Stephen Kelly is relentlessly optimistic when we meet during his last week as government chief operating officer.

Kelly (pictured) is leaving the civil service after three and a half years to run software firm Sage, but he has nothing but praise for the colleagues he’s leaving behind. He reels off achievements: building GOV.UK, increasing the use of SME suppliers, and fledgling digital transformation in Whitehall.

“There’s a great revolution going on in government,” Kelly says. He claims the government has digitised a third of the 1.6 billion annual transactions with citizens since 2010 and that new digital services “typically cost around 20 percent less” than the services they replaced.

He singles out Cabinet Office minister Francis Maude, digital director Mike Bracken and chief commercial officer Bill Crothers for particular acclaim.

However, during our conversation he highlights a number of issues: the lack of digital skills in Whitehall, poor service with management consultants, and a still too-slow pace of delivery in government.

He warns that it could take the best part of a decade for the government to truly be on top of its digital services, technology and contracts.

And even after then, transformation is a never-ending process of constant tweaks and improvements, he adds.

Despite this Kelly says he is confident the government will eventually behave more like the consumer world, offering more flexible, citizen-centric services. He believes digital transformation is ‘apolitical’ and will continue regardless of who forms the next government. 

“In the future there will be third-party apps that allow citizens to manage their own relationship with government, so they can get the services they need when they need it. And it’s all going to be mobile,” he says.

Speeding up the civil service

Beneath the upbeat exterior it’s clear Kelly has experienced some real frustrations. He admits: “There are some days I’ve left here and banged my head against the wall.”

One of his main bugbears has been the speed at which the civil service operates. Kelly also reserves some criticism for a civil service culture that focuses too much on policy over delivery, a situation he says he would like to see reversed.

“Things take too long. We worry too much in terms of process. And I’d say ambiguity is the enemy of execution. Clarity and leadership are what we need.”

Kelly says the civil service also has a tradition of being “very, very reactive”, but he thinks this is beginning to change, with more of a focus on planning projects. 

He is under no illusions about the scale of the challenge if the government is to reverse decades of contracting out its technology services and, as a result, capability.

Skills gap

Kelly admits it could take “the next 10 years” for government to bring its digital services, technology and contracts up to scratch. And even then, “you never finish transformation”, he says.

“There will always be more to do. There will always be better digital services to release, there will be more apps we can build, more platforms we can put out, more savings.” 

One issue that crops up repeatedly during our conversation is the much-vaunted ‘skills gap’ in Whitehall.

Kelly insists commercial capability is growing in the civil service and it is, as a result, becoming more confident in dealings with suppliers.

He says he is “optimistic we’ll see fewer and fewer” bad contracts and car-crash IT projects, perhaps referring to the troubled Universal Credit benefit reform project, which has already seen £663 million written off on unworkable IT.

And there are plenty of other examples: the disastrous National Programme for IT, a £10 billion project to build a single electronic care record for patients scrapped in 2011, or the FiReControl scheme to build a single IT system for fire and rescue services, cancelled in 2010 after wasting £500 million.

He concedes: “We’ve got lots to do over the next three or four years around defining skills, and starting to align reward and drive a performance culture.”

“Do we need more skills? Absolutely. In this Parliament we’ve probably taken out 80,000 civil servants. But there’s increasingly a role for strong specialists around IT and digital.”

Kelly adds: “I don’t think the civil service will ever pay absolute top dollar market rates. But I don’t think we need to. Because the stuff we do here is more complicated, difficult and will attract the people who want to do challenging stuff and make a difference.”

The government should work to recruit people from user-focused technology start-ups rather than re-hiring former civil servants back from big corporates, Kelly says.

“We are strategically looking to the consumer world. That’s why our message to industry is: we don’t want your recycled civil servants coming back in here. We want your disruptive consumer people. They’re the people we need to re-profile, and realign and put the citizen at the heart of government.”

Replacing ICT estates in Whitehall

The need to boost skills is a vital part of government plans to run more of its technology in-house.

As a result, developers, designers, user researchers, service managers, technical architects, web operations engineers and Agile delivery managers, to name but a few roles, are all in high demand in Whitehall at the moment.

Kelly says recruiting and training for these sorts of skills should be a core focus for senior IT leaders as big outsourcing deals expire and get replaced by shorter, more flexible contracts.

He will not be there to see departments replace these contracts, which are worth a total of £4 billion a year in the next Parliament, although he has been among those helping to prepare for it.

Kelly believes Whitehall departments can replace their ICT estates at a fraction of the cost they are currently paying, thanks to cheaper internet-based services and an increasingly commoditised IT landscape.

“If a contract was £1 billion 10 years ago, and therefore £100 million a year over 10 years, it is very likely to be 20 percent of that cost today,” he says.

Becoming an ‘intelligent client’

As the end of these deals gets closer, rhetoric from the Cabinet Office attacking an ‘oligopoly’ of IT suppliers, over-long contracts and poor behaviour from vendors seems to be receding.

Kelly says this reflects growing confidence in government that vendors are adapting to help it achieve shorter, more flexible contracts.

He says: “Two to three years ago it was a bit shock and awe, resetting the dynamics of the relationship. Our relationship has to be with industry, with SMEs, with us acting as the ultimate responsible, intelligent, experienced client.”

Kelly particularly emphasises the importance of ensuring contracts are constructed so the interests of the public sector and the vendor are aligned.

He says conflicting incentives have often been at the heart of poor supplier behaviour in the past.

Kelly identifies management consultants as one section of the supplier community where he feels this is still a problem. 

“Their model is about how they maximise fee income and project income. Actually our objective is to get them out as quickly as possible. So in that relationship with the consultancy, we’ve got diametrically opposing interests.”

He says: “The client wants to deliver fantastic outcomes and high quality as quickly as possible, and sometimes the consultancy operation is motivated to keep the project going as long as possible, and keep the project team as big as possible. There’s a law of diminishing returns.

“That’s a really good example of a conflicting set of interests where you get dysfunctional behaviour and normally bad outcomes."

Achievable reforms?

Kelly’s responsibilities have now been transferred to the newly-created civil service CEO role, now occupied by John Manzoni, appointed in October from the Major Projects Authority.

He has a mammoth brief including the digital transformation agendaICT reforms and Whitehall efficiency measures, improving management of major projects such as Universal Credit, managing suppliers and improving civil service skills.

Manzoni will inherit Kelly’s long-term mission of ensuring digital becomes mainstream in the civil service over the coming years.

He will be supported by large numbers of civil servants across Whitehall, but the question remains: can the government prove Kelly wrong and achieve digital transformation in under a decade?

Senior Whitehall bods seem to think so. The Cabinet Office has promised nine out of 10 of the online public will be using digital government services by 2020 and said it will save tens of billions in the next Parliament by halving spending on Whitehall ICT estates.

But as to whether the government can ever be a truly ‘disruptive’ force in the technology sphere, rivalling industry?

Kelly said he believes it led the way several decades ago and can do so again. At a roundtable in June 2014 he said: “When I was growing up in the UK, HM Government was the “go-to” organisation for some of the most radical and transformational IT programmes on the planet.” There’s no reason why this situation couldn’t be revived.

But no one should underestimate the scale of the challenge: to get there government will need to invest heavily in skills, tackle its many legacy systems, and undertake major organisational reform.

It’s still unclear if Whitehall has the stomach for it, though sceptics can take heart from the fact the strong leadership team of government CDO Mike Bracken and CTO Liam Maxwell have promised to stay to see out technology reforms for at least another three years.

Kelly could be forgiven for feeling some relief upon exiting Whitehall. But he will not get much respite at Sage either.

The company, which dominates the accounting software market among SMEs, is facing fierce competition thanks to a proliferation of startups offering cheap web-based business software.

On his first day in the job, competitor Netsuite launched an aggressive marketing campaign, claiming 500 former Sage customers have started using its cloud software instead.

Kelly can take some solace in the fact Sage reported year-on-year profits were up by 69 percent to £278 million in his first month. But if the firm is to cling onto the top spot it will need to keep up with the pace of innovation in an increasingly flexible, subscription-based internet driven-world. He has his work cut out.