Small step to public sector savings

The public sector drive to increase efficiency and cut costs may create more opportunities for channel players. Fleur Doidge reports

The Foreign Office in mid-March put out a tender for a £350m multi-year overhaul of its Firecrest desktop services, ERP, disaster recovery and datacentres covering several departments and 18,000 users. So there appears still to be money in addressing public sector deals, although the main key to unlocking interest will remain the potential for making savings.

The Firecrest pitch, for example, is hoping to reprocure while slashing its IT budget about 40 per cent by 2015, against continual messages from government about the need for such cost-cutting and efficiency gains. It is not all about big tenders and framework deals, however.

Jonathan Horley, managing director of reseller Value Licensing, has found that few stakeholders are aware that significant savings can be made in niche areas such as software licensing. He had a stand at the recent Public Sector Efficiency Expo at Olympia, which attracted many civil servants hoping to find innovative ways to make savings and improve services delivery.

Value Licensing looks at organisations - or government departments - that are closing or downsizing and finds software licences that can be repurposed. "The basic problem is that if you are closing down a public sector organisation, it [software licensing] is not high on your priority list in the first place. You are busy getting rid of people, closing offices down," Horley says. "It's about you being able to link parts together and understand the licensing agreements, and that is where we come in."

Horley says the first piece of business came via an insolvency practitioner with which the company previously worked on something else, who had noticed when going through organisational accounts that there were software licence assets remaining where value could perhaps still be extracted. It stood to reason that an IT specialist might be able to help in this area, and that many organisations might have unused software licences going to waste due to downsizing or restructuring.

And more niche opportunities may be facilitated in future, if the 9 March Cabinet Office announcement on helping SMBs win more government business plays out as expected.

Francis Maude, minister for the Cabinet Office, says the proportion of central government work going to SMBs will double to 13.7 per cent by the end of this financial year. That might sound small, but as a percentage of the public sector's annual £230bn spend on goods and services - accounting for about 15 per cent of the UK economy - that has to be positive news for the channel.

Procurement shake-up

In 2010, SMBs accounted for 50 per cent of turnover in the UK economy but won only about 6.5 per cent of central government's procurement spend.

"We are determined to shake up public buying so radically that there is no turning back to the old days of SMEs being shut out," said Maude in the official speech. "By failing to create a level playing field for smaller suppliers, government excluded some of the most competitive and innovative suppliers."

The government's plans include the introduction of set break points in IT contracts, starting with application software and infrastructure IT, to reduce the amount of budget locked into large, long-term deals. It will also look to disaggregate future contracts and deliver more flexible, lower-cost offerings.

Meanwhile, large private sector players - including IT giants such as HP and global consultancies including Capgemini - will be required to publish their government subcontracting opportunities on the government's Contracts Finder website.

This aims to give small providers more information about what is going on, and thus more chance of acting appropriately and receiving a larger piece of the pie. Maude says the Cabinet Office also plans to speed up payments to the supply chain, and to cut bureaucracy involved in procurement by about 40 per cent.

"Right now it is not unusual for SMEs in the supply chain to have to wait up to 100 days to receive payment for their work," Maude said. "Then there is the recently launched Cloud Store, which is allowing public sector organisations to purchase off-the-shelf IT services on a pay-as-you-go basis. The suppliers on the cloud are SMEs. And the Maritime and Coastguard Agency has just become the first public authority to make a purchase with an SME called Emergn to buy Agile educational software.

"The whole process was completed in less than 24 hours. This is the future."

Departments will also be rated on how well they work with SMBs. The government is aiming to spend about 25 per cent of its money with small IT providers, according to the Cabinet Office.

Cisco recently sponsored a UK webinar on public sector operational efficiency on PublicTechnology.net, where David Wilde, chief information officer at Westminster City Council, indicated that local bodies will consider any kind of technology if it offers a chance to make savings.

Market rethink

Opportunities are definitely out there, he says, but suppliers must move away from the traditional practice of simply trying to sell as much IT as possible, or the same IT 400 times for a juicy margin, to different departments. The market needs to be disrupted, and ideally IT needs to work with other services providers - for example, waste services providers - to put together appropriate, shared, efficient, cross-department solutions for government.

"That is the kind of rethink in the market that we need to see happen, but breaking tradition is very difficult," Wilde said.

Also, he added, it did not matter whether it used cloud or what type of cloud it was, so long as it delivers the savings and service being sought. Suppliers wishing to succeed in the public sector must focus much more on how they help the organisation, and much less on the technology itself.