Channel eyes shared services push in light of public cuts

Industry onlookers forecast opportunities as procurement undergoes facelift, but SMEs are warned of difficulties ahead

A problem shared: Numerous industry players claim the swingeing public cuts will foreshadow a move towards shared services

Industry onlookers have reacted positively to yesterday's Comprehensive Spending Review, seeing the cuts as a chance to push shared services and innovation.

Across all departments, budgets are to be cut by an average of 19 per cent over four years. The Home Office, Justice Department and Police Force are all facing tough cutbacks, while the budget for health escaped lightly.

Chancellor George Osborne said: "The NHS is an intrinsic part of the fabric of our country. To govern is to choose, and we have chosen the National Health Service."

Healthy outlook
Bolton-based security VAR Imerja has a strong roster of NHS clients. Managing director Ian Jackson claimed the planned rise in health spending – from £104bn to £114bn – over the next four years is welcome news.

"This will ensure critical IT projects remain, allowing the health service to continue to invest in innovative services that ultimately improve patient care, such as telemedicine and next-generation networks," he explained.

“Maybe the huge pressures placed on departmental budgets will finally ensure public sector organisations look beyond the monolithic IT service providers, instead choosing to work alongside more agile, capable and cost-effective service providers for their services to drive real value for money.”

Jackson advocated the use of shared services and outsourcing to help achieve the necessary spending, a view echoed by Chris Gabriel, solutions director at Logicalis. Gabriel claimed the IT procurement landscape is set for radical changes.

Procurement shake-up
"The traditional aggregation of spend through single suppliers or locked-in frameworks has not worked," he explained.

"Instead of suppliers standardising pricing – at the behest of the government – giving perceived best value on day one, but then eroding that for the term of the contract – there is already a new generation of public sector projects where ongoing supplier/buyer collaboration is paving the way for fair value, which should ultimately deliver best value.”

Tola Sargeant, research director at analyst TechMarketView, said big service providers including Atos Origin, Logica and Capgemini could feel the pinch. The Home Office, Ministry of Justice and HMRC will look to avoid new capital projects and trim the fat from existing IT contracts, explained Sargeant.

"Meanwhile, the Home Office and Cabinet Office single out reductions in consultancy spend as one way they will make savings," she added. "But it’s equally clear increased use of outsourcing and shared services will have a part to play in achieving the savings.

"The Ministry of Justice is implementing shared corporate services across the department and the Foreign and Commonwealth Office plans to ‘simplify, standardise, and streamline’ its back office through increased outsourcing."

SMB squeeze
Niki Dixon, head of technology at auditor Grant Thornton, claimed the efficiency drive will hurt SMEs' chances of breaking into the public sector IT market.

"The government will cut the administrative and backroom costs across all the departments, and this will push IT and procurement online and towards sharing services," she said.

"This will only be able to be done through high-tech solutions and will provide an opportunity for the large IT service providers, whereas SMEs are likely to find it increasingly difficult to penetrate this area."