Public sector wasting £6bn on IT outsourcing

The latest attack on outsourcing IT in the public sector comes in the form of a report from Compass, the consultancy that benchmarks government IT costs. Compass’ report claims, staggeringly, that the exact amount that the Coalition government is looking to save - £6 billion - can be saved just by cutting public sector IT wastage. This comes as public sector unions prepare to mount strikes in the face of other cuts to staff.

To compile the report, Compass analysed IT outsourcing contracts within central government for the past five years, being sure to compare the costs with those in IT departments and agencies in the private sector. Apparently, £6bn is being wasted by public sector organisations, which are paying way over the odds - up to 40% more, in some cases - for IT services compared to prices outside the sector.

Public sector IT spending last year was, at the highest estimate, £18.5bn. It may have been £12.5bn, but exact figures are unavailable as the government does not collect audited figures on its IT spend. Perhaps that is part of the problem.

Compass has pointed out that around £14bn of that money is spent on outsourcing, but that around £6bn is overspent. UK president of Compass Gary Bettis said that value-for-money initiatives are ‘timid’ within the sector, keeping going rates high.

So what is the answer? Bettis claims that government departments could cut costs hugely by merging resources such as datacentres and IT infrastructures. Bettis said that though each government department is obviously different, and so uses different systems, almost all departments have a ’90%-plus commonality of need from their IT services,’ making mergers a realistic option.

Bettis added that merging and standardising IT services between departments can help departments renegotiate IT contracts and save money. He said: “Standardisation reduces costs dramatically by allowing service providers to deliver economies of scale as they deliver utility IT services to a range of clients using the same delivery infrastructure.”