Office of Fair Trading to probe public sector IT oligopoly

The Office of Fair Trading has launched an investigation into the dominance of large systems integrators in the UK's public sector IT market. 

"There appears to be a high level of concentration in the supply of ICT to the public sector," the competition watchdog said today. 

It pointed to the Public Accounts Committee's 2011 report, "Government and IT: A Recipe for Rip-offs", which found that a "a recurring theme throughout our inquiry was the dominance of government IT by a small number of large systems integrators". 

The OFT said that certain suppliers were especially dominant in particular fields of public sector IT, and made particular mention of Capita's dominance of the local government market. "Stakeholders have told us they believe margins may be high and that competition may be restricted by other practices and features of the markets," the OFT wrote.  

"These include the costs and difficulties of switching because of factors such as the terms of licence agreements / contracts; lack of interoperability with other systems / software and the risk of disruption to critical services."

The OFT will also look at how public sector procurement practices may exclude smaller vendors. For example, SMEs may be excluded by overly-long tender processes, and they may not be able to bid for aggregated contracts if they do not offer all of the required services. 

Framework agreements, which were popular with the current government until recently, may exclude SMEs because they require too much up-front cost in order to apply, the OFT added. Last year, the government halted all planned procurement frameworks, pending an investigation into their effect on competition. 

The OFT today called for information from stakeholders that may be relevant to its investigation. 

"We will be issuing requests for information and holding meetings with relevant parties including ICT suppliers, central and local government and other public sector organisations, trade bodies, academics, business organisations and others across the UK over the next eight weeks," it said. 

In particular, it hopes to map the current structure of the public sector IT market – a complex task given overlap between business process outsourcing and IT, it said. 

Interested stakeholders should submit their evidence to by August 13. Next steps will be announced in October. 

The top five IT suppliers to the UK's public sector are, in decreasing order, HP, Capita, Capgemini, Fujitsu and BT. 

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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