The past few years have seen a massive shake-up of local government in the UK. The move to single unitary authorities has swept away the existing two-tier council system in a bid to cut costs and avoid duplication.
The move to unitary authorities began with the creation of the super councils that were foisted on Scotland and Wales. Earlier this year the first unitary authorities were created in England with the abolition of the unpopular counties of Avon, Cleveland and Humberside.
Over the next two years more district and country councils in England will be swept aside, culminating in the planned abolition in 1998 of the county of Berkshire. It will be replaced by six unitary authorities providing the whole range of local government services, from education to social services. Berkshire County Council contested its own abolition but was defeated in court.
Dealers are concerned that the rise of the super councils - which gain responsibility for increased PC procurement - will destroy the historic links that exist between local dealers and district and county councils.
Sandy McNeil, managing director of Glasgow-based reseller Dunedin Systems, says the rise of the super council, an organisation large enough to qualify for volume discounts in its own right, changes the relationship between small dealers and councils. But he adds that small Vars can still work with councils and large suppliers, using their proximity to the customer to fulfil orders and provide support.
The view that a smaller number of larger councils might not be a good thing for small dealers is also shared by some manufacturers. Stuart Denlegh-Maxwell, a local government sales manager at Mitsubishi Electric PC Division (formerly Apricot), says the shake-up in local government will affect the relationships that small resellers have spent years building up with local councils.
'New unitary councils are bringing together various IT departments from county and district councils,' he says, 'and small resellers cannot supply them.' By combining the functions of the two-tier councils into one, the unitaries are likely to have larger PC budgets, which will be increasingly attractive to the superdealers. Denlegh-Maxwell says larger contracts will go out to tender - a process that will bring in the likes of Computacenter.
'The new authorities will not be able to buy from local resellers,' he says. 'Even if a local authority wanted to use them, most would fail because they would be too small to fulfil large contracts.'
For small dealers an increased sales opportunity is lost, because by taking on more functions the new unitary authorities will need more PCs.
'The unitaries will have a higher dependency on IT,' says Denlegh-Maxwell.
An example is the new unitary authority of High Wycombe, which is set to increase its PC complement from about 500 users to about 3,000 users as its takes on education and social services functions. Denlegh-Maxwell says the majority of PC sales to councils are replacing existing dumb terminals. 'Orders are not as large as they were three years ago when the terminal replacement market took off,' he says. 'But, the creation of unitary authorities will persuade those councils that have not yet upgraded to PCs to finally do so.'
The merging of different IT systems has also caused problems in the IT departments that are supposed to be running the nation's vital local services.
A combination of turf wars between the merged departments, lack of additional government funding during the changeover and confusion over the future of contested areas has meant that the move to single-tier local government has gone more smoothly in some areas than in others.
Denlegh-Maxwell says: 'Some authorities have planned well. But with others it is an absolute shambles.'
In the North East of England, the new unitary authority for Hartlepool faces having to cut its budget by #5 million following confusion over how much cash it is going to receive from the abolished Cleveland County Council for taking over its services.
Meanwhile in Berkshire, protracted wrangling over the demise of Berkshire County Council is blamed for creating a situation where the six new unitary authorities are unable to create a new PC-based social services combined network.
The six single-tier authorities replacing Berkshire claim they will have to use the former county council's mainframe system when they take over control of social services, because the former county council did not plan ahead. Windsor and Maidenhead councillor Mike Scott says his council is 'very unhappy about being pushed into making a decision because the county just dragged its feet'.
But the confusion and chaos over the introduction of new councils might also work to the advantage of small dealers, says Denlegh-Maxwell.
'The positive side for resellers is that as authorities come together they will have to make their computer systems work with each other.' The move to unitary authorities could prove a boon to networking resellers that can piece together fragmented two-tier council IT systems into a coherent whole, and also provide support over their lifetime.
Mark Oakes, a representative of the Association of County Councils, says the abolition of some county councils would make it less likely that local authorities would continue to benefit from heavy discounting of PCs and IT equipment.
'The difference it might make is that large county councils could get big economies of scale when buying PCs,' says Oakes. 'But smaller unitary authorities might not get the same discounts.' That is why the government GCat scheme was set up (see box).
The other drain on the new unitary councils, he says, is that they're expected to take on new services, but not given any extra funding. 'Local government funding is being cut overall,' says Oakes, 'and the government is not acknowledging the cost of the transition to unitary authorities.'
The only concession that central government has made to the cash-strapped unitary councils is to increase slightly the amount they can borrow in the form of support credit approvals. A number of county IT managers fear that spending freezes are likely, and IT procurement is seen as a likely target for cuts.
The other danger is of a first-class and second-class IT infrastructure developing within a former county boundary.
Even after the final unitary authorities are created in 1998, the majority of English citizens will continue to be served by two-tier councils. The unitary authorities will create a doughnut effect, says Oakes, with a number of cities moved to unitary authorities and the surrounding countryside remaining under two-tier local government. Dealers will have to become adept at dealing with two different purchasing organisations.
One anonymous dealer on the south western tip of England - an area which does not have a lot of corporates and where resellers would be grateful for the opportunity of some public sector business - says that local councils seem to have a specific policy of not using local dealers; all contracts went to the largest dealers purely on the basis of price rather than out of any concern for the local economy - a situation which the dealer calls short-sighted.
Satellite offices of US companies, he says, have a more enlightened approach to using local businesses as suppliers, thus helping to provide local jobs and stimulate local economies. Those commercial organisations that do get preferential treatment from the government in these areas are large overseas manufacturing companies which are given substantial grants to set up plants.
Being a small local dealer is a positive disadvantage when it comes to supplying local authorities, says a representative of the British Chamber of Commerce. The reason is that according to European law, contracts to tender over #150,000 have to be advertised in the European Journal.
'The tendering process does not allow local authorities to only use local suppliers,' says David Wehler of the Association of County Supplies Officers.
Most local authority PC contracts, says Wehler, come in over the #150,000 threshold because support tends to be included. A contract for #150,000 may sound impressive, but over the five-year life-span of a PC it is just #30,000 a year.
The commercial imperative for councils is to get the lowest price for goods and services, and no leeway is built into the equation for local suppliers. Rules for tendering have also been tightened up to stop the unbundling of support for public sector contracts, after EC businesses spotted this as a potential loophole.
Opinion is divided over what effect the introduction of single-tier councils will have for dealers, and it is clear that there is more confusion and uncertainty to come. In May this year the government public accounts watchdog, the Audit Commission, felt obliged to issue a warning on IT to the 32 authorities that will be moving to unitary status during the next two years.
The commission says they should learn from the lessons of the 35 councils that have already gone unitary, and not go for a big bang approach to changes to the IT system.
The Audit Commission advises that authorities should run the old county IT systems in parallel with the new systems during a phasing-in period, to avoid the sort of problems that have arisen at Hartlepool and elsewhere.
As the turf wars continue and cash-strapped councils try to integrate systems that were not originally designed to work together, it seems as though many of the smaller dealers may lose out on the up-front PC contracts.
But this is the least profitable part of a dealers business anyway and they might just be able to gain on networking and support as the councils struggle to keep essential local service going.
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