Suppliers "outraged" by accusation of govt IT collusion
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Intellect, the UK's IT industry body, says members are outraged by suggestion that a "cartel" of suppliers limits competition for public sector IT work
Members of the IT trade body Intellect are "outraged" by the suggestion, made in a new report on government IT, that a "cartel" of suppliers is colluding to inflate the price of public sector IT work.
Having quizzed various government IT stakeholders, the Public Administration Select Committee wrote in the report that it "found that government is currently over-reliant on a small 'oligopoly' of large suppliers, which some witnesses referred to as a 'cartel'".
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It recommended that "the government should urgently commission an independent, external investigation to determine whether there is substance to these serious allegations of anti-competitive behaviour and collusion."
Speaking to Information Age this morning, Intellect's director general John Higgins said that had spoken to few members about the report, and that they were "outraged" by the suggestion of collusion.
"I've worked in and for this industry for 35 years, and I am completely convinced this collusion does not exist," Higgins remarked.
Higgins said that although contained a number of sensible recommendations, such as making the government IT procurement process simpler to allow more suppliers to pitch for business, "we don't think that its helpful to talk about anti-competitive behaviour".
One of the report's claims is that a lack of IT expenditure benchmarks across government departments has "enabled large systems integrators to charge between seven to 10 times more than their standard commercial costs".
"That doesn't sound realistic," said Higgins.
The report is the latest in a number of indictments of IT management by the UK government, but one of the most damning. It quotes sources as saying that on over-reliance on external suppliers is 'a recipe for rip-offs'.
It includes some interesting observations about the nature of government IT, as compared to private sector computing.
"Governance structures and business models can remain stable in private sector organizations for decades ... greatly simplify[ing] the process of identifying and implementing common best practice," the report quotes Jonathan Murray, a partner at IT consultancy Innovia Ventures, as saying. "Public sector organisations operate in a reality that challenges many attempts to identify and transfer best practice. There is no homogeneity of objectives across
government departments."
The public administration committee’s recommendation that departments across Whitehall use more small and medium-sized IT suppliers is not new but is one that appears to be taking time for the government to implement (and subsequently reap the rewards from). This would clearly provide increased competition, bring down prices and provide greater flexibility for government departments based upon a customer intimacy approach taken by smaller IT suppliers.
It is clearly disgraceful that some government departments were paying as much as “10 times the commercial rate for equipment and up to £3,500 for a single desktop PC.” However, in our experience at Bull, the issue with large IT suppliers selling into the public sector is as much about inflexible delivery models as it is about inflated prices. A large tier 1 player will generally sell on the basis of operational efficiency.
This works from the provider’s point-of-view. Customers, however, typically get ‘put into a box’ and have to follow the process through step by step with limited flexibility to adapt or change. If changes are required, they will either be seen as ‘out of scope’ and therefore passed over, or a change control cost will be incurred for modifications.
There is an alternative approach available which has the potential to deliver greater value to the end customer. This approach is focused on customer intimacy and gives the customer a much more strategic relationship with the provider - to enable more flexibility and ensure that the outcomes defined at the beginning of the project are delivered through to the end of the contract.
The best way to deliver such a model will typically be through a consortium of smaller players, which gives the prime contractor a trusted network of partners and allows the consortium to use partners with particular skill sets to meet specific customer requirements. This multi-sourcing approach would deliver best of breed benefits, enhanced flexibility and is surely ‘tailor made’ to meet the current challenges faced by Government.
This approach also fits well with the Government’s current focus on encouraging engagement with smaller businesses that often have more agile offerings and are more flexible in relationship management.
Andrew Carr, sales and marketing director, Bull UK and Ireland
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