Category Archives: cost avoidance

Aspire: eight lessons from the UK’s biggest IT contract

Posted on 22/06/2016 | 1 comment

By Tony Collins

How do you quit a £10bn IT contract in which suppliers have become limbs of your organisation?

Thanks to reports by the National Audit Office, the questioning of HMRC civil servants by the Public Accounts Committee, answers to FOI requests, and job adverts for senior HMRC posts, it’s possible to gain a rare insight into some of the sensitive commercial matters that are usually hidden when the end of a huge IT contract draws closer.

Partly because of the footnotes, the latest National Audit Office memorandum on Aspire (June 2016) has insights that make it one of the most incisive reports it has produced on the department’s IT in more than 30 years.

Soaring costs?

Aspire is the government’s biggest IT-related contract. Inland Revenue, as it was then, signed a 10-year outsourcing deal with HP (then EDS) in 1994, and transferred about 2,000 civil servants to the company. The deal was expected to cost £2bn over 10 years.

After Customs and Excise, with its Fujitsu VME-based IT estate, was merged with Inland Revenue’s in 2005, the cost of the total outsourcing deal with HP rose to about £3bn.

In 2004 most of the IT staff and HMRC’s assets transferred to Capgemini under a contract known as Aspire – Acquiring Strategic Partners for Inland Revenue. Aspire’s main subcontractors were Accenture and Fujitsu.

In subsequent years the cost of the 10-year Aspire contract shot up from about £3bn to about £8bn, yielding combined profits to Capgemini and Fujitsu of £1.2bn – more than double the £500m originally modelled. The profit margin was 15.8% compared to 12.3% originally modelled.

The National Audit Office said in a report on Aspire in 2014 that HMRC had not handled costs well. The NAO now estimates the cost of the extended (13-year) Aspire contract from 2004 to 2017 to be about £10bn.

Between April 2006 and March 2014, Aspire accounted for about 84% of HMRC’s total spending on technology.

Servers that typically cost £30,000 a year to run under Aspire – and there are about 4,000 servers at HMRC today – cost between £6,000 when run internally or as low as £4,000 a year in the commodity market.

How could the Aspire spend continue – and without a modernisation of the IT estate?

A good service

HMRC has been generally pleased with the quality of service from Aspire’s suppliers.  Major systems have run with reducing amounts of downtime, and Capgemini has helped to build many new systems.

Where things have gone wrong, HMRC appears to have been as much to blame as the suppliers, partly because development work was hit routinely by a plethora of changes to the agreed specifications.

Arguably the two biggest problems with Aspire have been cost and lack of control.  In the 10 years between 2004 and 2014 HMRC paid an average of £813m a year to Aspire’s suppliers.  And it paid above market rates, according to the National Audit Office.

By the time the Cabinet Office’s Efficiency and Reform Group announced in 2014 that it was seeking to outlaw “bloated and wasteful” contracts, especially ones over £100m, HMRC had already taken steps to end Aspire.

It decided to break up its IT systems into chunks it could manage, control and, to some extent, commoditise.

HMRC’s senior managers expected an end to Aspire by 2017. But unexpected events at the Department for Work and Pensions put paid to HMRC’s plan …

Eight lessons from Aspire

1. Your IT may not be transformed by outsourcing.  That may be the intention at the outset. But it didn’t happen when Somerset County Council outsourced IT to IBM in 2007 and it hasn’t happened in the 12 years of the Aspire contract.

 “The Aspire contract has provided stable but expensive IT systems. The contract has contributed to HMRC’s technology becoming out of date,” said the National Audit Office in its June 2016 memorandum.

Mark DearnleyAnd Mark Dearnley, HMRC’s Chief Digital Information Officer and main board member, told the Public Accounts Committee last week,

“Some of the technology we use is definitely past its best-before date.”

2. You won’t realise how little you understand your outsourced IT until you look at ending a long-term deal.

Confidently and openly answering a series of trenchant questions from MP Richard Bacon at last week’s Public Accounts Committee hearing, Dearnley said,

“It’s inevitable in any large black box outsourcing deal that there are details when you get right into it that you don’t know what’s going on. So yes, that’s what we’re learning.”

3. Suppliers may seem almost philanthropic in the run-up to a large outsourcing deal because they accept losses in the early part of a contract and make up for them in later years.

Dearnley said,

“What we are finding is that it [the break-up of Aspire] is forcing us to have much cleaner commercial conversations, not getting into some of the traditional arrangements.

” If I go away from Aspire and talk about the typical outsourcing industry of the last ten years most contracts lost money in their first few years for the supplier, and the supplier relied on making money in the later years of the contract.

“What that tended to mean was that as time moved on and you wanted to change the contract the supplier was not particularly incented to want to change it because they wanted to make their money at the end.

“What we’re focusing on is making sure the deals are clean, simple, really easy to understand, and don’t mortgage the future and that we can change as the environment evolves and the world changes.”

4. If you want deeper-than-expected costs in the later years of the contract, expect suppliers to make up the money in contract extensions.

Aspire was due originally to end in 2004. Then it went to 2017 after suppliers negotiated a three-year extension in 2007. Now completion of the exit is not planned until 2020, though some services have already been insourced and more will be over the next four years.

The National Audit Office’s June 2016 memorandum reveals how the contract extension from 2017 to 2020 came about.

HMRC had a non-binding agreement with Capgemini to exit from all Aspire services by June 2017. But HMRC had little choice but to soften this approach when Capgemini’s negotiating position was unexpectedly strengthened by IT deals being struck by other departments, particularly the Department for Work and Pensions.

Cabinet Office “red lines” said that government would not extend existing contracts without a compelling case. But the DWP found that instead of being able to exit a large hosting contract with HP in February 2015 it would have to consider a variation to the contract to enable a controlled disaggregation of services from February 2015 to February 2018.

When the DWP announced it was planning to extend its IT contract with its prime supplier HP Enterprise, HMRC was already in the process of agreeing with Capgemini the contract changes necessary to formalise their agreement to exit the Aspire deal in 2017.

“Capgemini considered that this extension, combined with other public bodies planning to extend their IT contracts, meant that the government had changed its position on extensions…

“Capgemini therefore pushed for contract extensions for some Aspire services as a condition of agreeing to other services being transferred to HMRC before the end of the Aspire contract,” said the NAO’s June 2016 memo.

5. It’s naïve to expect a large IT contract to transfer risks to the supplier (s).

At last week’s Public Accounts Committee hearing, Richard Bacon wanted to know if HMRC was taking on more risk by replacing the Aspire contract with a mixture of insourced IT and smaller commoditised contracts of no more than three years. Asked by Bacon whether HMRC is taking on more risk Dearnley replied,

“Yes and no – the risk was always ours. We had some of it backed of it backed off in contract. You can debate just how valuable contract backing off is relative to £500bn (the annual amount of tax collected).　 We will never back all of that off. We are much closer and much more on top of the service, the delivery, the projects and the ownership (in the gradual replacement of Aspire).”

6. Few organisations seeking to end monolithic outsourcing deals will have the transition overseen by someone as clear-sighted as Mark Dearnley.

His plain speaking appeared to impress even the chairman of the Public Accounts Committee Meg Hillier who asked him at the end of last week’s hearing,

Meg Hillier

Meg Hillier

“And what are your plans? One of the problems we often see in this Committee is people in very senior positions such as yours moving on very quickly. You have had a stellar career in the private sector…

“We hope that those negotiations move apace, because I suspect – and it is perhaps unfair to ask Mr Dearnley to comment – that to lose someone senior at this point would not be good news, given the challenges outlined in the [NAO] Report,” asked Hillier.

Dearnley then gave a slightly embarrassed look to Jon Thomson, HMRC’s chief executive and first permanent secretary. Dearnley replied,

“Jon and I are looking at each other because you are right. Technically my contract finishes at the end of September because I was here for three years. As Jon has just arrived, it is a conversation we have just begun.”

Hiller said,

“I would hope that you are going to have that conversation.”

Richard Bacon added,

“Get your skates on, Mr Thompson; we want to keep him.”

Thompson said,

“We all share the same aspiration. We are in negotiations.”

7. Be prepared to set aside millions of pounds – in addition to the normal costs of the outsourcing – on exiting.

HMRC is setting aside a gigantic sum – £700m. Around a quarter of this, said the National Audit Office, is accounted for by optimism bias. The estimates also include costs that HMRC will only incur if certain risks materialise.

In particular, HMRC has allowed around £100m for the costs of transferring data from servers currently managed by Aspire suppliers to providers that will make use of cloud computing technology. This cost will only be incurred if a second HMRC programme – which focuses on how HMRC exploits cloud technology – is unsuccessful.

Other costs of the so-called Columbus programme to replace Aspire include the cost of buying back assets, plus staff, consultancy and legal costs.

8. Projected savings from quitting a large contract could dwarf the exit costs.

HMRC has estimated the possible minimum and possible maximum savings from replacing Aspire. Even the minimum estimated savings would more than justify the organisational time involved and the challenge of building up new corporate cultures and skills in-house while keeping new and existing services running smoothly.

By replacing Aspire and improving the way IT services are organised and delivered, HMRC expects to save – each year – about £200m net, after taking into account the possible exit costs of £700m.

The National Audit Office said most of the savings are calculated on the basis of removing supplier profit margins and overheads on services being brought in-house, and reducing margins on other services from contract changes.

Even if the savings don’t materialise as expected and costs equal savings the benefits of exiting are clear. The alternative is allowing costs to continue to soar while you allow the future of your IT to be determined by what your major suppliers can or will do within reasonable cost limits.

Comment

HMRC is leading the way for other government departments, councils, the police and other public bodies.

Dearnley’s approach of breaking IT into smaller manageable chunks that can be managed, controlled, optimised and to some extent commoditised is impressive.　 On the cloud alone he is setting up an internal team of 50.

In the past, IT empires were built and retained by senior officials arguing that their systems were unique – too bespoke and complex to be broken up and treated as a commodity to be put into the cloud.

Dearnley’s evidence to the Public Accounts Committee exposes pompous justifications for the status quo as Sir Humphrey-speak.

Both Richard Feynman and Einstein said something to the effect that the more you understand a subject, the simpler you can explain it.

What Dearnley doesn’t yet understand about the HMRC systems that are still run by Capgemini he will doubtless find out about – provided his contract is renewed before September this year.

No doubt HMRC will continue to have its Parliamentary and other critics who will say that the risks of breaking up HMRC’s proven IT systems are a step too far. But the risks to the public purse of keeping the IT largely as it is are, arguably, much greater.

The Department for Work and Pensions has proved that it’s possible to innovate with the so-called digital solution for Universal Credit, without risking payments to vulnerable people.

If the agile approach to Universal Credit fails, existing benefit systems will continue, or a much more expensive waterfall development by the DWP’s major suppliers will probably be used instead.

It is possible to innovate cheaply without endangering existing tax collection and benefit systems.

Imagine the billions that could be saved if every central government department had a Dearnley on the board. HMRC has had decades of largely negative National Audit Office reports on its IT.  Is that about to change?

Update:

This morning (22 June 2016) on LinkedIn, management troubleshooter and board adviser Colin Beveridge wrote,

“Good analysis of Aspire and outsourcing challenges. I have seen too many business cases in my career, be they a case for outsourcing, provider transition or insourcing.

“The common factor in all the proposals has been the absence of strategy end of life costs. In other words, the eventual transition costs that will be incurred when the sourcing strategy itself goes end of life. Such costs are never reflected in the original business case, even though their inevitability will have an important impact on the overall integrity of the sourcing strategy business case.

“My rule of thumb is to look for the end of strategy provision in the business case, prior to transition approval. If there is no provision for the eventual sourcing strategy change, then expect to pay dearly in the end.”

June 2016 memorandum on Aspire – National Audit Office

Dearney’s evidence to the Public Accounts Committee

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Posted in Accenture, BT, Campaign4Change, Capgemini, change management, Cloud Computing, cost avoidance, DWP, efficiency savings, Freedom of Information, G-Cloud, Government IT, HMRC, HP, Institute for Government, IT successes, Legacy ICT, managing change, managing outsourced services, National Audit Office, project management, supplier relationships, Universal Credit

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Big IT suppliers and their Whitehall “hostages”

Posted on 30/01/2013 | 6 comments

By Tony Collins

Mark Thompson is a senior lecturer in information systems at Cambridge Judge Business School, ICT futures advisor to the Cabinet Office and strategy director at consultancy Methods.

Last month he said in a Guardian comment that central government departments are “increasingly being held hostage by a handful of huge, often overseas, suppliers of customised all-or-nothing IT systems”.

Some senior officials are happy to be held captive.

“Unfortunately, hostage and hostage taker have become closely aligned in Stockholm-syndrome fashion.

“Many people in the public sector now design, procure, manage and evaluate these IT systems and ignore the exploitative nature of the relationship,” said Thompson.

The Stockholm syndrome is a psychological phenomenon in which hostages bond with their captors, sometimes to the point of defending them.

This month the Foreign and Commonwealth Office issued  a pre-tender notice for Oracle ERP systems. Worth between £250m and £750m, the framework will be open to all central government departments, arms length bodies and agencies and will replace the current “Prism” contract with Capgemini.  

It’s an old-style centralised framework that, says Chris Chant, former Executive Director at the Cabinet Office who was its head of G-Cloud, will have Oracle popping champagne corks. 

“This is a 1993 answer to a 2013 problem,” he told Computer Weekly.

In the same vein, Georgina O’Toole at Techmarketview says that central departments are staying with big Oracle ERP systems.   

She said the framework “appears to support departments continuing to run Oracle or, indeed, choosing to move to Oracle”. This is “surprising as when the Shared Services strategy was published in December, the Cabinet Office continued to highlight the cost of running Oracle ERP…”

She said the framework sends a  message that the Cabinet Office has had to accept that some departments and agencies are not going to move away from Oracle or SAP.

“The best the Cabinet Office can do is ensure they are getting the best deal. There’s no doubt there will be plenty of SIs looking to protect their existing relationships by getting a place on the FCO framework.”

G-Cloud and open standards?

Is the FCO framework another sign that the Cabinet Office, in trying to cut the high costs of central government IT, cannot break the bond – the willing hostage-captive relationship –  between big suppliers and central departments?

The framework appears to bypass G-Cloud in which departments are not tied to a particular company. It also appears to cock a snook at the idea of replacing  proprietary with open systems.

Mark Thompson said in his Guardian comment: 

– Administrative IT systems, which cost 1% of GDP, have become a byword for complexity, opacity, expense and poor delivery.

– Departments can break free from the straitjackets of their existing systems and begin to procure technology in smaller, standardised building blocks, creating demand for standard components across government. This will provide opportunities for less expensive SMEs and stimulate the local economy.

– Open, interoperable platforms for government IT will help avoid the mass duplication of proprietary processes and systems across departments that currently waste billions.

–  A negative reaction to the government’s open standards policy from some monopolistic suppliers is not surprising.

Comment

It seems that Oracle and the FCO have convinced each other that the new framework represents change.  But, as Chris Chant says, it is more of the same.

If there is an exit door from captivity the big suppliers are ushering senior officials in departments towards it saying politely “you first” and the officials are equally deferential saying “no – you first”. In the end they agree to stay where they are.

Will Thompson’s comments make any difference?

Some top officials in central departments – highly respected individuals – will dismiss Thompson’s criticisms of government IT because they believe the civil service and its experienced suppliers are doing a good job: they are keeping systems of labyrinthine complexity running unnoticeably smoothly for the millions of people who rely on government IT.

Those officials don’t want to mess too much with existing systems and big IT contracts in case government systems start to become unreliable which, they argue, could badly affect millions of people.

These same officials will advocate reform of systems of lesser importance such as those involving government websites; and they will champion agile and IT-related reforms that don’t affect them or their big IT contracts.

In a sense they are right. But they ignore the fact that government IT costs much too much. They may also exaggerate the extent to which government IT works well. Indeed they are too quick to dismiss criticisms of government IT including those made by the National Audit Office.

In numerous reports the NAO has drawn attention to weaknesses such as the lack of reliable management information and unacceptable levels of fraud and internal error in the big departments. The NAO has qualified the accounts of the two biggest non-military IT spending departments, the DWP and HMRC.

Ostensible reformers are barriers to genuine change.  They need to be replaced with fresh-thinking civil servants who recognise the impossibility of living with mega IT contracts.

Mark Thompson’s Guardian article.

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Posted in Agile, Campaign4Change, Capgemini, change management, Cloud, Cloud Computing, cost avoidance, cost reduction, culture, DWP, G-Cloud, Government IT, HMRC, innovation, managing change, managing outsourced services, open source, open standards, operational issues, Oracle ERP, Politics, private sector lessons for the public sector, procurement, project management, reducing cost strategically, supplier relationships

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Civil service reform plan – real change or a tweak?

Posted on 19/06/2012 | Leave a comment

By Tony Collins

The civil service reform plan is to be published this afternoon, at 3.30pm.  The Cabinet Office minister  Francis Maude and Sir Bob Kerslake, the head of the civil service, write about it in today’s Daily Telegraph.

They say that the plan will help deliver a civil service culture that is “pacier, more innovative, less hierarchical and focused on outcomes not process”. They write:

“We also need sharper accountability, in particular from permanent secretaries and those leading major projects, and we need more digital services, better data and management information and for policy and implementation to be linked seamlessly together…”

In the same edition of the Telegraph Andrew Haldenby,  director of the independent think tank Reform, criticises the reform plan which, although not yet published, has been foretold in newspapers including the Financial Times yesterday.

He said the reform plan will “leave the flawed structures of Whitehall in place and do no more than propose some minor variations on a theme”.

We await publication of the paper before we judge it. We hope it will, at least, require the publication of “Gateway” review reports on the progress or otherwise of major IT-enabled projects.

Without timely publication of the Major Projects Authority’s Gateway reports, MPs and the public will continue to learn of failed schemes such as the NPfIT and Firecontrol when it is too late to do much about any rescue; and without contemporaneous publication there will continue to be no accountability for the rigour or otherwise of the reviews, or their outcome.

Civil service reform – meltdown or business as usual? – Institute for Government

Cabinet Office promises unprecedented openness on big, risky projects.

Civil service shake-up – Guardian

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Posted in Campaign4Change, change, change management, Cloud Computing, cost avoidance, cost reduction, culture, Government IT, IT projects, IT-related failures, Major Projects Authority, managing change, openness and transparency, public sector, public services

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Cabinet Office promises unprecedented openness on risky projects

Posted on 13/06/2012 | 2 comments

By Tony Collins

The Cabinet Office has defended its decision not to publish “Gateway” review reports on the progress or otherwise of large and risky IT and construction projects.

Gateway reviews are regular, short and independent audits on the state of medium and high-risk projects. Their publication would allow  MPs and the public to have an early warning of a major project in trouble – rather than know of a project failure only after it has happened.

Campaigners have sought for a decade to have the review reports published; and the  Information Commissioner, in requiring the publishing of ID Card gateway reviews under FOI,  dismissed the generalised arguments put forward by officials for Gateway reviews to remain confidential.

The Conservatives, when in opposition, promised to publish Gateway review reports if they came to power. But departmental heads and senior officials have stopped this happening.

Now the Cabinet Office, in a statement to The Guardian, has suggested that the first annual report of the Major Projects Authority will more than compensate for the non-publication of Gateway review reports.

The statement says that the Authority’s ( delayed)  first annual report will “bring unprecedented scrutiny and transparency to our most expensive and highest risk programmes, changing forever the culture of secrecy that has allowed failure to be swept under the carpet”.

The statement continues:

“Historically, fewer than a third of government major projects have delivered to original estimates of time, cost and quality. Since April 2011 the Major Projects Authority has enforced a tough new assurance regime and begun raising leadership standards within the Civil Service.”

The Guardian asked the Cabinet Office whether the traffic light red/amber/green status of Gateway reviews will be published.  The spokesman replied:

“The annual report will contain details of the status of major projects.“

Comment:

We applaud the Major Projects Authority in scrutinising, and in rare cases helping to stop,  departmental projects that don’t have adequate business cases. The Authority’s work is vital in pre-empting ridiculous schemes such as the NPfIT.

But project  disasters that rely on  IT continue, at the Ministry of Justice for example.  Like the National Audit Office, the  Major Projects Authority has limited resources and cannot scrutinise everything. Even if it could, the system of government is not set up in such a way as to allow the Authority to have final say over whether a project is stopped, curbed or re-negotiated.

Preventing failure

Gateway review reports are a critical component in preventing IT-related project failures. If officials know the whistle is going to be authoritatively blown on their failing schemes they are likely to do all they can to avoid failure in the first place. If they know that nobody will be aware of doomed schemes until those involved have left or moved, they will have less incentive to make projects a success.

An annual report is no substitute for the contemporaneous publishing of Gateway review reports. Each Gateway review is several pages and puts into context the traffic light red/amber/green status of the project. An annual report will not contain every Gateway review report. If just the traffic light status is published that will be a start, but without the context of the report what will it mean?

[And it’s worth bearing in mind that the first annual report of the Major Projects Authority is already six months late.]

The non-publication of Gateway review reports is  a victory by senior officials over ministerial promises.  How can we believe that the coalition is committed to unprecedented openness when the final say remains with Sir Humphrey?

Cabinet Office promises to challenge culture of secrecy on IT projects.

Whitehall to relent on secrecy over mega projects?

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Posted in change, change management, cost avoidance, cost reduction, excessive secrecy, Freedom of Information, Gateway reviews, government, Government IT, IT projects, IT-related failures, openness and transparency, operational issues, Politics, reducing cost strategically

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Francis Maude talks open govt – and Whitehall does the opposite

Posted on 12/06/2012 | Leave a comment

By Tony Collins

“If people do not know what you’re doing, they don’t know what you’re doing wrong.” – Sir Arnold Robinson, Cabinet Secretary in a discussion on open government in Yes Minister.

Francis Maude, the Cabinet Office minister, said all the right things at the Intellect World Class Public Services conference 2012.

He said that:

– smaller, innovative and efficient suppliers were finding themselves locked out of the supply of services to Government because of what was described by Parliament as a powerful “oligopoly” of large suppliers

– for the first time in Government “we are using agile, iterative processes, open source technology platforms and world-class in-house development teams alongside the best digital innovation the market can offer”

– “We must eliminate failure waste. At the moment, a large proportion of our service delivery costs are incurred through incomplete or failed digital transactions. And these transactions create cross-channel duplication, which burdens the user and costs Government a huge amount in repeated costs. For HMRC alone, they estimate that 35% of calls to its contact centres are avoidable, which would save £75m.”

– “Transparency is a defining passion for this Government …”

Comment:

How much influence does Maude really have? Can he persuade permanent secretaries to effect major change? The evidence so far is that departmental officials and Maude have different ideas on what reform means.

In “Yes Minister” civil servants were proud of a new hospital that was the best run and most hygienic in the country, with no medical staff, 500 administrators and no patients.

Maude may also recall that Antony Jay and Jonathan Lynn, the acclaimed writers of Yes Minister, spoke of the Whitehall law of inverse relevance – “the less you intend to do about something, the more you have to keep talking about it”.

Open government? 

Perhaps civil servants are letting Maude get on with talking the talk while they find every way to keep things much as they are. A good example: The Guardian reported yesterday that a key part of the Government’s transparency drive has stalled amid reports of ministry opposition.

The paper’s political editor Patrick Wintour reported that plans to publish regular ‘traffic-light’ progress reports on large, costly and risky IT projects “appear to have been shelved”.

When it comes to IT this could have been the coalition’s most important single reform. It would have given MPs and the public a way of knowing when mega projects such as Universal Credit are failing. Usually we don’t know about a failed IT-related project unless there is a leak to the media, or the National Audit Office finds out and decides, with its limited budget, to do a study.

Sir Bob Kerslake, who is head of the civil service,  had indicated to MP Richard Bacon that “Gateway” review reports on large and risky IT and construction projects may be published in the civil service reform plan which is expected to be released this month.

Gateway reports to go unpublished?

Now it seems that departmental civil servants  have persuaded the Sir Bob not to publish “Gateway” reports. So the secrecy over the progress or otherwise of government mega projects is set to continue.

Yes, civil servants will allow the Cabinet Office to have its way on the publication of data about, say, some government spending. But it’s becoming clear that the civil service will not allow any publication of its reports on the progress or otherwise of major projects. It has been that way since Gateway reviews were introduced in 2001.

Some senior officials – by no means all – say they want a confidential “safe space” to discuss the progress of projects. The reality is that they do not want outsiders – MPs, the media and NAO auditors – meddling in their failing schemes – schemes such as Firecontrol and e-filing at the Ministry of Justice.

Unlike Maude, senior civil servants have what Jay and Lynn call a “flexible approach to open government”. This means in practice that Whitehall will happily release data – but not project reports on which the civil servants themselves can be judged.

Activity is not achievement

Maude’s speeches will give the impression of activity. But activity is the civil service’s substitute for achievement. I quote Jay and Lynn again, in part because their depiction of Whitehall seems to have been taken as serious wisdom by those officials who think Sir Humphrey a character worth living up to.

It’s time Maude and his team got a grip on departments. Until they do, permanent secretaries and their senior officials will regard Maude as trying to get out of situations that don’t need getting out of.

Whitehall to relent on secrecy over mega projects?

The empty hospital – Yes Minister

Government’s transparency drive stalls.

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Posted in Campaign4Change, change management, cost avoidance, cost reduction, culture, excessive secrecy, Gateway reviews, Government IT, IT-related failures, Major Projects Authority, openness and transparency, oversight, Politics, SME

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How London IT director saves millions by buying patient record system.

Posted on 07/06/2012 | 4 comments

By Tony Collins

An NHS organisation in London has bought an electronic patient record system for less than a third of the cost of similar technology that is being supplied by BT to other trusts in the capital and the south of England.

The £7.1m purchase by Whittington Health – a trust that incorporates Whittington Hospital near Archway tube station – raises further questions about why the Department of Health is paying BT between £31m and £36m for each installation of the Cerner Millennium electronic patient record [EPR] system under the NPfIT.

Whittington Health is buying the Medway EPR system from System C which is owned by McKesson. The plan is for the EPR to operate across GP, hospital and social care boundaries.

It will include a patient portal. The idea is that patients will use the portal to log on to their Whittington Health accounts, see and save test results and letters, and manage outpatient appointments on-line.

In a board paper, Whittington Health’s IT Director Glenn Winteringham puts the case for spending £7.1m on a single integrated EPR.  Winteringham puts the average cost of  System C’s Medway at £8m. This cost, he says, represents “significant value for money” against the average deployment costs for the NHS Connecting for Health solution (Cerner Millennium) for London of £31m. In the south of England the average cost of Cerner Millennium is £36m, says Winteringham in his paper.

He also points out that the new EPR will avoid costs for using “Rio” community systems. The NPfIT contract with BT for Rio runs out mid 2015. “From this date onwards the Trust will incur an annual maintenance and support cost. Implementing the EPR will enable cost avoidance to the [organisation] of £4m per year to use RIO (indicative quotes from BT are £2m instance of RIO and the [organisation] has 2 – Islington and Haringey).

BT’s quote to Whittington for Rio is several times higher than the cost of Rio when supplied directly by its supplier CSE Healthcare Systems. A CSE competitor Maracis has said that, during a debrief, it was told that its prices were similar to those offered by CSE Healthcare for a Rio deployment – then less than £600,000 for installation and five years of support.

In comparison BT’s quote to Whittington for Rio, as supplied under the NPfIT, puts the cost of the system at more than fifteen times the cost of buying Rio directly.

In short Whittington and Winteringham will save taxpayers many millions by buying Medway rather than acquiring Cerner and Rio from BT.

Why such a price difference?

The difference between the £31m and £36m paid to BT for Cerner Millennium and the £8m on average paid to System C could be partly explained by the fact that Whittington (and University Hospitals Bristol) bought directly from the supplier, not through an NPfIT local service provider contract between the Department of Health and BT. Under the NPfIT contract BT is, in essence, an intermediary.

But why should an EPR system cost several times more under the NHS IT scheme than bought outside it?

Comment:

Did officials who agreed to payments to BT for Cerner and Rio mistakenly add some digits?

Whittington’s purchase of System C’s Medway again raises the question – which has gone unanswered despite the best efforts of dogged MP Richard Bacon – of why the Department of Health has intervened in the NHS to pay prices for Rio and Cerner that caricature profligacy.

Perhaps the DH should give BT £8m for each installation of Cerner Millennium and donate the remaining £21m to a charity of BT’s choice. The voluntary sector would gain hundreds of millions of pounds and the DH could at last be praised for spending its IT money wisely.

Whittington buys Medway and scraps Rio – E-Health Insider

NHS IT supplier “corrects” Health CIO’s statements

MP seeks inquiry into BT’s £546m NHS deal

NPfIT go-live at Bristol – trust issues apology

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Posted in Campaign4Change, cost avoidance, Government IT, health, health records, IT and the Business, IT projects, managing outsourced services, NHS, npfit, reducing cost strategically, supplier relationships

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Should Francis Maude say “no” to so many projects?

Posted on 23/03/2012 | Leave a comment

By Tony Collins

When Jack Straw was Secretary of State for Justice and Lord Chancellor, he told MPs on the Constitutional Affairs Committee in 2007 that when he abandoned projects there was a fuss at first and soon nobody noticed the project did not exist.

“There is always the option to abandon things. I did that in the Foreign Office with much complaint that the world might end.

“What happened was that we saved a lot of money and no one ever noticed the fact that that scheme did not exist…it is very frustrating that so many people, including the private sector, are taken in by snake oil salesmen from IT contractor who are not necessarily very competent and make a lot of money out of these things. I am pretty intolerant of this.”

Andrew Tyrie (Conservative): Do you suggest that the public sector has been taken in by snake oil salesmen?

Straw: I am saying that we are all taken in. There are plenty of disastrous IT examples in the private sector, BP and Sainsbury being two of them.

Tyrie: I was looking at the public sector.

Straw:

“I was looking at both. I think we all face problems whereby unless we are total IT experts there is a danger of being taken in by snake oil salesmen… It is a real problem and it is one that is inherent in IT; it is not just a problem for the public sector.

“The difficulty is that in the case of the public sector it is taxpayers’ money, not shareholders’ or customers’ money, and the mistakes are much more visible, but plenty of companies in the private sector have similar problems.”

Comment:

Should the Cabinet Office Francis Maude say “no” to so many projects? Clearly he’s doing the right thing if Straw’s remarks are anything go by. Would a  private sector board that has to watch every penny launch costly IT-related projects that weren’t really needed?

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Posted in Campaign4Change, cost avoidance, efficiency savings, Government IT, IT projects, IT-related failures, private sector lessons for the public sector, project management, public sector, reducing cost strategically, supplier relationships

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Is Francis Maude starting to spin – without realising it?

Posted on 16/03/2012 | 6 comments

By Tony Collins

Francis Maude is, perhaps, the most effective Cabinet Office minister in decades.

If the business world divides into two main types of character, black and white, and grey – neither being better or worse than the other –  Maude is black and white.

He wants clarity. He shuns subtlety and complexity. He has no time for civil service sophistry and equivocation, or the coded language of some supplier representatives. He wants cuts in the cost of contracts and doesn’t want to hear long arguments on why things are not that simple. He had deep reservations over doing a new deal with CSC over the NPfIT.

A strength of Maude and his colleagues at the Cabinet Office has been the absence, or at least scarcity, of exaggerated and unsubstantiated statements of efficiency savings, of the sort made repeatedly during Labour’s tenure.

Is that beginning to change?

In the past fortnight Maude has made two major claims that are not based on published evidence.

• Maude said spending on SMEs has risen from 6.5% to 13.7%.  It’s not clear how that figure is calculated. There’s a good analysis of the tenuousness of the claim by Peter Smith of Spend Matters. How much of the increase in SME work is down to unaudited claims by large companies that they are giving their SMEs more work?

• He said that £200m has been cut from Capgemini’s Aspire contract with HMRC. [Aspire also involves Fujitsu and Accenture.] He has received much good publicity for the claim. Said the Telegraph yesterday:

“He [Maude]  announced that ministers had successfully renegotiated one deal on computers and tax systems for HM Revenue and Customs.

He said the new contract, with Capgemini, would save £200 million on the deal previously agreed.”

Last year Mark Hall, deputy CIO at HMRC was reported as saying that the Aspire contract was on course to save more than £1bn. Is the £200m quoted by Maude in many news articles this week new?

And none of the articles mention the total cost of the Aspire contract – so from what is £200m being cut?

At one point, according to Mark Hall, the estimated cost of Aspire rose to £10bn from its original estimate of £2.83bn over 10 years. This means that cost increases on the Aspire contract are measured in billions – which puts the £200m savings figure mentioned by Maude into context.

And have Maude and his team offered Capgemini anything in return for a price cut, such as an improved profit margin? [The contract is on an open-book accounting basis]. This week’s Cabinet Office statement on the £200m cut gives no help here. An HMRC FOI response in 2010 and an NAO report in 2006 show that costs of Aspire are fluid. They change according to internal demand; and pricing arrangements are complex. HMRC has refused FOI requests to publish the contract so how can anyone put the claimed £200m savings into a contractual content?

In 2007 negotiations between HMRC and Capgemini extended the 10-year contract by three years, to June 2017; and there’s an option to extend Aspire  for a further five years to 2022. In return for the contract extension Capgemini has already guaranteed savings of £70m a year and a further £110m a year from 2012. Are these savings in addition to the £200m a year Maude has announced? Or the £1bn savings mentioned by Mark Hall?

The good news is that HMRC’s CIO is Phil Pavitt who is a natural sceptic of big outsourcing deals. If anyone is going to achieve genuine savings on Aspire it is Pavitt. Indeed he has given some details of his negotiations. But the contractual context remains abstruse.

Comment

Doubtless Maude believes the figures he has announced on SMEs and Aspire are correct but without substantiation they will mean little to anyone except the media. Maude, perhaps, needs to trust his own cautious instincts than listen too much to his advisers. Otherwise he’ll begin to sound more like Labour ministers who repeatedly made claims the NAO found difficult to substantiate.

The important and impressive work Maude is doing to cut the costs of running government should not be trivialised and debased by spin. Announcements on what he is doing to cut costs and make government more open are usually helpful. But Maude should the first to differentiate the real – in other words the factually corroborated – from aggrandising and flimsy political claims.

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Posted in Campaign4Change, compliance with spending review, cost avoidance, efficiency savings, Freedom of Information, Government IT, managing change, managing outsourced services, outsourcing, Politics, procurement, public sector, public services, reducing cost strategically, supplier relationships

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Why thinking beyond ‘If it ain’t broke, don’t fix it’ might pay business dividends

Posted on 30/01/2012 | 1 comment

By David Bicknell

Most organisations in the public sector are continuing to reduce their costs. 2012 brings a continued diet of re-asserting control of costs and delivering operational savings to cope with a challenging economic landscape.

But a conversation with York-based services and solutions company Trustmarque recently raised a new phrase, and one that is perhaps blindingly obvious, and which applies to both public and private sectors: cost avoidance.

As an IT organisation it is worth asking yourself whether you really need to purchase a product or service. Can you find an alternative strategy? If you don’t have to buy something, then don’t buy it. Or find a better way of spending the money to deliver structural change that benefits the business. 

Sometimes organisations miss an opportunity to bring their technology up to date and change the way they work. Their conservative approach never drives real change.

It is vendors like Trustmarque’s role to help such organisations plan, source, deploy and manage their IT infrastructure with an end goal of reducing their costs and delivering operational savings. In Trustmarque’s case, it is a highly successful approach which just led to the company’s best-ever year and won it the Services Provider of the Year title for 2011 in the CRN Channel Awards.

It is an approach that has also worked for its customers: Plymouth City Council, by upgrading to Windows 7, tackled change by creating a more flexible, mobile way of working – and saved itself £494,000 in licensing fees.

Sometimes you have to think big to win big. And thinking in terms of ‘cost avoidance’ rather than the cliche ‘reducing costs’  – though that doesn’t necessarily mean not spending at all – and going beyond an, ‘If it ain’t broke, don’t fix it,’ approach just might help some realise their cost goals, and at the same time, change their organisations for the better.

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Posted in Campaign4Change, change, change management, cost avoidance, Government IT, IT projects, project management, public sector, public services

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