Category Archives: managing change

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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Universal Credit – the ace up Duncan Smith’s sleeve?

Posted on 24/01/2013 | 3 comments

By Tony Collins

Some people, including those in the know, suspect  Universal Credit will be a failed IT-based project, among them Francis Maude. As Cabinet Office minister Maude is ultimately responsible for the Major Projects Authority which has the job, among other things, of averting major project failures.

But Iain Duncan Smith, the DWP secretary of state, has an ace up his sleeve: the initial go-live of Universal Credit is so limited in scope that claims could be managed by hand, at least in part.

The DWP’s FAQs suggest that Universal Credit will handle, in its first phase due to start in October 2013, only new claims  – and only those from the unemployed.  Under such a light load the system is unlikely to fail, as any particularly complicated claims could managed clerically. 

The second phase of Universal Credit, which is due to begin in April 2014, is the important one, in terms of number of claimants. But this phase may be delayed with a general election approaching, according to Government Computing, which quotes the FT.

This is from the DWP’s website:

“Universal Credit will start to take new claims from unemployed people in October 2013.”

It continues:

“For people in work this process will begin in April 2014. The remainder of current claims will be moved to Universal Credit from 2014, with the process being complete by 2017.”

Comment: 

The projected costs of real-time information, an HMRC project on which the success of Universal Credit depends, have increased by tens of millions from an initial estimate of £108m, according to Ruth Owen, Director General, Personal Tax, HMRC.  At least HMRC is being open about RTI – relative to the DWP which continues to deny FOI requests for the risk register or independent assessments of the progress or otherwise of the Universal Credit IT project.

Auditors at the National Audit Office found that the Rural Payment Agency’s Single Payment Scheme for farmers dealt with so few claims that it could have been handled manually for a fraction of the cost of an IT system that went awry. Perhaps Iain Duncan Smith has learnt from that episode.

As Universal Credit phase one will handle only new claims from the unemployed, there may be no need initially for complicated monthly interactions with HMRC’s Real-time information [PAYE] systems. 

There may be further restrictions on go-live UC candidates. The DWP may insist that unemployed new claimants are single, childless, between certain ages and not receiving certain benefits or tax credits. They may have to have a valid bank account.

So the numbers of claimants and simplified processing will maximise the chances of a go-live success.

This may explain why the Major Projects Authority has not intervened (yet) to delay the October 2013 go-live date.   

It makes sense to minimise complications when going live. But the Passport Agency found that although the go-live of new systems in 1999 went well, extra IT-related security checks slowed down the issuing of passports, such that backlogs built up, people lost their holidays and queues built up at passport offices. It was a project disaster. 

The real test of the agile-based Universal Credit project will be when existing benefit claimants move onto the new systems in large numbers. This will not happen before the next general election. The plan is for the roll-out to be completed by the end of 2017.

Meanwhile does Iain Duncan Smith plan to claim a victory for the go-live of Universal Credit when the initial transactions are so simple, and the numbers involved  so insignificant, they could be managed clerically if necessary?

 As long as Universal Credit does not reduce payments to the genuinely disabled and the most needy, it is generally regarded as a good idea. It should cut fraud and administrative costs. 

It’s a pity though that no central department can be open about the progress of its major  IT-related projects; and on forcing these progress reports out of dark departmental corners the coalition has made no difference at all.

Will GDS delay Universal Credit by a year? – David Moss’s blog

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Posted in Campaign4Change, change management, DWP, excessive secrecy, Freedom of Information, Government IT, managing change, public services, Real-Time Information, Universal Credit

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Lessons from Birmingham Council’s joint venture with Capita

Posted on 04/12/2012 | 3 comments

By Tony Collins

A report on Service Birmingham – Capita’s joint venture with Birmingham City Council – shows that the deal has been largely successful so far but that trust and relationships may be breaking down in some areas.

The “High-Level” review of Service Birmingham by the Best Practice Group could be read in two ways: as a qualified endorsement of the deal so far, or as a warning that a deteriorating relationship in some areas could end up, in years to come, as a legal dispute.

The report’s authors suggest that the council and Capita have little choice but to make improvements given that the contract lasts another nine years. They say:

“Given the fact that the commercial partnership has a further nine years to operate, there is an inherent risk that unless a core focus for both parties is re-established, the commercial trust between BCC [Birmingham City Council and SB [Service Birmingham] will continue to deteriorate.

“Neither party will benefit from the relationship if this situation is permitted to manifest itself.”

In another part of its report the Best Practice Group says:

“BCC and SB seemed to overcome early challenges in their relationship by having a ‘great common cause’. The Council entered into this relationship in 2006 because it had the foresight to realise it had to fundamentally transform how it operated in order to improve social outcomes for its population…

“Now the transformation has largely been successful and the initiatives are almost complete, the level of innovation seems to have stalled and the relationship has deteriorated. Somewhere in the fire-fighting, both BCC and SB have lost sight of the next ‘great common cause’ – the fact that the Council needs to further reduce the cost of ICT service delivery by £20m per annum. This will require some significant ‘outside the box’ thinking about how to achieve from both BCC and SB.”

Below are verbatim extracts from the Best Practice Group’s report which highlight some of the lessons arising from of the joint venture so far. The sub-headings (in italics) are mine.

Extracts from Best Practice Group’s report:

Service Birmingham charges a fee even when the council implements services outside the joint venture – poor value and reputedly poor practice?

“SB has an on-going contractual duty to ensure it provides independently benchmarked best value in the services it delivers to BCC [Birmingham City Council]. As part of these arrangements, BCC can request specific third party services (outside SB’s own delivery capability) with SB applying a fee for ‘contract management’.

“However, these situations vary considerably, raising the question of how to maximise value. The contract management fee would be considered high value when BCC gives SB a service outcome it wants to achieve, and SB researches the market, provides options and recommendations to BCC, sources the best value vendor, and ensures the solution is implemented and the business outcomes achieved.

“In other situations, BCC already knows the outcome to be achieved, how to achieve it and who the best value vendor is, and can implement the solution itself. However, the same contract management percentage still applies to these cases. This causes resentment for the service area involved because they cannot see how SB has added to the process, and in real terms, is perceived by BCC as very poor value. Although the sums involved are minimal compared with the relationship’s overall cost, it is highly visible as an area of poor value and reputedly bad practice, and needs to be realigned.”

Service Birmingham needs to make a significant return for its shareholders

“Given the relationship challenges between BCC and SB, there are a couple of fundamental points to address, namely that: (a) certain individuals within the Council need to understand that SB is not a social enterprise, a public sector mutual, or a charity, and needs to make a significant return on its capital for its shareholders, and (b) SB needs to understand that the Council is in a significantly deteriorating financial position due to Government cutbacks.”

SB drops its prices when challenged

“There have been statements made by a number of the officers in the Council that SB drops its prices when challenged, especially when the Council has investigated alternative industry offerings. SB have suggested that it is only when the challenge arises that initial data is clarified and therefore, more focused pricing can be provided.”

A hardened commercial stance in some circumstances?

“… these obvious and immediate savings are now being met with a hardened commercial stance for anything that falls outside of the core deliverables by SB.”

The cloud imposes hidden costs for SB

“Regardless of whether a scale of mark-up can be achieved, one issue that is clear from the interviews undertaken is that SB/BCC needs to educate the BCC service areas at all levels around what the contract management mark-up actually buys for the Council from SB. At present, for example, there is a lack of understanding within BCC service areas that having ‘cloud’ delivered solutions within the overall portfolio does still incur hidden costs for SB in supporting the overall infrastructure and managing the intermediate fault–reporting service.”

Staff survey on SB – mixed results

“With regards to the survey, 63% stated that they talk ‘positively’ about SB to their colleagues. Slightly less, 59%, believe SB understands the requirements and support needed to deliver the Council’s services. However, when asked if they would naturally think to contact SB for help and advice in situations where they were thinking about undertaking new ICT related work, only 33% of the Council respondents said that they would…

“When asked the direct question of how satisfied they were overall with the service delivered by SB, only 15% of the respondents felt that the service was less than satisfactory. However, only 10% believed that it was excellent with 39% rating it as satisfactory and 36% rating the service received as good.”

Project concerns

“There is a feeling which was voiced by several interviewees from the Council that project implementation often runs behind schedule and ultimately it is the ‘loudest project to shout’ which will then have the scarce resources allocated to it at the cost of other projects.”

Lack of commercial trust

“…there are elements of the KPI [key performance indicator] reporting received from SB that BCC need clarity on . This, coupled with the general lack of commercial trust between the parties and the fact that BCC have shown that SB have reported some data incorrectly (after discussion around interpretation), means that the KPIs are not fully aligned to the business outcomes BCC now needs to achieve in the current financial climate.”

Seeds of a possible legal dispute in future years between the two sides?

“One point that should be highlighted is that we believe there is a misalignment between both parties view of what partnership working actually entails. From the perspective of some service areas within BCC, they view certain individuals within SB as uncooperative. In a similar vein, there are certain individuals within SB who view specific BCC staff also as uncooperative. It should be noted that these individuals within both BCC and SB are in the minority.

“However, such un-cooperation is manifesting itself into a perception of a lack of commercial trust in both camps. Some BCC individuals are not really taking into account, or understanding, that SB is a commercial organisation that has a majority shareholding by a publically listed company. Its commercial shareholders need to see financial returns from SB that increase annually…

“In the early stages, the working relationship was put firmly on the rails by having a ‘great common cause’. The transformation requirements of BCC were so fundamental, it seems many differences of opinion were set aside and both parties worked very hard to overcome the obstacles in ensuring the transformation was successful. Largely, that was achieved. Now that the original transformation process has almost all been completed, the parties working relationship seems to have deteriorated in certain instances. This pattern of behaviour is normal in most strategic vendor relationships.”

SB more expensive than the average in certain areas?

“SB appear to be significantly more expensive than average in the areas of voice, data and converged service provision (KPI-17). The most significant of the three costs provided is the provision of Data services where SB are the worst value of all of the respondents in the SOCITM survey with a cost of £227 per data outlet (capital + support) compared to a median of £118. At the time of writing this report, no clarification had been provided as to the reasons for the significant difference between the SB provided cost and the survey median. When KPI-17 is reviewed as a cost per user, SB fairs much better across the service types. It has a cost of £321 per user compared to a median of £290 per user. However if you consider that this £31 per user per year, it actually represents over £600k per annum above average.”

Council concerns over SAP work going abroad

“Different parties within BCC perceived that in the interest of cost savings, SB was passing some work on SAP projects to an off-shore organisation, rather than using the UK workforce. It should be noted that the contract allows for the off-shoring of SAP work, but only where such work does not adversely impact jobs in the UK.

“A high level review of the SAP project work has identified that SAP work has only been off-shored when the UK workforce does not have the required expertise. In addition, we requested specific evidence from individuals to support their view that work was being off-shored that could have been undertaken by the UK workforce, but this could not be provided.”

The Council was paying for unused phone lines

“… Ultimately, the Council kept receiving invoices from the line provider for what were essentially unused telephone lines. The process ceased promptly after BCC and SB addressed the escalation of the issue.”

Stagnating innovation could widen the divide between the two sides

“It is clear that both parties will continue to feel significant frustration until they can resolve how to share the innovation process, provide resources to help the generation of sound business cases and provide formalised and comprehensive feedback to allow for the implementation of suggestions. These suggestions need to become acceptable to the Council as realistic deliverable solutions. If this does not happen, then innovation between the partners will continue to stagnate, driving a widening divide between the organisations.”

KPIs not always useful?

In the case of the BCC and SB agreement, despite an abundance of KPIs being in place, the Council perceives the contract could be better aligned in order to maximise the behaviours from SB that it needs.

Comment:

The report gives the impression that those running the joint venture must overcome the many problems because the contract still has nine years left to run. Both sides, it seems, are locked into the relationship. In some areas it works. In others it doesn’t.

Capita, clearly, has been trying hard to make the relationship work. Some within the council have too. Some are not so enthusiastic and have been “making noise” according to the report’s authors. Do those making a noise have a point, or are they simply making trouble against the joint venture? The report suggests removing those making a noise. But will that remove some of those who are providing an independent challenge?

So far the relationship has been largely successful; and the survey of staff is generally positive. But there are signs of serious trouble. Innovation is stagnating, the council’s finances are deteriorating and Capita needs to make a profit from the venture. Are these fundamental incompatibilities? Will the relationship really last another nine years, especially if there is more political change within the council?

High-Level Review of Service Birmingham

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Posted in Campaign4Change, Capita, Cloud, Cloud Computing, cost reduction, G-Cloud, innovation, IT projects, local government, managing change, managing outsourced services, operational issues, outsourcing, project management, public services, public-private partnerships, reducing cost strategically, SAP, shared services, supplier relationships

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Success in outsourcing needs political stability says councillors’ panel

Posted on 26/11/2012 | 4 comments

By Tony Collins

A group of councillors has found, after investigating several large local authority outsourcing contracts, that political stability may be a critical factor in successful deals.

Cornwall Council’s “Support Services Single Issue Panel” investigated outsourcing deals that involved Birmingham City Council (Capita), Liverpool City Council (BT),  Taunton Deane Borough Council (IBM), Suffolk County Council (BT) and South Tyneside Council (BT).

The panel is not,  in principle, against outsourcing. It found that,

“Information from other authorities has highlighted the importance of political stability for a project which will extend for many years. This has been the single most important lesson that they have learnt.”

In those councils that have an inherently stable majority of one particular
party, outsourcing has not necessarily been a problem. “Likewise it has not been an issue for those councils who have achieved a cross-party consensus, even where there has been a change of administration,” says Cornwall’s panel of councillors. But …

“For those councils who do not have a cross-party approach the process of going into a strategic partnership has caused significant problems; in some  cases a polarised membership which has also impacted on their staff…”

The finding indicates that the risks of a large-scale failure of outsourcing contracts at Cornwall and Barnet councils – where political dissent has been marked – could be greater than its officials realise.

Cornwall may outsource a range of services, including IT, to BT in a contract that is likely to be worth at least £200m, and possibly hundreds of millions of pounds more,  over 10 years.

Barnet has chosen Capita as its preferred outsourcing supplier as part of its “One Barnet” transformation programme. The plan includes outsourcing IT.

A need for cross-party support

The findings of Cornwall’s Single Issue Panel also suggest that the initial major decision to outsource may need a cross-party consensus to succeed..

“What has proved both corrosive and destructive is where a major decision has been made without the support of a substantial majority of members,” says Cornwall’s panel.

Cornwall Council is putting the major decision of its outsourcing deal with BT to the full council. A yes or no decision is expected in December.

But Barnet is going ahead with its major decision to award a large outsourcing contract to Capita without a vote of the full council, although dissent over the plans are widespread. An inner circle of councillors, the “Cabinet”, is expected to approve a deal with Capita 0n 6 December.

This is part of what Cornwall’s panel says on the importance of political stability to successful outsourcing deals:

“Throughout the investigatory work of the Panel the importance of political leadership has been consistently stressed.

“It has been regarded by most authorities as the single biggest activity to get right and failure of this function will at best lead to problems and at worst to failure of the partnership.

“The form of the leadership is in itself not important and both cross-party support and a stable base from one political party have both been effective…

Comment:

BT in Cornwall and Capita in Barnet have made promises of large savings which, understandably, makes some councillors and officers want to sign large, long-term outsourcing deals.

If suppliers provide money upfront for transformation projects this eases, or even releases, the burden on councillors and officers to make big cuts.

But how will BT at Cornwall and Capita at Barnet pay for savings, and for new investment in changes, if they fail to attract new business?

This was among the findings of Cornwall’s investigating panel of councillors:

“Members of the SIP [Single Issue Panel] have supported the investigation of ways in which jobs in Cornwall Council could be retained by trading shared services.

“All other authorities that have started with a similar ambition have failed to deliver that aspiration. In one case the business model was substantially reliant on trading and growth and has been in place since 2006.

“No significant trading has taken place and this is a similar story in all other authorities that the SIP has been in contact with.”

This finding shows how the promises of suppliers to attract new business can prove over-optimistic; but at least all of Cornwall’s councillors will have a chance to vote on a deal. Barnet is not giving its full council the same opportunity.

If Barnet’s officers and ruling members read Cornwall’s Single Issue Panel report they will be aware of evidence that it can be corrosive and destructive for a council to make a major decision without the support of a substantial majority of members.

If Barnet’s inner circle then goes ahead with making a major decision in the face of widespread and strong dissent among some staff and councillors, could its decision amount of maladministration if the subsequent deal turns sour?

One concern is that the suppliers may put up money in advance and charge for this – with interest – in the latter part of the contract, as in discredited PFI deals.

Today’s councillors and officers would have money for investment in the early stages of the contract. But they may leave future generations of councillors and officers with a legacy of large payments. The full facts should be known before any deal is signed.

Another concern is that the suppliers may rely on major legislative and organisational change – both of which are inevitable – to provide much of their profit.

If a future council does not want to pay the suppliers’ invoices for changes a dispute may arise, for which the suppliers will be much better prepared than the councils.

A further concern is that the savings promised by suppliers may be smaller than the savings the councils could make on their own,  with suppliers acting as consultants, for the costs of technology fall annually – as do some cloud services as competition increases. Again the facts should be known before any long-term deal with a single supplier signed.

It may also be important for officers at Cornwall and Barnet to be aware that Suffolk County Council has decided after its outsourcing deal with BT that it is better to outsource to multiple “expert” suppliers than a single one.

In Barnet the public needs to be able to hold those responsible for a major decision to account, if all goes wrong. The problem is that the individuals on any minority group that is responsible for a outsourcing decision today are unlikely to be in post when any dispute arises.

Links:

Councillor Andrew Wallis – The Single Issue Panel Releases its Third Report on the Support Services Proposals

Capita preferred bidder at Barnet

The Barnet Eye

Shared services disaster

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Posted in BT, Campaign4Change, Capita, change management, cost reduction, IT-related failures, local government, managing change, managing outsourced services, procurement, public sector, public services, public-private partnerships, shared services, supplier relationships

Are HMRC’s IT costs under firm control?

Posted on 20/11/2012 | 1 comment

By Tony Collins

 The costs of IT outsourcing at HMRC have soared despite a well-written contract that promised large savings. When, as Inland Revenue, the department first outsourced IT in 1994, annual IT costs were around £100m.  Now it has emerged that HMRC’s  annual IT spending was running at more than  £1bn between April 2011 and March 2012.  Only some of the 10-fold increase is explained by new work.

Are there lessons for Barnet, Cornwall and other public authorities as they ponder large-scale outsourcing, given that HMRC did almost everything right and still faces a costly contractual lock-in to major IT suppliers until 2017 – a 13-year outsourcing contract?

HMRC has made some extraordinary payments to its outsourcing suppliers since 2011  – more than mid-way through a 13-year contract.

HMRC figures collated by former Inland Revenue IT employee and now payroll specialist Matt Boyle of Research4paye show that HMRC paid its “Aspire” IT partners £964.2m in a single year, between April 2011 and March 2012.

HMRC paid a further £42.6m of invoices from Serco for one year of website development and support. These figures do not include all of HMRC’s IT costs between April 2011 and March 2012, such as invoices from Accenture for maintenance fees and for work relating to Customs.

IT costs soar

1994. £100 annual IT costs. Inland Revenue first outsources its 2,000-strong IT department to EDS. The annual cost of the 10-year contract is about £100m a year according to the National Audit Office.

2004.  £250m annual IT costs. The end of the EDS contract. HMRC’s annual IT costs have risen to about £250m a year (National Audit Office figure).

2004. £280m annual IT costs. Capgemini wins from EDS a new 10-year HMRC outsourcing deal called Aspire (Acquiring Strategic Partners for the Inland Revenue). Capgemini’s main subcontractors are Fujitsu and Accenture. Capgemini’s bid is for £2.8bn, an average of £280m a year.

2005. £539m annual IT cost.  Inland Revenue merges with Customs and Excise to form HMRC which takes on £1bn Fujitsu IT contract from Customs. The first year of the Aspire contract costs £539m, nearly double the expected amount. The NAO blames most of the increase on new work.

2007. In return for promised savings of £70m a year from 2010/11, HMRC extends Capgemini’s contract by three years to 2017. There’s an option to extend for a further five years.

2010. £700m annual IT costs. Under FOI, HMRC releases a statement saying that the Aspire annual contract costs are running at about £700m.

2011/12. £964.2m annual IT cost. HMRC’s list of invoices from its Aspire suppliers for one year between April 2011 and March 2012 add up to £964.2m. A further £42.6m is invoiced by Serco for website development and support.  This puts HMRC’s IT annual outsourcing costs at 10 times higher than they were when Inland Revenue let its first outsourcing deal in 1994. Some of today’s HMRC systems pre-date 1994 [BROCS/CODA].

Aspire – a good contract?

It appears that HMRC did everything right in its Aspire contract. Indeed the National Audit Office has found little to criticise. Aspire is committed to “open book”, so Capgemini, Fujitsu and Accenture must account for their costs and profit margins.

The contract has some innovations. The suppliers’ margin is retained by HMRC until trials are successfully passed. Even then 50% of the margin is retained until the final Post Implementation Trial about six months after implementation.

Charges under Aspire are split into two categories: “S” and “P”.  The former is mainly a commodity pricing arrangement with unit prices being charged for all service elements at a commodity level (e.g. per Workstation, volumes of printed output etc). The charge to HMRC will vary by volume of demand for each service line.

The ‘’P’’ series charge lines are charged on a man-day basis. Application development and delivery is charged mainly on what HMRC calls an “output basis utilising function points“.

Where IT spending goes

There are more than 800 invoices from Aspire covering the year from April 2011 to March 2012. Some of the invoices are, individually, for tens of millions of pounds and cover a single month’s work.

The invoices cover services such as data centre output, data centre operations, systems software maintenance, software coding changes, licences, IT hardware and data storage.

For some of the Aspire invoices HMRC gives a brief explanation such as £57.6m – “June monthly payment for development and support”. But some of the biggest invoices have little explanation:

May 2011:  invoice for £24.7m – IT Software. A further invoice of £61.7m – “data output prod”.

June 2011: invoice for £55.8m – “data output prod”. A further invoice £56.8m – “data output prod”.

On top of these payments HMRC paid about 24 invoices of management fees in the year. Typical monthly invoice amounts for Aspire management fees ranged from about £390,000 to £2.9m.

There are dozens of Aspire invoices in the year for IT software changes to support day-to-day HMRC’s business. Quite a few of those invoices for software changes are each for tens of thousands of pounds but more than 30 invoices for IT changes in the year 2011/12 each bill more than £100,000. The biggest single invoice in the same year for software changes to support day-to-day HMRC business is  £469, 964 in December 2011.

Transparency

Matt Boyle collated the figures on HMRC’s IT spending from spreadsheets published by HMRC . All credit to Francis Maude, the Cabinet Office minister, for making government departments publish details of their invoices over £25,000.

And credit is due to Matt Boyle for collating and totalling HMRC’s IT-related invoices. Boyle says he is surprised at the high costs of Aspire. He is also surprised that the contract excludes web development and support.

Comment:

HMRC appears to have done nearly everything right and still its IT outsourcing costs are soaring, apparently uncontrollably.

It is hard to avoid the conclusion that the department and taxpayers would have been much better off if Inland Revenue had not outsourced and instead spent the millions it pays annually on, say,  management fees, to building up an in-house IT force and expertise.

Central government seems now to shun big outsourcing deals but local authorities including Barnet and Cornwall are at the stage Inland Revenue was in 1994: they are considering saving money by outsourcing major IT and other services to one main supplier.

If they learn from HMRC’s experiences – and the sums it has had to pay to outsourcing partners – it may take a little of the sting out of HMRC’s enforced prodigality.

[It may also be worth mentioning that some including Boyle ask how it is possible to credibly justify a spend of £46m in one year on a website.]

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Posted in Campaign4Change, Fujitsu, governance, Government IT, HMRC, managing change, outsourcing, Real-Time Information, Universal Credit

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We spend more on IT per capita than any other government – Maude

Posted on 08/11/2012 | 3 comments

By Tony Collins

Cabinet Office minister Francis Maude, in a speech at the FT Innovate Conference on 6 November 2012, said:

“In the last decade our IT costs have gone up – while our services remained patchy. According to some estimates, we spend more on IT per capita than any other government.” Estimated annual IT spend in the public sector is between £14bn and £20bn.

And is the spend worthwhile?

“The same people who do their shopping, banking and social networking online are still interacting with Government on the phone, in person or on paper at less convenience to them and more cost to us…

“Government provides more than 650 transactional services, used about 1 billion times every year – but presently there are only a handful where a large majority of people who could use the online option do so.

“Half don’t offer a digital option at all – and apart from a handful of services, if there is a digital option few people use it because it’s not a sufficiently fast or convenient option.

Car tax online – under-used

“In some cases users try online and then have to revert back to other channels – in 2011 around 150 million calls coming into government were self-reported as avoidable.

This leaves us with a situation where, for example, three-quarters of people use the internet for car insurance, but only half buy car tax online.

“This is simply not good enough …”

GOV.UK

He praised the agile-based GOV.UK government website as easier to use and faster than Directgov and Businesslink which it replaces.

Mosquitoes

The Cabinet Office is also reducing the “incomprehensibly large number of Government websites”  – down from 424 to 350 in the last year.

“We closed a site dedicated to British mosquitoes – no doubt mosquitoes is a serious issue. We just didn’t feel it warranted a whole website.”

£15,000 to change a line of web code

“Departments can be asked to pay £15,000 to change a single word on a website because they are locked into legacy contracts negotiated at a time when the digital capacity lay almost entirely outside government.

“This is changing. We are moving away from legacy IT and our reliance on a few large System integrators. And introducing smaller contracts; shorter terms; a more diverse supplier community that is welcoming to SMEs; open standards; open source; more use of commodity. These are the new parameters.”

Francis Maude’s speech in full.

 

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Posted in change, change management, cost reduction, Government IT, managing change, private sector lessons for the public sector

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Lessons from a government agile success

Posted on 29/10/2012 | 5 comments

By Tony Collins

Some central government departments spend a great deal with large suppliers on the development and maintenance of their websites (more on this in a separate post).  They could save millions of pounds if they followed the example of the Government Digital Service (and were not locked into mega-outsourcing contracts that include website development).

Agile teams within the GDS are responsible for GOV.UK, which largely replaces Directgov and offers a one-stop site for government services and information.

Simple, clear, fast

The guiding principles for GDS’s agile teams were “simple, clear, fast”. Lessons from the open-source project are on the GDS website. These are some of them:

“When things get tough and you want to go back to old ways, go more agile, not less”.

Less is more (a rare attribute for a government IT project).

Use independently-verifiable data to track your programme

Agile can work at scale. “We’ve embraced it culturally and organisationally…”

The Cabinet Office minister Francis Maude said:

“In stark contrast to the way IT has been delivered in government in the past, GOV.UK can rapidly accommodate new standards for development and security, catering to emerging technologies and user requirements quickly and effectively. It has been built the way Amazon built Amazon, and in the way that BA transformed their online business, by being agile, iterative and focused on users.

“GOV.UK has also been built using open source technology, which means we don’t have to pay expensive software licensing costs.”

Comment:

A good result for the Government Digital Service. Will others in central government follow?

What we’ve learnt about scaling agile – Government Digital Service

Agile can fix failed GovIT says lawyer

 

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Posted in Agile, Campaign4Change, Government digital Service, Government IT, innovation, IT projects, managing change, open source, public sector, public services, reducing cost strategically, software licensing

Somerset’s dispute with IBM is “escalating”.

Posted on 22/10/2012 | 3 comments

By Tony Collins

Somerset County Council says in a paper due to be discussed next week that its dispute with the IBM-led Southwest One joint venture is “escalating” and that there is a need to “restore a deteriorating relationship with a supplier”.

The poor relationship is in contrast to the mutually content position in 2008, one year after Somerset signed its unique, ground-breaking deal with IBM. At that time Somerset refused a request by Unison for a copy of the business case for Southwest One saying, “We can record, however, that all our cost and performance criteria within the business case were met or exceeded”.

Now Southwest One and the council are in a legal dispute on several fronts. The council’s paper for its cabinet meeting next week says:

“The history of Southwest One [SWo] poor performance is continuing; during 2012 the Client Team have been holding SWo to account; resulting in the serving of 8 contractual notices to SWo.

“Over the past 3 weeks SWo have commenced disputes on several other matters, issuing further financial claims and disputing Somerset County Council’s warning notices.

“With a number of escalating disputes, we need to take action to:

• Conduct proceedings

• Respond to these disputes and restore a deteriorating relationship with a strategic supplier.

• Seek to improve value for money and service performance and ensure it is fit for purpose.

• Continue to assertively manage Southwest One to ensure it meets its contractual obligations.

• Maintain Partner relationships

Somerset’s officers recommend to the cabinet that:

“The Leader of the Council authorises the Chief Executive, Deputy County Solicitor, Director of Finance & Performance and other relevant SCC officers to serve and proceed with the defence and any counterclaim, to carry out all subsequent steps in the litigation process and any engagement in connection with the disputes.”

The paper  adds:

“It is also recommended that the Leader of the Council and the Chairman of Scrutiny Committee agree urgency in respect of the above recommendation…

“The Deputy County Solicitor is authorised to institute defend or settle any legal proceedings and to lodge an appeal. This report seeks authorisation to be given to SCC officers to serve and proceed with the Defence and any Counterclaim, to carry out all subsequent steps in the litigation process and any engagement and commit to financial considerations (such as legal costs) in connection with the disputes…

“Due to the contractually binding timetable for resolving disputes SCC officers need a mandate. Risks will be reported and managed through SCC’s governance arrangements.”

A budget exists to support the council’s approach.

The report says that the council is in disagreement with Southwest One over the quality of the procurement service and what payments it is entitled to as a result of savings made by getting better deals through the joint venture. “We had hoped we would be able to settle this through negotiations, but unfortunately that has not been the case.”

Comment:

In mid-2007, about two months before Somerset signed its deal to set up Southwest One with IBM, an external consultancy report on the proposals by consultants “Maana” praised the “immense amount of research and thinking” that went into the IBM bid.

It said that the “whole of the procurement process, from market investigation to preferred bidder selection has been well planned and executed”. Maana added:

“The evaluation process has been more extensive, well thought through and executed than any we have seen before.”

And look what happened to the best laid plans. Many saw at the time that the joint venture was too complicated and put too much responsibility IBM’s way, but the council pushed aside their concerns.

Who now is responsible for the failure of Southwest One? Nobody.

Thank you to Dave Orr whose information made this article possible.

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Posted in Campaign4Change, IBM, IT projects, IT-related failures, legal disputes, local government, managing change, outsourcing, oversight, Politics, procurement, public services, risk, shared services

GP groups want more money for IT from April 2013

Posted on 19/10/2012 | Leave a comment

By Tony Collins

Clinical Commissing Groups [CCGs] should not have to use their budgets to manage the provision of GP practice IT from April 2013, says the General Practitioners Committee of the British Medical Association, according to Pulse.

The NHS Commissioning Board said in June that expenditure on core GP IT will be included in the £12.6bn primary care commissioning budget devolved to CCGs. But the General Practitioners Committee wants the board to provide additional funding to CCGs.

Primary care trusts now provide funds for GP IT but responsibility will eventually pass to the NHS Commissioning Board.

Dr Chaand Nagpaul, GPC lead negotiator on IT, said it was vital that ‘increased resources’ were made available to ensure GPs had access to the full range of support to run their practices.

He told Pulse that as a priority his committee was seeking to ensure that the full cost of GP IT is devolved to CCGs “so that they can ensure that practices receive continued support as well as hardware and all other current provisions for GP IT”.

Dr Nagpaul said it was crucial for CCGs not to have to ‘subsidise IT from their already stretched budget’.

Clinical Commissioning Groups are groups of GPs that, from April 2013, will be responsible for planning and designing local health services in England. They will have budgets to buy health and care services such as planned and  emergency hospital care, rehabilitation, community health services and mental health services.

Pulse article.

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Posted in Campaign4Change, health, health records, managing change, NHS

DWP starts media campaign on Universal Credit IT tomorrow

Posted on 19/09/2012 | Leave a comment

By Tony Collins

The Work and Pensions Secretary Iain Duncan Smith has told MPs his department is launching a “major exercise” tomorrow to inform the media about Universal Credit, including progress with the IT project.

The public relations push will include a demonstration to journalists of the Univeral Credit front-end, and an explanation of the ability of “agile” to rectify problems as you go along. Duncan Smith said there is a lot of ignorance in the media, and suppositions, that need tackling head on.

His full statement on the PR campaign is at the foot of this article.

Comment

Iain Duncan Smith’s remarks to MPs sound remarkably like the statements that were made in the early part of the National Programme for IT in the NHS, when DH ministers and senior officials were anxious to correct ignorance and suppositions in the media – and to show journalists the front end of new electronic patient record systems.

Several times journalists were invited to Richmond house in Whitehall, the HQ of the DH, to hear how well the NPfIT was going. So anxious were the minister and leading officials to give a good impression of the programme that, on one occasion, trade journalists who had an insight into the NPfIT’s progress and could ask some awkward questions in front of the general media were barred from attending.

I would like Universal Credit to succeed. In concept it simplifies the excessively complex and costly benefit system. The worrying thing about the scheme, apart from the DWP’s overly sensitive reactions to scepticism in the media, is the way UC seems to be following the path which led to NPfIT’s downfall.

The Secretary of State attacks the media while trying to show UC in a glowing light and at the same time keeps secret all the DWP’s interview reviews and reports on actual progress. Duncan Smith says that the DWP wants to be open on UC but his department is turning down FOI requests.

There is no doubt that Duncan Smith has a conviction that the programme is on course, on budget, and will deliver successfully. But there still a morass of uncertainty for the DWP to contend with, and lessons to be learnt from pilots, some of which could be important enough to require a fundamental re-think. That’s to say nothing of HMRC’s Real-Time Information project which is part of UC.

Duncan Smith says the UC project is not due to be complete until 2017 which gives the DWP ample time to get it right. But ministers and officials in the last administration gave the NPfIT 10 years to complete; and today, nine years later, the scheme is being officially dismantled.

Did NPfIT ministers really know or understand the extent of the project’s true complexities and uncertainties?  Did they fully grasp the limited ability of suppliers to deliver, or the willingness of the NHS to change?  But they were impressed with the patient record front-end system and they organised several Parliamentary events to demonstrate it to MPs.

The NPfIT public relations exercises – which included DH-sponsored DVDs and a board game to market the NPfIT – were all in the end pointless.

Should Duncan Smith be running Universal Credit?

This is another concern. Duncan Smith is much respected and admired in Parliament but he appears too close to UC to be an objective leader. At a hearing of the Work and Pensions this week Duncan Smith took mild criticism of UC as if it were a verbal attack on his child.

It is doubtful anyone working for Duncan Smith would dare give him bad news on UC , though he attends lots of departmental meetings. Doubtless he listens to all those who agree with him, those who are walking press releases on the progress of the UC programme. He’d be a good marketing/PR man on UC. But surely not its leader. Not the one making the most important decisions. For that you would need somebody who’s free from the politics, who is independently minded, and who welcomes informed criticism.

Is there any point in a demo of front-end systems?

Seeing a front-end system means little or nothing. The question is will it work in practice when it is scaled up, when exceptions come to light, and when large numbers of people try to contact the helpdesks because they cannot get to grips with the technology and the interfaces,  or have particular difficulties with their claim.

What will a media campaign achieve?

If the NPfIT experiences are anything to go by, journalists who criticise the UC project will be made to feel stupid or uninformed.

In a totalitarian regime the media could be forced to publish what the government wants people to believe. Will the DWP’s PR campaign be designed to achieve the same end without the slightest attempt at coercion?

Duncan Smith’s comments to MPs

Below is some of what Iain Duncan Smith told Work and Pensions Committee MPs this week. He had been asked by a Committee MP to have a dialogue with the media to ensure that people believe that Universal Credit is a good thing.

Duncan Smith:

“On Thursday we are carrying out a major exercise in informing the median about what we are doing, looking at the system front-end, about budgets and all the elements the committee has been inquiring into.

“We will take them through that, show them that. We are going to open up much more. It is such an important system that I want people to learn what it is all about.  There is a lot of ignorance in the media and suppositions made; things that are important to tackle head on. Everyone says you mustn’t have a big bang; you are not going to be ready in time. The time we deliver this is 2017 when it is complete.  That is over four years…”

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Posted in Agile, Campaign4Change, change, change management, culture, DWP, e-health, excessive secrecy, FOI, Government IT, IT projects, managing change, managing outsourced services, NHS, npfit, Politics, procurement, project management, public sector, public services, Real-Time Information, Universal Credit

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