“It’s disappointing to see that Defra, as well as some other government departments, are still struggling to break their addiction to large suppliers.”
As part of its efforts to overhaul its massive £1.4 billion IT contract with IBM, the Department for Environment, Food and Rural Affairs (Defra) has awarded its Hosting and Application Support Services contract worth up to £135 million over six years to…you guessed it, another giant supplier, Atos.
Defra is in the middle of procuring for its UnITy transformation programme, which aims to reconfigure ICT delivery from provision by two large Systems Integrators (SIs), IBM and Capgemini, to a wider supply chain.
But in April, Defra courted criticism when it agreed to a £30 million, 17-month contract extension with IBM, citing the need to cope with the substantial application development and maintenance service pressures of Brexit. At the time, Defra strongly defended its procurement process, saying that it followed Cabinet Office rules and it welcomed tenders from a diverse range of suppliers, including SMEs.
“A Kick in the Teeth”
So as one of the small and medium-sized companies keen to ensure government sticks to its pledge to give us a greater share of government and public sector business, this week’s award to Atos was a kick in the teeth. It’s disappointing to see that Defra, as well as some other government departments, are still struggling to break their addiction to large suppliers.
Cabinet Office guidance seems to be pretty clear. Large, long-term, single-vendor outsourcing contracts, no longer represent value for money and constrain departments from delivering ICT that both meets the needs of users and which enables better ways of working. And departments claim they agree.
So why are departments continuing to resort to multiple contract extensions or replacing one outsourcing giant with another, despite ICT provision regularly being inadequate, programmes years behind schedule and millions of pounds over budget?
If nothing else, it’s a dangerous game, and it comes at a cost to the taxpayer. The repercussions of the recent collapse of outsourcer Carillion are still being felt. The well-documented financial problems at the large SIs, evidenced by a spate of recent profits warnings, are an ongoing reminder of the risks. Faced with smaller margins, large SIs are engaging in a race to the bottom.
Under pressure to keep shareholders happy with new business wins, and holding on to contracts in the hope that they can eventually yields profits, sometimes, dare it be said, many large SIs are even guilty of promising what they simply can’t deliver on a sustainable basis.
Multi-Vendor Environments Reduce ICT Provision Costs
The fact is, the outsourcing model is absolutely fine, if used properly.
For IT contracts, the Cabinet Office champions highly competitive multi-vendor environments, including the use of SMEs, because they have been proven to reduce the costs of ICT provision, provide a more flexible model that is able to respond to a more volatile, uncertain, complex and ambiguous world (including Brexit!), and deliver ICT that better meets user needs.
The unwillingness from departments to change the way they procure their ICT provision, whether down to the scale and complexity of incumbent programmes, the distraction of Brexit, or a lack of in-house expertise, only serves to perpetuate the cycle of archaic infrastructure, sub-standard ICT, inflexible lock-ins and exorbitant change requests.
Changing supplier from IBM to Atos doesn’t really alter anything, because a successful ICT programme isn’t about the technology. It’s about a compelling and ambitious business vision. It’s about how the department can use technology to meet the needs of its users, now and in the future.
“ICT procurement needs to change”
A Change of Mindset is Needed
Rather than focusing on insourcing versus outsourcing, departments need to turn a spotlight on smart-sourcing; a balance between developing unique and novel components in house and making best use of products and commodities available in the technology marketplace. They need to understand the integration points between technology and its users. They also need to understand how to deliver this at the lowest cost, with minimal risk to service continuity.
But to do it successfully requires a major improvement in skillset and mindset. Not every department currently has the necessary expertise, governance or desire to manage the transition of services to a multi-supplier environment. This is a major factor in departments resorting to conventional procurement practices. Departments need to commit to rapidly gaining the new skills needed to take overall control of the ICT estate and services and delivering the required benefits for users and citizens.
Until this skills gap is closed, departments will continue to rely on large SIs, who may have a better understanding of the technology but they are less likely to invest the time necessary to truly understand the business needs. It prevents departments from taking advantage of the innovation and agility that SMEs have to offer.
Collective Empowerment Needed
Fundamentally, moving to a multi-supplier environment needs departments to encourage personal and collective empowerment across the ICT estate and develop new skills so staff can take control and ownership for delivery.
Where departments are brave enough to give it a go, the results tend to be impressive. They get better services from suppliers, at lower cost and which better meet user needs. The Food Standards Agency used this approach to untangle themselves from complex legacy technology, transforming their estate, digital services and processes to enable better ways of working. In doing so, the FSA was able to save 40% of its ICT run costs and transfer key knowledge to the in-house team, with a return on investment within 12 months.
There are signs that other enlightened areas of government are following suit too. Croydon Council, Sheffield City Council and Birmingham City Council, to name a few, have all started on this journey and are set to benefit from this smarter approach.
Sadly, it seems that Defra are not there yet. And so, they risk failing to tap into the real innovators in the marketplace – smaller, more nimble and flexible providers capable of delivering far greater value at a far lower cost. And that’s a huge shame for taxpayers.