Jos Creese on Government Procurement

Selling IT into Local Government – A New Approach is Needed. The way in which the public sector used to buy IT is no longer fit for purpose.

Actually it hasn’t been for quite a long time, but old habits die hard. Those habits are not just ingrained into the policies, politics and processes of local government, such as “Standing Orders on Contracts”, and “Financial Regulations”, but also in the way suppliers operate.

For the public sector, procurement practices have developed with good intentions, to try and de-risk IT procurement; after all, the track record of IT projects in the sector have not had a good press. Not only have major public sector IT projects often failed to deliver value (or collapsed outright), but they have often resulted in costly ‘white elephants’. That has damaged the reputation of IT in the sector, but has also made many suppliers wary about doing business, so adding of course to the costs.

Risk and reward

The response has been in many cases the wrong one – procurement practices becoming more sophisticated to try and reduce the risk of this failure – specifying more precisely what is required, making evaluation of tender responses more complex, passing risks on to the supplier where possible. The result: higher cost, longer lead times and ironically greater risk for everyone. That was one of the reasons G-Cloud was born.

But the issues run deeper than this, lying also within the sales methods and models from the private sector. Bidding techniques, terms and conditions, processes and engagement practices which have served the bottom line well in the past, now represent a significant barrier and also a commercial risk – either to leave alone, or to change.

In 2012 the Public Accounts Committee published a damning report titled “A Recipe for Rip-offs” which criticised the private sector and the public sector in equal measure. And in 2011 the Society of IT Management (Socitm), identified in research that outsourcing typically increased costs for local government. Something has been going wrong for some considerable time and we have not yet succeeded in dealing with it effectively.

To be fair, things have improved and most of the old-style large-scale outsourcing deals we saw in the 1980s and 1990s are finally thankfully disappearing. G-Cloud has certainly made a big difference recently, not just in providing a common basis for small and large companies to provide services into the public sector, but also to demonstrate that simpler and faster procurement is possible and delivers low risk and better outcomes. Of course, G-Cloud still needs to be more widely used, and is still developing – but it offers considerable hopes.

Accelerating the pace of change is pressing – the public sector cannot wait, given the financial pressures and growing demands for simpler, intuitive, lower cost and more flexible IT. Small and medium size suppliers have tended to adapt more quickly than the large companies, offering new operating models for selling their services, offering greater flexibility and a different approach to managing risk.  But the large companies are also changing and I have worked with several of the very big names who have fundamentally overhauled their way of doing business and are, as a result, easier to buy from and likely to retain their market share in competition with the smaller companies.

One particular priority is in helping the public sector (and local government in particular) to start to rationalise its software estates. For example, too much data and information are locked into proprietary solutions. This not only makes business intelligence limited, but fundamentally holds back shared services. The former is critical to effective demand management and the latter to reducing costs and better public service outcomes. Local public services will need to integrate software into a common platform of services, removing duplication, maximising sharing and eliminating inflexible contracts.

How can local government go about this?

What local government in particular needs is not more innovative technology, but more flexibility to be innovative in the use of existing technology. It needs to experiment with delivery models, not with technology. And it needs to see suppliers as partners, not adversaries. In turn suppliers need to be part of the delivery of those public service improvements and not just selling a product. How much more satisfying is it for a company to feel it is changing the world, not just making profit? And for this to happen, in a turbulent service environment with rapid advances in IT, suppliers need to be much more flexible, with modular and open-ended contracts, built around a core, but maximising the opportunity for future adaptability. Ironically, this will be in suppliers’ commercial interests in the long run, providing a competitive edge in a market where the customer is increasingly aware.

I am seeing a new software architecture model emerging across local government. It is one that is built around some core corporate systems, but also provides space for a wide range of smaller, cheap and flexible tools, such as smartphone apps. These may not be controlled by the IT department, but are also not ‘shadow IT’, at least in the in the derogatory use of the term. They empower professionals in every service area, and partners, suppliers and service users. They help to generalise digital practice and support mobile and flexible working which provide much needed staff productivity improvement.

In these changes a higher priority is being placed on extracting and sharing data in meaningful ways – between teams, between systems, between organisations. Large scale and complex strategies that talk about sophisticated middleware integration layers and complex CRM and ERP components, are being rightly challenged. They still have a place, but that place is changing. ‘Big data’ is a fact, but please let’s stop using the term in ways which frankly obscure the tangible benefits from better use of information. Labels give IT a bad reputation when their implicit expectations are undeliverable.

As we come out of a period for IT change that is primarily focused on process re-engineering, we are now moving heavily into information exploitation. This means that systems need to hold data securely but not imprison it. Done well and this will allow applications to be more widely used (more people, shared across organisations, from any device). They will also be capable of being more intuitively designed, without compromising privacy and confidentiality which are essential for public trust in digital delivery.

What does the future look like?

G-Cloud for example has simplified and created a more even playing field. It is already allowing procurement cycles to be shortened, with a greater emphasis on investment of scarce resources (time, money, skills, capacity) to deliver value, rather than just investment to acquire a tool kit. Why would any local authority want to use outdated, cumbersome and devalued procurement methods when G-Cloud exists? OK, G-Cloud can’t be used for everything, but can lead the way to streamlining and simplifying early stages of procurement leading to negotiations and testing.

Whilst all this will sound attractive to suppliers struggling with the complexity, variety and slowness of public sector procurement methods, it will also create new expectations of the private sector. There will need to be more openness about contracts and a much higher level of easy integration and sharing. Suppliers will no longer find it easy to provide the same services to neighbouring local authorities on different terms, such as price and flexibility. Pricing low in order to make profit later from change will not be tolerated (or hidden) for example. Neither will playing the ‘FUD card’ (fear, uncertainty and doubt) to drive sales at higher cost from industry leaders; fear uncertainty and doubt is everywhere and contracts need to be agile enough to accommodate the future unknown.

There is also likely to be a move from proprietary solutions, with a preference for open source where possible. This does not mean that there will be no space for proprietary solutions, but it does mean that suppliers will need to demonstrate the openness of their product and significantly greater value, in return for adopting a non-generic solution. The big players such as Apple, Microsoft, Oracle, Adobe and SAP  – to name but a few – all understand this.

So the measure of success in IT sourcing will be from the value extracted from IT, not in the ability to predict the future in tender specification. Local authorities in particular need to move away from trying to over-specify (and over-engineer) tender requirements in a misplaced believe that this will de-risk and increase value. Indeed, reverse is usually true – i.e. trying to specify everything in advance only serves to increase future risk and cost, and so reduces return on investment.

As we move to a digital operating model for local government, it is essential that IT is not a barrier to business change and shared services. Detailed SLAs that previously have underpinned approaches to strategic sourcing may control price, but have been shown to limit value and innovation as well. Whilst more innovation in the use of technology is probably seen in local authorities than in any other part of the public sector, and I firmly believe that this will continue, it is nonetheless dependent on new models of client/supplier relationships, rebalancing of risk in the way software in particular is procured and deployed.  Value comes from adaptability not predictability.