Tim Gregory, the man put in charge of CGI’s UK operations after the £1.7 billion acquisition of Logica, has slammed the UK government for implementing reforms that have made it difficult for big suppliers to do business with the public sector.
He warned that if it continues, and the pendulum swings too far towards giving work to SMEs, larger companies will look to invest their money elsewhere.
The UK government has undertaken a number of reforms in recent months to push out the traditional suppliers of IT services to government, following a number of high profile failures that have cost the taxpayer billions of pounds.
The Government Digital Service (GDS) and key technology players within the Cabinet Office want to introduce more agile SMEs to working with the public sector, which will work to help overhaul legacy systems with new online, digital products that could save £1.7 billion a year after 2015.
Gregory believes that the government may be pushing its reforms too far.
“You’ll be aware that the government is making life difficult for IT vendors. I find this adversarial approach quite unhealthy,” he told Computerworld UK.
“I’m not saying that the government shouldn’t be driving value for money, and previous suppliers have taken advantage, but I think the pendulum is in danger of swinging too far the other way.”
“Certain companies will stop investing. It’s as simple as that. If you are being given an opportunity in the UK government that says: you can’t make a profit, you have to give X percent of your business to an SME, you have unlimited liability, there are lots of service credit penalties, it takes you anything up to two years to bid to win the deal - companies will simply take their investment to another country.”
Gregory also warned that although the SMEs that the government is hoping to work with are likely to have excellent technology, they may struggle with governance and working with government departments.
“The first time one of these SMEs doesn’t deliver, when something goes pear-shaped, there will be no safety net. There’s no point in a government organisation trying to sue them, there’s nothing to sue. It will be gone,” he said.
CGI and Gregory are also concerned that the government’s move towards shorter outsourcing contracts, some as short as three years (with a non-committal option to extend by two further one year periods), are simply unworkable for outsourcing companies.
He said that outsourcers spread their risk over a long period and if the government is looking for three year deals, it isn’t going to be a worthwhile investment for many suppliers out there.
“If you look at the average outsourcing deals – ours on average are about seven years, and then we have some at ten years and some at twenty years. That’s where we drive out cost for the customer because that’s where we can take a long term view,” said Gregory.
“For a ten year contract we are prepared to make a big investment in the first year, which really helps to drive the cost out, because we will gain it back over the next nine years. However, if it’s contract over three years we can’t do anything with it!”
He added: “Everybody is a loser, because the government won’t get the savings it wants. They really need to find that middle ground.”