will save this amount per year from 2011/12."

The Cabinet Office offered no denial of Pavitt's comments. "The buying power of the larger departments is an important factor in leveraging the market to provide best value deals across the public sector IT landscape," a spokesman said.

"The Cabinet Office is committed to ensuring government exploits IT to deliver maximum benefit to the public and represents value for money for the taxpayer. The government's IT strategy has been designed to enable all public sector organisations to reduce their IT spend in line with the £3.2bn annual savings as called for in the Operational Efficiency Programme," he added.

Influential departments

Pavitt's disclosure of the existence of an unofficial club of high-spenders confirms the suspicion among some in the IT industry that central budgets are kept artificially high so that departments retain their influence in Whitehall.

The government spends about £14bn a year on IT, but a detailed breakdown of the spend is not known or published.

Chris Goodall, a director of consultancy Five One Two, who has worked at IBM, UBS and Citigroup, said: "Government CIOs should be rewarded and recognised for breaking away from this old school club.

"I think this is a fairly typical example of bloated IT costs which government ministers have been encouraged to pay for years The tender process is not delivering best value for money in terms of pound notes and, as Pavitt revealed, they are not incentivised to do so either.

"The message looks to be that government should go with the highest bidder, regardless of the quality of what is being delivered or what skills and innovations a smaller - and cheaper - provider could offer," he said.

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