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Strategic sourcing: beyond the either/or impasse

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In July 2011 a public administration select committee investigation reported that Whitehall’s overreliance on large contractors for its IT needs combined with a lack of in-house skills to create a “recipe for rip-offs”.

The report said central government organisations were paying between seven and 10 times more than the standard commercial rate for IT products and services. It also warned that without the necessary depth of understanding and ownership of digital channels the civil service was unable to act as an ‘intelligent client’ to ensure efficient and effective services for users.

Local government, noted the committee, had largely avoided these pitfalls. Councils had maintained IT expertise in-house, and paid significantly less for services. Socitm was able to provide the evidence for this, based on findings from its long-running benchmarking services that track website and IT arrangements and costs.

The PASC noted that the absence of such benchmarking by Whitehall departments had contributed to their manifest overspending in this area.

Well before PASC reported, the coalition had started on the road to change. This led to the establishment of the Government Digital Service and the publication, in November 2012, of the Government Digital Strategy. The PASC described itself as “greatly encouraged” by the plans.

Digital services are a key area where councils need in-house capability. Improving customer experience requires an in-depth understanding of customer requirements, careful design of customer journeys and measurement of success. GDS has recognised and is delivering on these requirements. All local public services should too.

However, this does not translate as ‘all in-sourcing good, all outsourcing bad’.

Outsourcing has a place in the delivery of local government IT and digital services, particularly when it comes to commodity products, but what is needed is a mixed economy, or ‘strategic sourcing’ of IT. This involves acquiring the most appropriate mix of resources to provide services, whether in-house or from the marketplace, using partnerships, or services from other public, voluntary or third sector organisations, or commercial suppliers, including small and medium enterprises.

What is ‘strategic’ about this approach is not just far-sightedness in the overall choice of supplier or delivery channel, but also retention of flexibility in a field of activity where circumstances change faster and less predictably than any other.

Long-term IT outsourcing contracts are inappropriate against a backdrop of a turbulent service environment and rapid advances in technology, quite apart from the fact that the public sector has a poor track record in procuring and managing wholesale outsourcing. Traditional contracts also freeze the current model of service delivery, when flexibility is key.

The failure of Somerset CC’s Southwest One venture with IBM, set up in 2007 as a joint venture with Taunton Deane BC and Avon & Somerset Police to modernise business processes, is a case in point.

The deal was intended to save money, but in February 2012 it became clear that it was failing to deliver value, cope with a changing financial landscape, and be flexible enough to adapt in challenging times. The causes lay in the contract, failed technology and missed opportunities.

It would be a tragedy if local government were to abandon its largely successful approach to sourcing IT and digital services and marched off in the opposite direction.

Martin Greenwood, programme manager, Socitm Insight

Planting the Flag: pocket guide 4 - strategic sourcing is downloadable from the Socitm website (free for Socitm members and £65 each for non-members)

In April Socitm will publish its report Improving the Citizen Experience: a practical framework for local digital services

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