With the public sector spending plans of all political parties coming under close scrutiny, IT is being labelled in equal measure as the cause and saviour of the current spending crunch that the public sector is facing.

However, it is not a simple either/or argument. It is not a case of should the country have an eGovernment strategy, but rather what that strategy should be.

The debate reached a new height this week with the Conservative Party’s announcement regarding its suggested alternative to the spiralling costs of the NHS database project. Moving on from general statements of intent, this was the one of the first acknowledgements that government technology purchasing is under the spotlight and seen to be an important part of a party’s manifesto.

The idea of moving NHS data into the ‘cloud’ through providers such as Google is a bold choice; however it mimics strategies that have been adopted across the private sector. There is no doubt that the landscape of public sector technology purchasing is changing and the adoption of open source/ open standards technology provides a more transparent, democratic approach to technology purchasing.

As public bodies look to reduce CapEx, the traditional IT project looks anachronistic in light of today’s economic environment.

This migration to a more flexible methodology is part of a wider trend towards a New Economics of IT. Before open source adoption, as budgets were squeezed, organisations were forced to either reduce the number of projects or personnel working on them.

However, with the emergence of enterprise-legitimate open source vendors, such as Ingres and Red Hat, public agencies can reduce the amount of licence revenue locked in projects as a subscription model becomes the norm.

According to the National Audit Office, the current bill for the NHS IT project stands at £12.7 billion and rising, the bulk of which will be sunk into software licensing. Instead, by moving from an upfront license fee to a service based model, capital expenditure will be reduced and the saving can be funnelled into other areas of public spending.

At the heart of this New Economics of IT is open source, which earlier this year was given a massive endorsement by the UK government with the publication of its open source strategy. Looking at the cost savings that have been achieved by companies and governments all over the world, it is estimated that the UK Government could reduce its annual IT bill by at least £600m a year if more open source software was used as part of an effective procurement strategy.

As all political parties search for the policy options that will enable them to cut costs without cutting services, one could be forgiven for being a little skeptical. After all, it seems the impossible balancing act of trying to reconcile the irreconcilable. However, taking costs out of IT projects does not have to mean shelving those projects all together.

The pressure on public spending generally, and major IT projects specifically, is challenging the whole industry together with the government to deliver the very best value for the taxpayer and find alternative IT solutions that are just as good (if not better) as the old solutions.

There is a realisation now that there is a new way of procuring technology where superior technology at 95% less cost delivers better, new ways of doing business.

This pressure is disrupting the $20 billion proprietary lock-in business model to the point where vendors have to try and change their own way of doing business to compete and operate in the new commercial environment that the public sector is defining.

For example, Becta, the body leading the national drive to inspire and lead the effective and innovative use of technology throughout schools and colleges, this month negotiated a new subscription licensing agreement with Microsoft. This will considerably increase potential cost savings by removing the need for schools to pay Microsoft to license their entire estate.

Therefore if terminals are running competitor technologies (such as Linux and or are technically incapable of running Microsoft they do not have to be licensed, a huge come down from Microsoft’s approach of old.

Of course, why they even had to pay license fees to Microsoft under these old terms in the first place is a fair question. Nevertheless, it is clear that the power of open source is fundamentally changing the procurement approach of the public sector. Indeed, Becta is running the first national Open Source Schools Unconference later this month; such is the uptake of open source by teachers and technical staff.

At both national and EU level, openness and transparency in IT is now the mantra. With the European Commission reshaping its standards policies to be more open, government bodies renegotiating contracts with proprietary vendors and placing open source at the heart of their strategy, and with opposition parties placing new IT procurement models at the heart of their policies, the public sector is leading the way defining the new economics of IT.

Roger Burkhardt serves as president and chief executive officer of Ingres. Prior to Ingres, Roger was the chief technology officer and executive vice president of the New York Stock Exchange, where he led a global technology team of 2,000 colleagues through the most important business and technology transformation in the Exchange's history: the shift to electronic trading. Under his leadership, the NYSE embraced open source solutions, maintained world-class reliability standards, and increased transaction volumes seven-fold.