£7.2bn can be shaved from public sector IT spend, report claims

Government-funded study finds a total of £15bn of savings, but receives mixed initial support

The government should look to save a combined £7.2bn on IT spend a year, according to a report co-written by the former chief executive of Logica, Martin Read.

Read was part of a five-strong panel of external consultants which spent the past year researching the Operational Efficiency Programme (OEP) ahead of the 2009 Budget.

The final report has identified a total of £15bn annual savings from back office operations and IT, collaborative procurement, asset management and sales, property and local incentives and empowerment.

Specifically for the IT sector, Read recommended better management information, benchmarking and review of costs, and better governance of IT-enabled change programmes to achieve a whopping £4bn of savings a years on back-office operations, coupled with £3.2bn of savings a year on IT spending.

According to a write up on HM Treasury site, the findings will make it possible to deliver efficiency savings alongside continuing to increase investment in frontline services.

However the OEP group admit that delivery of the full £15bn savings will take time to achieve, with procurements contracts needing to be renegotiated, back-office functions merged and market conditions considered before property sales are undertaken.

In the foreword to the report, the five advisors said: “The private sector never stops seeking greater efficiency in the ways that it purchases and provides services, and neither should government.

“There is scope to go further and increase the value for money the public sector achieves from both its activities and from some of its most valuable assets – the insight and energy of its people, as well as its bricks and mortar.”

It is widely believed that the Chancellor will use this report as a foundation for his Budget speech tomorrow.

However the news brought a mixed response from the industry.

Andy Jacques, senior vice president, North EMEA at Salesforce.com, said: "If the government announces a reduction in IT spending there is no reason why that should negatively impact services. Done well, the public sector can modernise, reduce costs and actually improve efficiency. Forward-looking departments can take the approach ‘adapt and innovate’ rather than 'hibernate’.

"Budget concerns in the current economic climate are driving a major migration towards cloud computing which provides sophisticated applications and services provided on a subscription basis without the associated costs of purchase, maintenance, management and infrastructure.

"Buying and owning technology has always been an investment in in-built obsolescence, but that has often been the way the public sector has budgeted for IT. Now, by moving towards cloud computing it has the opportunity to improve its service, increase staff satisfaction with the IT they use and most importantly reduce cost.”

Steve Ash, government sales director at Citrix, added: "This need not be a negative step by any means but could result in a leaner, more joined-up government that benefits us all. IT budgets are almost always spent in full but that doesn’t mean they have always been set at the right level. If anything, overspend could result in complexity and additional management headaches when what the government needs is speed, reliability and ease of use."

The public sector is already finding greater efficiencies through shared services and enabling remote and flexible working. Key areas where the government can make further savings, while improving efficiency, are around the desktop and the datacentre and a consolidation of physical and digital estates. The consolidation of government bodies’ physical estates has been a key focus in previous budgets, and IT plays a key role in making the move successful.

However Stephen Midgley, senior director at Absolute Software was a little more sceptical: "The planned cuts in public sector IT spend will bring with them a host of problems. The last year has not been kind to Government IT – data breaches, lost laptops and other such issues have tarnished the reputation of many a public sector office.

"On top of the bad headlines come the security issues caused by the loss of sensitive information. If a laptop gets stolen a company’s first, immediate concern must be about what data was on that laptop. Does the organisation need to retrieve the laptop or should it remotely delete all the data? Both are possible but both require efficient IT security systems.

"Cutting IT budgets flies in the face of claims that IT security will be improved across the public sector. Cases such as the HMRC ‘lost’ CDs will become increasingly common if organisations aren’t given the money to combat security issues.”