The Government's Best Value initiative will make it difficult for local authorities to avoid outsourcing computer applications to private companies, council IT managers and analysts have said.
From April, the Best Value initiative will require town hall IT departments to evaluate their services every five years and outsource them if they cannot provide a cheaper option in-house.
John Serle, head of IT at Lincolnshire County Council and chairman of the public sector IT managers association, said the application service provision (ASP) model would be almost impossible to avoid. His council outsourced a SAP/R3 application to Hyder in a £250m deal last November.
"The price point was 23% less than the services were costing us," said Serle. "Councils can't get the investment they need and can't get the economies of scale. They have two alternatives: collaborate together - which has already been tried and failed - or bring in a company like Hyder to do it for them."
David Burman, director of research at Butler Group, believes ASPs will be keen to take advantage of the initiative. "It is a golden opportunity for ASPs," he said. "On the face of it, it is bound to be cheaper than all but the most cost-effective, reduced function, in-house installations."
This does not necessarily mean the end of the IT manager. "There will always be a requirement to translate business requirement into technology requirement. The IT manager will become a facilitator of IT services," added Burman.
Hyder is presenting at eight CDI/ Local Government Network seminars in the coming months. Robert Campbell, Hyder's SAP business manager, said his company is on the shortlist at five county councils.
"Under the Best Value regime, we have no option but to give serious consideration to the Hyder-type approach," said one county council IT manager.