Coalition achieved its goal of smaller IT deals, research reveals

Previous coalition government managed to reduce the average size of public sector IT services and IT outsourcing contracts, shows an ISG study

The previous coalition goverment doubled the number of IT services contracts but achieved lower average values when compared with the previous Labour administration, an ISG study has revealed.

According to the study, the public sector signed 741 IT services contracts with a value of more than $5m each – just over $69bn in total – during the coalition government's term in power from 2010 to 2015. This compared with 336 deals worth almost $54bn in total during the term of the previous Labour government.

In the same period, contracts in the private sector for IT outsourcing and business process outsourcing (BPO) increased by 60% in contract volume and 40% in total value, signalling that both sectors are moving to more smaller contracts.

Breaking the public sector up, the figures reveal that central government spending only increased by just over $200,000 to $36.5m, but the number of contracts leapt from 139 to 212. The number of local government contracts increased significantly from 132 to 324 but spending also shot up, almost doubling to $19.65m.

“There are plenty of positive savings and other benefits to outsourcing as well as cost savings. For example, there is access to greater technology and resources, adoption of more efficient processes, cloud, and other new tech,” said ISG.

The firm estimated that net operating savings generated through outsourcing average around 16.7%. “Savings from BPO contracts tend to be on the higher end of this scale – and the UK public sector is heavily BPO-focused, accounting for more than 60% of the market since 2010,” it said.

One of the goals of the coalition government was to reduce the dominance of a small group of IT service providers in the public sector. Known as the oligopoly, this group included the likes of IBM, HP, Accenture and Fujitsu,

In 2011, Cabinet Office minister at the time, Francis Maude, said: "We will end the oligopoly of big business supplying government IT by breaking down contracts into smaller, more flexible projects. This will open up the market to small and medium-sized enterprises and new providers." Developments such as the government cloud computing platform, known as G-cloud, were introduced to qualify more varied suppliers.

Read more about public sector outsourcing

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  • The number of staff directly employed by a fifth of local authorities will reduce 35% by 2020 as a result of outsourcing
  • A G-Cloud ‘masterclass’ promising attendees a ‘significant and unfair advantage’ in securing business through the framework prompts supplier concerns

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