A recent National Audit Office report reviewed the success so far of the initiatives taken under the UK Government’s ICT strategy. This found that overall, the initiatives were producing good results, although some were not yet sufficiently mature to be definitive. Does the strategy makes sense, and how can those working within its’ direction implement multiple suppliers?
The Central View
There has long been dissatisfaction with the efficiency and effectiveness of Government. For all her reforming zeal, this was one step too far for Mrs Thatcher. Tony Blair had vision but was not too hot on driving implementation. Gordon Brown liked spending other people’s money, although to be fair, one of the seminal events was on his watch as Chancellor. This was the commission of Sir Peter Gershon in 2004 to review the efficiency of Central Government. This highlighted the impact of the incredible diversity of approaches taken by the independent fiefdoms of Government and the need to hold people to account (amongst many others). This report still has largely to be played out. The intervention of the financial crisis of 2008 and the delayed effect this had on the tax take and UK Public Sector Borrowing Requirement leading to the change of Government in 2010 meant that the party came to an abrupt halt.
In 2009, Francis Maude MP said: “the history of UK government ICT projects is littered with budget overruns, delays and functional failures.” From the central perspective, several of the large players have let down or exploited Government repeatedly and should no longer be trusted. The Cabinet Office is exerting itself in the role of coordinating agent, reflecting the objective of making Government act as one customer, seeking to obtain economy of purchasing scale. In November 2012, the Cabinet Office published a strategic supplier risk management policy which sets out how government intends to assess serious or persistent under-performance by strategic suppliers. The Commercial Relationships Board is starting to apply this policy to a risk assessment for the first time. The suppliers on the naughty-step know who they are and have been told what Government would like to see changed, and that they will get no more significant work until it is. This for the first time is a credible threat.
Central Government is making a coherent attempt to re-shape the UK ICT industry to its own advantage, and the perceived advantage of the UK economy. The current flavour of the month is to promote UK-based SMEs. The published reason for doing this is that of promoting competition, reducing contract length and so capturing economies. Someone may have read Porter’s 1980 “Competitive Strategy” and decided that his five-forces can be brought to bear on market conditions. In the rush to get up to date, they seem to have forgotten Adam Smith’s 1776 “Wealth of Nations” and basic industrial economy. More of that later.
The Departmental / Agency View
Many departments have long-standing relationships with suppliers they know and who know them. “Liking” may be putting it a bit strong. It is fun being rude about suppliers, especially when the catalogue of disasters and under-performance is long. They remember the time taken to get the contracts to a level of performance and do not relish the prospect of going to market every two years. Operational people look at the change with horror. The incompetence of the major suppliers may be known. That of the SMEs is completely unexplored. Those encountered appear to be credible within their own space but know their limits. They, wisely, will not go beyond them. Assembling a jig-saw from ill-fitting pieces becomes a nightmare. The first course is to adopt wishful thinking: Would it not be nice if the Fairy Godmother sent us an infinitely adaptable helper that could magically fit a gap of any size and extent? Let us call such a thing a SIAM, because there are lots of people who say that they can do that. There may be difficulties in hiring such a chimera through the G-Cloud. Quite what would turn up on day one of delivery is another matter.
We know that the old Prime suppliers did all sorts of stuff, but it is quite difficult to nail precisely what that was in a way that can be contracted. Most start with ITIL v3, as that is the answer to a Contract Manager’s prayer and operations have been working with suppliers who talk about it for years. It is really difficult to be confident that the new contracts will work coherently together, when it is not clear what needs to be done to make the new world work. Without such clarity, contracting is a hazardous affair.
The old world may have become too comfortable and have needed a shake-up. The triple storm of:
- The Cloud – changing from custom to standard offerings on utility pricing and global competition, sweating assets on virtual machines
- The rise of the Indians – It is tough to compete with someone who has labour costs 1/3 of those in the West
- The economic crash – the gravy-train is no longer infinitely generous
Is hard to cope with. That these three are happening at once confuses cause and effect in ascribing success to the changes made to the Government’s strategy. There are three underlying drivers of economy:
- Standardisation. This permits automation and reduces the costs of quality. This drives economies of scale.
- Exploitation. Sweating assets through virtual machines and other facilities.
- Commercial leverage. Changing the rules of the game to shift power and so influence who captures value.
A recent (unpublished) benchmark analysis showed the effect on price for a customer of increasing the number of suppliers. It took a range of numbers of suppliers to an estate. All made savings from the current baseline. The client rejected very small numbers as making them excessively reliant upon those few, and so the impact of failure of any one would be great. Above around 8 suppliers, the dis-economies of scale for both supplier costs and internal supplier management became strongly adverse.
There are many strands to coordinate. The first steps recommended are:
- Building consensus on the business case, priorities, principles and considerations
- Build a target operating model. Evaluate options against the principles and business case to select the best and check it against the draft transition plans to evaluate delivery risk. The definition of the operating model should include drawing the boundaries between the lots so that they are sufficiently defined for both internal staff and potential suppliers to know what each is expected to do.
- Select the contractual mechanism. Determine the evaluation criteria based on a carefully devised analysis of the critical success factors, interactions and dependencies. Engage legacy suppliers in planning the transition. Go to market.
Some clients focus on the transition project; some on operational integrity and processes; organisation change; technical migration; others on the procurement and contractual approach. In reality all need to be addressed concurrently. Unless there is a sufficiently balanced perspective of the business case, supported by analysis and data, there is a risk of one aspect dominating the others to the detriment of all.
Suppliers are not naturally cooperative. This is especially so in an environment of falling budgets, where it is natural even after contract award for them to compete for what budget remains. For this reason, I strongly advise against allowing one supplier to obtain a position of influence over peers e.g. by allowing the winner of the SIAM Tower to deliver other Towers too (other than possibly SI). This invites the influential party to manipulate the situation to their own advantage and score points against other Towers rather than work for the customer. There will be some economies e.g. with Applications Delivery, but the price in terms of collaboration will be high.
There are some elements which the parties must agree to do for the whole ecosystem to work. The obvious elements are sharing design information and configuration data, working together to fix incidents and resolve problems, impacting changes. There are real difficulties in getting all to sign up to collaboration terms under G-Cloud. This may fatally undermine the otherwise nice idea of that market-place. The disturbance to the operational quality in changing suppliers is so great that anyone who suggests that reliance should be put on firing suppliers after two years as the principle means of imposing discipline should be regarded with the greatest suspicion.
The suppliers, marketplace and customers are all immature in the UK Public-Sector market for these services. Much has been discovered about what to avoid, less has been proven about how to bring contractual terms and operations together. Entreaties from the centre to apply G-Cloud properly will not resolve its suitability in use for anything beyond isolated commodity purchases, for which it is well adapted. All this promotes is an enthusiasm amongst the afflicted to see the whole exercise fail. Such an outcome will profit nobody other than the major SI’s to whom a chastened Cabinet Office would be forced to turn to resolve the debacle.
The impact of government’s ICT savings initiatives 23/1/13 NAO.
Government ICT Strategy, Cabinet Office, March 2011
Releasing Resources to the Front Line: Independent Review of Public sector efficiency Sir Peter Gershon July 2004