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Outsource magazine: thought-leadership and outsourcing strategy | November 26, 2014

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Government ICT policy: throwing the baby out with the bath water?

Government ICT policy: throwing the baby out with the bath water?
Martyn Hart

As I suggested in last week’s blog, it seems as though the wind of change is blowing hard through public sector procurement processes at the moment – and large suppliers of outsourcing are feeling the full force of the gale. Last week’s announcement from the Cabinet Office, in which it pledged to bring down what some have referred to as the ‘ICT oligopoly’, is clearly bad news for larger suppliers of outsourced IT, many of which have had the government locked into contracts for a number of years.

Clearly, the move to open up the procurement process is aimed at increasing competition, in terms of both quality of service and price, while allowing smaller organisations to take a slice of the public sector pie.  But is it necessarily a good idea to ostracise larger suppliers completely?  At present, it’s thought that 18 large ICT suppliers control as much as 80 per cent of Britain’s public sector contracts, many of whom look set to have the rug pulled from beneath them as part of the government’s focus on supporting SMEs with a view to, potentially, multi-sourcing, with a number of smaller suppliers.

It’s clear, then, that this strategy is not without risk.  After all, many large, established suppliers have a solid, established infrastructure, with resources which allow government departments to deliver projects in a fraction of the time it would take other suppliers.  Perhaps, moreover, there’s a much greater risk that in opening up the procurement process to smaller suppliers, who have little or no experience in dealing with public sector procurement, we’re running the risk of throwing the baby out with the bath water?

It’s worth remembering that large suppliers of ICT outsourcing have been dealing with the public sector for many years, which means that they have an increased understanding of its requirements, and what it needs to make the relationship a success.  Moreover, it seems to have gone unnoticed by many that the Cabinet Office’s announcement related largely to ICT, which typically refers to the provision of hardware and software.  It’s worth remembering that most major outsourcing and shared services contracts are also dependent to a large extent on building relationships and understanding business processes, which, if not effectively established, can lead to operational inefficiencies. If the government is to ditch most of its larger suppliers and open the procurement process up to SMEs, surely it will be vital that there is an element of knowledge transfer in place for all of these relationships to ensure that the transition causes as little trouble as possible?

Of course, by opening up the procurement process to smaller suppliers, the theory goes that efficiency of service should improve, as the public sector will have more options in terms of which organisations it partners with.  Even so, it’s worth recognising that unless the short-term transition is managed effectively, the government’s shift in procurement strategy could cause as many problems at it solves…



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