John Suffolk, Government CIO, made it clear in a 40-minute talk this week that he wasn’t criticising the suppliers themselves. [The suppliers are making money as best they can.]
But he criticised the lock-in that the major suppliers to government achieve.
“Suppliers to public sector organisations are able to lock themselves into long contracts and render themselves indispensible as they ‘own’ the ICT stack,” he said.
EU procurement rules say that public sector buyers cannot specify an ICT product or brand. That means the big suppliers, usually systems integrators, select the products, the brands, and the architecture.
“Frequently in outsourced contracts the systems integrators design, develop, run and maintain the whole ICT stack. You want to change you pay,” said Suffolk.
The approach of public sector buyers can add to lock-in by the major suppliers to government.
“Procurement activities are time consuming, costly and result in further lock-in of suppliers. It is so painful and expensive lets make the contract long so we don’t have to repeat the process.”
Suffolk was speaking to the SIIA OnDemand Europe conference. He said that the top 12 ICT suppliers get over 60% of the government’s ICT spend.
It can take 77 weeks to bid for a Government contract, which discourages small and medium-sized enterprises from bidding. SMEs cannot commit the people and money for so long.
Suffolk showed a slide which referred to the “systems integrator lock-in and the SME lock-out.” It said:
“This is not a criticism of suppliers but a statement of fact on how we have ‘drifted’, as a client, into a certain model with profound consequences ”
He compared the control exerted by the major suppliers to supermarket owners: systems integrators often own the store - the data centre - and heavily influence the input prices through the pressure they put on SMEs and their subcontractors which are necessarily subservient; they decide what they want to sell, and set the output price by bidding cheap and charging for changes.
Unlike supermarkets, though, the client has limited choice because of the limits of the contract and the cost of a new procurement.
G-cloud and the Application Store are the solutions to supplier lock-in, said Suffolk.
When you pay for what you use, there is, for example, no lock-in to long- term software licence contracts.
"No longer am I locked to a building or a supplier or a host of subcontractors. I can pick and choose, and choose my check-out. It is a fundamental shift which I believe most people do not understand the consequences of."
In his talk he outlined the main challenges facing government as it tries to cut its £17bn annual IT bill as part of the Savings Review. But he strongly hinted that the Cabinet Office and ministers have only a limited ability to control the costs.
G-Cloud will save us £1.2bn a year says Government CIO - Computerworld UK