Public sector IT spending currently absorbs more than £17 billion of public spending annually in the UK. Under Labour, British expenditure in this area dwarfed that of any other European Union nation, with many contracts costing billions of £s and running for periods up to 18 years. The UK also has perhaps the most concentrated government IT market in the world. So the Treasury announcement of an effective freeze in central government IT spending has sent shock waves through a major private sector industry. Here Jerry Fishenden decodes what the new Conservative/Liberal Democrat government is seeking to do and why it has determined on such a radical stance.
The future of public sector information technology (IT) is firmly in the coalition government’s spotlight. On 24 May 2010 the Treasury announced an immediate freeze on all new IT expenditure over £1m and additional very tight restrictions on consultancy.
The immediate intent is set out as being to “cut out waste”. But in opposition both the Conservatives and Liberal Democrats took a critical view of the many problems they saw with public sector IT when in opposition (see, for example, the discussions at http://www.makeitbetter.org.uk/ and http://www.makeitbetter.org.uk/?page_id=298). So the current drastic move looks like the start of a more significant and wider change to the way in which IT is governed, designed and procured.
Some of the rationale behind the immediate freeze is likely to include a desire to achieve multiple objectives:
- Drawing a line under the constant “technology churn” upgrade cycle, bringing to a halt hardware and software rolling expenditure that appears to have little purpose in terms of public service improvements.
- Ensuring that Whitehall departments rigorously baseline their use of IT, driving out costs and “sweating the assets” of existing systems.
- Forcing Whitehall departments to be able to articulate much more clearly why they’re proposing to spend money on more IT. (What is it for? What public services does it benefit? And what outcomes will it improve?)
- Freeing up money for key projects over the next Parliament (such as potential welfare simplification and taxation simplification and modernisation).
- Delivering budgetary savings – anywhere from 20%-40% savings in IT costs, depending which rumours are to be believed, in order to meet HMT budget expectations.
- Putting into place a new ‘IT governance’ regime designed to stop IT-led strategies that are isolated and unrelated to the wider public sector reform programme. The key underlying idea is to move away from the naive idea that expenditure on IT in itself will somehow magically cure the public sector of efficiency problems.
- Encouraging a change of mindset amongst the big IT suppliers by signalling much tighter cost/benefit controls over IT in future. The government will also hope to provide a much greater chance for smaller IT suppliers to engage in public sector projects and procurements
Critical to the success of a new approach to public sector IT will be ensuring that the right governance regime is put into place. It will have to ensure that the technology and public policy are planned together, rather than IT being thrown at problems without a proper business case, as in the past.
This will require a practical, effective governance model that has the right people and the right skills in place to pay attention to detail. These are major changes to the way public sector IT is run – and they will need to be well executed if they are not to just become a soundbite policy of the kind we saw in Labour’s early days back in the late 1990s.
Today’s announcement is clearly only part of an emerging new vision for public sector IT. We have yet to see any detail of the rumoured changes to the way public sector IT is going to be led and managed in Whitehall. Such changes are believed to include wide-ranging changes to the CIO role, new governance structures and a more agile, effective approach to architecture and procurement, aimed at establishing a more effective, more open and competitive market.
The Treasury has today taken a first step. The interesting question now is what comes next to make the £1m cap on IT projects an effective part of a wider, more successful new approach to public sector IT?#
Jerry Fishenden is a key author for the Centre for Technology Policy’s recent report Open Government: Some next steps for the UK (London, Centre for Technology Policy, May 2010), which exploires the longer-run issues raised in this blog. Jerry blogs on technology policy at http://ntouk.com/
Hyperlink for the above report is: http://ctpr.org/files/2010/05/CTPR-Report-Open-Government.pdf
Thanks James and Wilf.
The erosion of the civil service’s ability to manage IT-related issues, combined with a reliance on large external businesses with little practical, hands-on experience of public service, remains a long-running issue that has yet to be fixed.
The idea of aggregating public sector IT requirements into massive contracts seems to be based on a theory of acquiring greater purchasing influence in the market. But it has ended up delivering something quite different: an inefficient, narrow market dominated by a handful of powerful IT suppliers who are now, rather like the banks before them, “too big to fail”. One IT supplier alone is estimated to have around 60% of the public sector marketplace.
There also appears to be a fixation with procuring expensive and bespoke IT *infrastructure* instead of procuring *services* that best meet public sector needs. It seems to me that we should be defining the requirements and capabilities required by the public sector, not specifying infrastructure.
I’d like to see corrective action to restore an effective and open market that encourages true innovation and competition, and which provides a role for smaller, more agile smaller companies. And for that to happen hand-in-hand with a return to a focus on the public sector’s service needs, not arbitrary, technically-led initiatives that rarely deliver what our public services actually need to operate more effectively.
But much of this is, regrettably, nothing new. We have seen policies in the past designed to ensure a higher percentage of smaller businesses get opportunities to bid for and engage with public sector projects, and for the greater use of technology based on open standards. But they have remained just that: policies. Delivery has lagged a long way behind.
The real test will be whether the new government has both the political will, and the right people with the right skills, to drive through and deliver its stated ambitions.
The supplier and the customer are now so very far apart and this is why money is wasted on huge IT projects that are developed and delivered on a half baked set of requirements. Civil servants used to own and run IT systems from concept to delivery but now since the late 90s the work is contracted out in massive billion pound contracts lasting years. External suppliers (from the US) not happy with keeping the IT work in the UK – off shore the work to India \ China at a fifth of the cost (but are the contracts cost cut by a 80%? – answer – no, is the quality of the product as good – no).
Therefore the civil service has nearly lost all its IT skills and experience to the major suppliers and now doesn’t know what it requries for itself. All the major Enterprise IT skills are being offshored by the US suppliers and soon Enterprise IT experience (this is the top evel required to run Government IT systems and is about as big as they get!) will be lost in the UK.
At the cutting edge the digital phenomena is being deflated across the board in the UK from the Customer to the Supplier and yet again we are losing a major industry and all the skills that go with it.
Ask the major US IT services companies operating in the UK delivering Gov IT how many UK grads or trainees they have in their employment and the answer will give an insight into the future of enterprise level IT as a career path in our ‘Digital future’ as our ex PM used to call it.
This is a great piece and together with the comments make essential reading for anyone who has been involved in a civil service IT project. For me the escalation in cost comes from lower down the chain of command – where a deskilled civil service no longer has the knowledge or authority to make IT decisions or to develop existing IT solutions for the cost of a normal salary. Instead, consultants are brought in to develop systems which they have no knowledge of which are used in a field they have no experience in and the product soon becomes obsolete.
You make a telling point Sam. The knowledge has existed for more than a decade of what makes projects successes or not. Yet there has clearly been a long-term failure to implement the lessons learned – despite copious guidance, from the 2000 Cabinet Office publication “Successful IT”, through various reports from the Public Accounts Committee and the National Audit Office.
The lack of action at even the most senior levels indicates systemic failures of governance that urgently need to be addressed. It will be interesting to see what actions the new coalition take to address the lack of accountability and responsibility for this costly track record.
Departments have experienced unprecedented levels of IT investment over the last 13 or so years, and yet, as you note Simon, not optimised their existing legacy systems. During the same time, many private sector companies have completely updated their technology infrastructures.
I think the age of the public sector specifying, procuring and running its own expensive bespoke infrastructure through a limited number of powerful suppliers is going to be increasingly challenged, not just by developments such as commodity cloud computing, but also by making far smarter use of existing UK infrastructure elsewhere. For example, taxation and welfare modernisation can largely be undertaken on the back of the existing UK national payments infrastructure, rather than assuming that departments such as DWP and HMRC need to build a new generation of expensive, proprietary, in-house systems.
Times of economic austerity can sometimes achieve improvements that are simply not possible in more affluent times. The means to improve the way IT enables UK public services has always been there, but I’m not sure the appropriate skills and will have been. As Sir Gus O’Donnell, the Cabinet Secretary commented in March 2009,“Necessity is going to be the mother and father of innovation,
– there is no other way.”
It will indeed be an interesting few months, and years, ahead.
You make some good points Jerry. There are complications to the reality of the savings which you have touched upon.
1) There is a huge amount of in place legacy that is critical to business function, long out of date and excessively expensive to run. Ridding ourselves of this is a difficult task and one few departments have successfully tackled without massive investment (which is no longer available). Straight like for like upgrades are no longer financially viable.
2) The relentless upgrade cycle from software vendors is maddening. No value is added on the whole but fail to upgrade and maintain and good luck with security fixes etc. Forcing the software vendors to support software for much longer periods would helpf reduce the churn.
It will be an interesting few months ahead.
The Perm Sec and several other Senior civil servants in more than one Department have previously been questioned on substantial (>£500m) IT projects which have failed. Pensions Transformation, Tax Credits, Employment Support Allowance (hailed as a success but already in plan to be replaced) and a litany of tactical ‘old technology’ based projects has seen HMRC and DWP collectively waste over £3bn on systems that will never fully roll-out. HMRC will point to Tax Credits having been implemented and is working – however £2bn over-payment annually and a failed on-line solution points to the real problem.
The Lib Conservatives do indeed need to step on some very senior officials, some of which are the highest paid civil servants in the country but failed over 10 years to deliver value for money.