SI’s price for hosting was 80 times higher than SME’s

By Tony Collins

The Cabinet Office minister Francis Maude has criticised the high cost of Government IT and called on CIOs to be innovative, radical and pioneering as their departments move away from the “big, sclerotic SI contracts”.

His speech at an event for IT professionals was not unlike Chris Chant’s last year when Chant said the vast majority of GovIT was  “outrageously expensive”. Chant was then Executive Director in the Cabinet Office , heading  G-Cloud initiative.

Maude said that the government spends more than £1.2bn a year on hosting contracts. “Much of that is spent with just one or two suppliers,” said Maude. “And it’s more money than those suppliers are investing in their own cloud, the future of their own business.”

He continued:

We know we’re not getting value for money – recently a big SI and an SME bid on the Cloudstore for hosting. The SI bid £4m. The SME bid £50k.

Maude said the plan is to consolidate hosting and use collective requirements to run it.

“I’m particularly keen to explore mutualising it. I’ve asked my IT Reform team to come up with proposals by Christmas and I hope you will contribute to their work with your own energy and ideas.”

Reform is too slow

Much of Maude’s speech appeared to show a frustration that change in government IT is happening too slowly.

“We’ve made progress on all aspects of the IT strategy – but we need to go much further and faster.”

He did not mention any department in particular but the Department for Work and Pensions is among those that continue to award large long-term contracts to major IT companies, much as it used to, on the basis that civil servants do not want to risk any disruption to benefit systems .

Maude said:

“At the moment we spend more than 1% of GDP on the administrative IT to run government.  That’s far too much. It is imperative that Government reduces its IT budget further in the next 3 years – while delivering more digital, innovative, user-focused services.

Big is not beautiful

“So how can we get there? Firstly it’s crucial that we continue to move away from the mentality that big is beautiful.

“For too long Government IT has been too expensive, over-specified and run in contract structures that encourage complexity, duplication and fragmented user services.

“For the most part contracts were consistently awarded to a limited number of very large suppliers on long-term, exclusive contracts – whilst we shut out smaller more innovative suppliers.

“… Government repeatedly found itself paying large amounts for systems that were delivered late, over budget and not even to the quality required…

“Shockingly when we came into office SMEs – despite accounting for half the turnover in the UK economy – were winning only around 6.5% of Central Government’s procurement spend.

“This Government has set out an aspiration for a quarter of our business to go – directly or indirectly – to SMEs by 2015. And that means creating a more competitive and open marketplace for buying IT services and solutions.

“This process has started – we have cut red tape, introduced G-Cloud and increased the visibility of contracts across the board and we are giving firms a chance of redress through the Cabinet Office’s ‘Mystery Shopper’ Scheme.

“But there’s more to do. I am reiterating my requirement that for any IT programmes not being displaced by digital solutions, no project, framework or contract can be over £100m.

No contract extensions

And to ensure we are in charge of our own destiny rather than the supplier – we will have no contract extensions – the conditions and pricing that were signed up to even three years ago are ruinous in comparison to what is available now, when the price of IT keeps dropping.”

Open standards

“We need to change the way we procure and run technology systems – introducing Open Standards and using a wider group of smaller, innovative suppliers…”

Allowing Government to inter-operate would mean “we don’t have to build the same thing thirty or forty times”.

He said that open standards will improve competition for government contracts.  In a consultation on open standards more than 70% of respondents supported the view that mandation of open standards, or of particular standards, would improve value for money in the provision of government services.

“Following this consultation I am today publishing our Open Standards Principles. These set out that Royalty Free open standards are key to levelling the playing field for open source and proprietary software in government IT.

“And that competition between open source and proprietary software can result in lower licensing costs and increased innovation in government IT.

“…All Government bodies must comply with the Open Standards Principles or apply for an exemption. And a challenging comply or explain process is being implemented, through the existing IT spend controls process.”

Maude said that reforms can happen only with strong, radical, innovative leadership – “people who will challenge the status quo and can inspire change in every corner of Whitehall. And that’s where I expect you to come in.”


The Government’s CloudStore allows public sector organisations to purchase a range of the best IT services off the shelf from on a pay-as-you-go basis, rather than having to develop their own systems.

Maude said there have been 99 purchases of IT services totalling over £2.2m through the CloudStore and 70% of this  has been with SMEs.

He thanked Chris Chant – who retired in April –  and the current Director Denise McDonagh and her team for their work on G-Cloud.

“I’ve heard suppliers say they can’t believe how easy G-Cloud is to use – which is not what you’re used to hearing about Government procurement,” said Maude.


Maude says all the right things  – as did Chris Chant last year. Bill CrothersLiam Maxwell and Mike Bracken are among the excellent adjutants to Maude. But if this strong team – which is backed by the Prime Minister –  cannot significantly change the way government runs, and how much it spends on IT, who can?

Maude’s speech

DWP defends £316m contract award to HP

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