Suppliers have welcomed the Government declaration that the era of “mega IT contracts” is over. Francis Maude, the Cabinet Office minister, told an audience of chief executives from 31 key government suppliers including BT, Hewlett Packard, IBM and CapGemini, that costly IT mistakes like the £12.7bn NHS national programme would not be repeated. Instead, future contracts would be cheaper, "smaller" and "off the shelf" rather than expensive, bespoke systems, he said.
Bindi Bhullar, director of global IT services company HCL said: “This is the clearest indication yet that the era of bloated IT contracts is coming to an end, and not before time. These unpredictable economic times will naturally lead to a new dawn of shorter term contracts where risk is shifted from the customer to the IT supplier. For example, an IT service provider may offer to pay the customer projected savings up front in cash before starting work. There is nothing like putting your money where your mouth is.”
Mark Dale, Head of Government, UK and Ireland for global outsourcing company MphasiS, said: Francis Maude is right to adopt a more forward-thinking approach to Government procurement, which has been lacking until now. The cost of selling into the public sector is unnecessarily high and overly complex, and that complexity leads to higher prices for services.
“This is the strongest sign yet that we will see a shift towards outcome-based contracts. This gives the suppliers flexibility to use methods that deliver the business outcomes that the Government is looking to achieve. In the past procurement has too prescriptive with very little focus on the end goal. Greater dialogue and openness with suppliers during the procurement process will ensure that the services procured are the right ones for the organisations, and not based on cost.”
Juergen Gallman, CEO, of cloud computing supplier visionapp said: “For too long, the UK government has given out massive IT contracts that inevitably waste money when elements of the programme are not fully utilised. Francis Maude’s comments are very timely and respond to what we see in the marketplace – people want to ‘pay as they go’, with flexibility instead of vendor lock-in so that they can respond to volatility in the marketplace. They want to choose best of breed applications and services, and be able to change when better options or newer versions appear.
“Resources need to be used wisely, with nothing left ‘on the shelf’, so that no money is wasted on IT.”
Judith Niederschlep, general manager at correspondence management company PrintSoft, said: “We welcome this announcement as it marks a sea-change in the way the Government handles IT procurement. This sounds like a more cost-effective way of conducting business as it will open up the field to more providers and benefit the taxpayer. The pressure is now on smaller IT providers to bring greater transparency to contract negotiations if they are to prove their worth to the public sector.”
Maude told his audience: "Government will no longer offer the easy margins of the past. We will open up the market to smaller suppliers and mutuals and we will expect you to partner with them as equals, not as sub-ordinates. The days of the mega IT contracts are over, we will need you to rethink the way you approach projects, making them smaller, off the shelf and open source where possible. We will expect you to be transparent in all your dealings with us and for the terms of the contracts we sign with you to go,” he said.
