The Public Eye: 1
Why the General Election may undermine government IT strategy
In the first of the Strategist‘s new series of Public Eye reports on the strategic issues facing the UK public sector, Dan Stockton explains why the timing of the General Election could derail plans to make IT procurement more efficient – but not because of party politics. Meanwhile, Whitehall COO Stephen Kelly is jumping ship to lead a vendor…
The UK government’s IT procurement strategy is clear. Whitehall believes that the old guard of enterprise IT suppliers have made hay at taxpayers’ expense for too long and delivered too little. It also believes that multi-year, multibillion pound contracts that lock government departments into inflexible working arrangements are a thing of the past. Smaller, more modular deals that adapt to both changes in government policy and advances in technology are the preferred model for the future.
According to this strategy, the enterprise IT establishment – those multinational technology vendors, large integrators and services giants that prospered in the old world – are still welcome to bid for a slice of public sector business, but the government wants to force open the door so that innovative SMEs can access one of the largest technology markets in the world on level terms.
Not so simple
But the government’s policy, designed to save money and to promote UK entrepreneurship, is proving much harder to put into practice than it would have people believe. One reason is the General Election in May 2015, which could wreck its procurement strategy completely. The issue is not the rights or wrongs of different parties’ policies, it’s a matter of bad timing and Civil Service intransigence. Let’s explore why.
First, the government’s vision of a more dynamic and open market hasn’t gone down well with those large providers that have long moved with apparent ease from one deal to another, despite the number of Whitehall projects that have run over budget, missed deadlines, or been scrapped. (Whether these problems have been the vendors’ fault or are the results of poor specification and management is a moot point.)
At times, the Public Accounts Committee (PAC) has almost seemed to be in permanent session, grilling a succession of flustered project owners and large-vendor executives. Some of the latter have accused Europe of putting up trade barriers to America’s de facto tech dominance.
Those companies – members of what government CTO Liam Maxwell and others call ‘the oligopoly’ – have made the right noises about Whitehall’s strategy, but their palpable sense of resentment about it is never far beneath the surface, particularly on the subject of Cabinet Office Minister Francis Maude, who has held onto his post through multiple reshuffles.
That tension will only worsen between now and the Election, after which (of course) there is no guarantee that Maxwell and Maude will still be at their desks. Indeed, tension is already rising with the news that government COO Stephen Kelly – one of the trio of Whitehall strategists to attack ‘the oligopoly’ – is stepping down in November. The reason? He has been appointed CEO of a technology vendor, Sage.
The Election problem
Once party politics are stripped out of it, the crux of the matter is simple: the UK government has a real opportunity to rethink technology procurement for the cloud-services age, but the General Election falls right in the middle of a period in which a number of massive IT contracts are ending. Political uncertainty or a messy transition, combined with the innate conservatism of government buyers – who are civil servants, not politicians – may knock the public sector back into outmoded purchasing models for a decade or more to come.
In other words, May 2015 represents a perfect opportunity for ‘the oligopoly’ to reassert its dominance over public sector technology procurement, at a time when the direction of the supply market is strongly towards leaner, nimbler cloud services and away from big-ticket implementations and consultancy programmes.
Indeed, it’s apparent that some of ‘the oligopoly’ can’t wait to see Maude and his team out of a job. In July 2014, Hewlett-Packard (HP) – the biggest single beneficiary of UK government deals – reportedly wrote to the Treasury, voicing its concern about Maude’s plan to end all IT contracts valued at more than £100 million. HP is believed to have questioned whether it would even be worth multinationals’ effort to bid for government work in future.
If true, the irony will not be lost on government procurement leaders, who have long been on the receiving end of similar complaints from SMEs.
Window of opportunity
Traditional suppliers are only too aware that the window of opportunity to influence procurement policy may close for good in the Spring, and there are signs that they are winning support. In June 2014, it was reported that at least two senior ministers had broken ranks and claimed to Prime Minister David Cameron that SMEs/SMBs are not up to the job of supplying technology to government buyers.
A Whitehall source was quoted in the FT as saying: “Getting more SMBs in was an idealistic Tory policy in 2011 to shake up Whitehall. But… they are not necessarily the best fit for this sort of task.”
Clearly, this argument suits the purposes of ‘oligopoly’ suppliers, but it benefits them in another way too: it makes jittery procurement professionals default to existing means of buying technology. And so the danger for anyone who seeks to embed reform into government is that their plans may be stifled by buyers’ resistance to change at a time of political uncertainty.
This isn’t a new problem, nor is it one unique to the UK. In the US, the Obama administration imposed a ‘cloud first’ mandate on Federal Government, a strategy that ran into trouble when a number of state CIOs refused to accept it.
The same problem can be seen in the limited success of the UK’s G-Cloud programme. Its most recent sales figures, published in July 2014, showed that only £217.5 million has been spent to date via the CloudStore. Central government (where a ‘cloud first’ mandate is in place) accounted for 80 per cent of that total, whereas local government (where there is no such mandate) accounted for just six per cent.
But as a raft of major contracts end or come up for renewal, the strategy is for much more expenditure to go through the G-Cloud, and the so-called ‘oligopoly’ suppliers don’t want that to happen.
Their own devices…
The figures suggest that, left to their own devices (no pun intended), government buyers revert to traditional solutions. This culture is deeply rooted in public sector procurement and remains the biggest single obstacle to the Cabinet Office’s IT strategy. Arguably, it is a hangover from the late 1990s when spending billions of pounds on massive technology programmes was less of a strategy and more of a status symbol – like buying a muscle car simply to park it somewhere conspicuous.
The refusal last year by the Department for Work and Pensions (DWP) to accept any help from the new Government Digital Service (GDS) is a case in point. The Cabinet Office bussed in GDS experts to help it turn around the Universal Credit system, but the DWP sent them packing and did things the old-fashioned way, wasting tens of millions of pounds in the process.
More recently, the National Audit Office (NAO) issued a scathing report on the progress of reform in HMRC’s Aspire outsourcing deal. Over the years, Aspire has been portrayed by some as an example of good contracting practice, but both the Revenue and its main contractor, Capgemini, now seem to accept that it is no longer fit for purpose.
Aspiring to change
Indeed, Aspire is precisely the type of multi-year, multibillion-pound arrangement that the Coalition wants to abolish. Back in 2012, Capgemini and HMRC announced that they would be putting in place changes to the contractual arrangements to bring them in line with the government’s strategic objectives.
But two years on, the NAO has found that few of those good intentions have been turned into action. For example, one requirement was to introduce more competition and lessen the reliance on Capgemini and Aspire’s other main supplier, Fujitsu. But since 2012, HMRC has put just 14 contracts to tender outside of Aspire, worth a total of £22 million (or just three per cent of Aspire’s total cost).
According to the NAO, resistance to change is at the root of the problem. “There has been a lack of rigour in HMRC’s commercial management of the contract,” says NAO head Amayas Morse. “HMRC now faces a considerable challenge in a limited amount of time to negotiate reform to the contract, while at the same time defining its technology strategy for post-Aspire.”
That’s an uncomfortable position to be in, given that any disruption to the Revenue’s work would be unacceptable. Unless there is a transformation in attitudes, there’s a real possibility that a renewal or extension of Aspire may be the only option.
Liam Maxwell has said that as the current batch of ‘old style’ contracts winds down over the next 18 months, they will not be renewed. But so entrenched is ‘the oligopoly’, as this government sees it, that many CIOs will take the path of least resistance and continue buying the old-fashioned way.
Strategic objectives are all very well, they might argue, but tactically they need to keep the lights on. TS
Signal, not noise.