'Resellers must learn to work within new public sector IT model'

Analyst GlobalData registers first drop in UK public sector ICT spend for over a decade as it flags up trend towards rebuilding in-house skills

Public sector bodies will need the channel's help as they continue to snub outsourcing in favour of building out in-house tech and digital strategies.

That's according to analyst GlobalData, whose latest data shows that UK public sector ICT spending has fallen for the first time in over a decade.

Total spending in 2015/16 hit £18.75bn, a 0.2 per cent year-on-year drop, GlobalData - formerly Kable - found.

But talking to CRN, GlobalData chief analyst Jessica Figueras said the drop in the headline figure - the first since GlobalData began monitoring the market - is less interesting than a big shift in spending patterns within the sector the data uncovers.

Spending on IT outsourcing contracts fell by £116m, a 2.2 per cent annual drop, while staff spend was up by £252m, or 6.7 per cent, she said.

"You don't see consistent spending across all the categories," she said.

"Some areas have grown quite strongly and others have shrunk quite strongly. This reflects real policy change in how the public sector is choosing to buy - particularly the move away from IT outsourcing which you can see is quite pronounced. There is this marked phenomenon where what they are saving on IT outsourcing they are paying out on staff."

After the coalition government came to power in 2010, Cabinet Office minister Francis Maude warned that the days of the mega-deal were over, with turning the screw on large suppliers emerging as a theme of the last parliament.

"The numbers confirm that the direction of travel - which has been in place for five years - which is towards building in-house capability and away from the old style, where organisations would really outsource a lot of decision making to their suppliers," Figueras said.

She added: "We've seen a clear reversal of that trend now. For resellers, they need to learn to work within that new model and look for opportunities to help public sector organisations build capability. There are some big issues in terms of lack of access to good staff and decent tech leadership, so there is a lot of opportunity for advisory services, whether that's paid or not."

Figueras said the decline in the headline number is attributable mainly to falling unit costs in commodity areas of IT, including in areas like networking and managed comms.

IT hardware - including laptops and desktops - did "surprisingly well" by registering 1.4 per cent growth - Figueras (pictured) said.

Where before the focus was on reducing the deficit and cutting Whitehall spending, now all eyes have turned to Brexit, which could start driving department-level technology investment in the future, she added.

"Under Cameron, the efficiency and reform agenda was always explicitly tied up with a certain technology strategy, "she said. "There was a very coherent programme around the use of digital and technology and how technology is bought - it was a Number 10 policy goal. What's happened now with Brexit, tinkering around the edges is not a vote winner. Where investment in technology and digital is being made, it's going to have to feed into wider policy goals. It's going to have to help departments achieve their objectives in a much more political sense."

Figueras gave the example of HMRC and the Home Office's immigration agenda, as well as well as DEFRA, which she said is not interested in investing in new systems due to its uncertain future.

"It makes more sense for it to invest in organisational fitness. At some point there will be a policy agenda for it, and it needs to move really quickly when it comes up," she said.