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Tips on breaking free from long-term IT contracts

Far-reaching, multi-year contracts are less popular these days, but IT departments often find the renewal date is still years away

Earlier this year, IT consulting firm Brightman ran an event in which public sector organisations discussed their supplier relationship challenges, and how these affect digital transformation initiatives.

Brightman has now published a blueprint from these discussions, which highlights the fact that organisations in the public sector are still struggling to manage complex supplier relationships.

Gail Evans, director at Brightman and author of the paper, said: “After years of outsourcing, the public sector has lost control of its supply chains, which is hindering its ability to deliver the transformation that it wants. There is nothing wrong with outsourcing, as long as it is done correctly.

“In this whitepaper, we explain how the public sector can take back control of its supply chains so it can continue to leverage the benefits of outsourcing while driving its own digital transformation agenda.”

In Evans’ experience, no matter whether an organisation is in the private or public sector, it is paramount that it focuses on the commercial and procurement aspect of any IT project. “You need to understand the requirements to engage with the right suppliers, to get the right contract,” she said.

IT is not seen as a core competency and, until very recently, many organisations preferred to outsource large amounts of their IT to a prime outsourcer, often involving a complex multi-year contract. But Evans said: “When done wrong, a large contract with a prime contractor who provides all the services is locked down.”

Such contracts probably met the client’s original requirements, but no longer match where it now wants to go, she said, adding: “It is quite difficult to get out of these contracts.”

Although there are clearly benefits in having one outsourcer as the main point of contact, rather than having to manage multiple IT suppliers directly, Evans urged IT decision-makers to ensure they understand the impact of the contract throughout its lifespan, such as evaluating whether it will remain relevant in five years’ time.

Read more about contract renegotiation

  • As it disentangles the Aspire contract, HMRC has been working directly with key IT suppliers, with this latest agreement providing managed desktop IT.
  • Crown Commercial Service launches ICT framework to help education sector bodies procure technology products and services, with SME participation becoming more prominent.

She said it is quite difficult for an organisation to get out of a long-term IT contract. The IT team needs to understand the different tiers of the contract and how costly it is to break it. Paying an exit fee and taking a lower tier of contract could work out much more expensive when the IT department has to source suppliers to support areas of the original contract that are not supported by the new arrangement.

Where these costs are prohibitive, Evans suggested that organisations look at how they can form partnerships with the prime IT contractor, such as work on co-development initiatives.

Digital transformation has brought IT into the engine room of most organisations. Brightman has found that many public sector and private sector organisations question to what extent IT expertise becomes a core skill and how much IT service needs to be provided by a third party. 

Evans said frameworks such as the Crown Commercial Service’s framework can help public sector bodies figure out the style of contract that best suits their situation. But in her experience, there is generally a lack of awareness of how to make the best use of such frameworks.

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