NAO: Legacy ICT puts £480 billion of central government revenue at risk

The National Audit Office (NAO) has found that at least £480 billion of central government revenue and at least £210 billion of non-staff expenditure in 2011-12 is reliant on legacy ICT, which could be at risk if ageing systems are handled poorly.


The National Audit Office (NAO) has found that at least £480 billion of central government revenue and at least £210 billion of non-staff expenditure in 2011-12 is reliant on legacy ICT, which could be at risk if ageing systems are handled poorly.

Amyas Morse, head of the National Audit Office, described the public sector’s performance in managing old IT systems as ‘patchy’.

“Legacy systems are a fact of life for most significant ICT users. The challenge is how intelligently they are managed, whether they are being retained, updated, replaced or phased out,” said Morse.

“The aim is to balance the costs of these options against the limitations and risks to ICT capability they can present, in a way that makes sense for the user and secures best public value. Performance in the public sector is patchy.”

In a new report, ‘Managing the risks of legacy ICT to public service delivery’, the NAO found that the strategies that government bodies have been applying to legacy ICT are unlikely to deliver the wide-reaching levels of transformation that have been laid out in the government’s digital strategy.

The Cabinet Office and the Government Digital Service (GDS) have mandated that central departments should work to overhaul legacy systems and implement innovative digital products for use by citizens, so as to save taxpayers some £1.7 billion a year by 2015.

However, departments have spent decades building upon complex and ageing ICT systems that are also often tied into lengthy outsourcing agreements, making the move to digital services challenging.

Varied approach to legacy systems

For its research, the NAO looked at four legacy systems in Whitehall: the Office of Fair Trading’s (OFT) consumer credit licensing service; HMRC’s VAT collection service; DWP’s pension payment service; and the NHS Business Service Authority’s prescription payment service.

The departments have taken a varied approach to their legacy systems. For example, the OFT has not been able to make changes to its service after the government decided that in 2014 the department will cease to exist. This has meant that the OFT’s ICT has not been able to adapt to changing business needs and the cost of the credit licensing service on a per customer transaction basis rose by an average of 10 per cent per annum between 2008-9 and 2011-12.

Conversely, the NAO found that well planned strategic investments can successfully enhance the functionality of legacy ICT. This was the case with DWP, which reduced the cost per customer of its pension payment service by 30 percent between 2008-9 and 2011-12. It did this by successfully implementing a new customer account management system that draws together customer information from multiple legacy systems to simplify the processing of pension cases.

Legacy equals risks

Despite this, the NAO found that legacy brings a number of risks across all the systems.

For example, legacy ICT increases the number of security vulnerabilities, it can create lock-in to uncompetitive agreements with single suppliers, the availability of skills to manage the systems are in short supply and legacy ICT is harder to adapt to meet the changing needs of the business.

These risks are being brought to the fore as a direct result of the government’s digital strategy, according to the NAO.

The report states: “[Government] is changing the way it commissions public services, to make them digital, cheaper and more adaptable to user needs. The strategies that government bodies have been applying to legacy ICT are unlikely to be sufficient to deliver the level of transformation envisaged by the government’s digital strategy.

“The lack of a full end-to-end view of the service, gaps in cost and performance information and the siloed working of ICT and business functions also restrict decision making.”

The integration challenge

The NAO found that legacy systems often require data to be processed as a sequence of batches that are incompatible with a fully real-time digital service.

For instance, in DWP’s pension system online applications have to be manually re-entered into the main system by a DWP operator, as the website and the main legacy ICT system are not integrated.

The report added: “The approach of adding functionality through the addition of interfaces to the core legacy ICT is likely to be insufficient to achieve full digital transformation.”

Performance analysis

Departments are also not basing their decision to retain legacy systems on complete performance data, which becomes critical when trying to understand the benefits of implementing new digital technologies.

The NAO argued that “without a full analysis of service performance, operational efficiency and cost breakdown for the service over recent years, it is impossible to generate a robust business case for change”.

Those responsible should also draw more on cross-government comparisons and examples of best practice of managing legacy ICT while transforming to digital, the NAO said, suggesting that the Cabinet Office and GDS were in a good position to provide this support.

Public bodies should also ensure that service managers, responsible for managing the whole life cycle and performance of a service, are made fully aware of the risks posed to their services by legacy ICT.

This doesn’t mean the Cabinet Office should adopt an autocratic approach, however. The NAO states that it should listen to the needs of service managers and those undertaking digital transformations across government.

It can also offer service managers access to the ICT asset register and the ICT professional development networks, and develop advice about the business and commercial analysis needed to underpin digital transformation.

In related news, HMRC’s outgoing CIO Mark Hall has said that the department’s £700 million a year Aspire contract is currently made up of suppliers offering ‘vanilla’ services and needs innovation brought in from SMEs and start-ups in order to adapt to a new digital age.

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