Further spending reduction proposals could hurt service providers
The Cabinet Office has promised more cuts to IT spending after a ‘ruthless’ axe swinging approach brought about a $250 million reduction this year.
According to the Cabinet Office, moves to cut “wasteful” IT procurement expenditure have contributed to an overall saving of £5.5 billion in Whitehall spending between 2011 and 2012.
Part of this figure has been a result of ceasing the delivery of certain ICT projects, saving £104 million, alongside better scrutiny of ICT projects, which reduced spending by a further £145 million. The government has been on a major savings drive since the set up of the Efficiency and Reform Group to create a more business savvy procurement system following widespread condemnation of procurement practices.
Cabinet Secretary Francis Maude said that further savings are expected in the future, a move which would affect those providing IT services to the public sector.
He said of the Efficiency and Reform Group which was set up to beef up the government’s new business-like approach: “It’s working well, but we are determined to go even further, because when it comes to spending other people’s money we must always strive to find more efficient and better ways of providing public services.”
As part of the cost reduction drive it is likely that the government will seek to provide more in-house IT services, with less cash to spend on external services. Currently the Department for Education is one of the only major departments in Whitehall to do so, but this could be more common in the future.
The government also highlighted drops in consultant fees, a figure which has dropped 85 percent since 2010, amounting to a staggering $1.035 billion reduction in the past year. The government’s use of costly IT consultants has been lambasted in the past, with the public sector often found lacking in IT expertise.
Supplier negotiations have also netted the government a small fortune in savings, with a reduction of £437 million in contract renegotiations across Whitehall. In the IT sector specifically this has involved bartering with the likes of Microsoft and Oracle to reduce contracts by £63 million and £75 million respectively. Francis Maude recently claimed to have set out plans to big suppliers that they would now have to negotiate hard for all future contracts.
While the government has made attempts to open doors to smaller suppliers in order to break up the cartel of big vendors bagging contracts, by cutting IT spending even further at the same time, the landscape for service providers could become more difficult.