Government Looks to Cut IT Spending by £3.2bn

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Improved benchmarking, better information management, and tackling risky IT projects key to cutting costs

The UK government is looking to save up to £3.2bn on IT spending over the next five years according to the results of a long term Treasury review of public spending.

Published today, the findings of the Operational Efficiency Programme (OEP), which has been underway for a year, claim that the UK’s public sector could trim around 20 percent of its current £16bn annual spend on IT by 2014.

The publication of the review coincides with announcement of chancellor Alastair Darling’s budget today which is expected to include cuts in public sector spending including IT.

The IT and back-office section of the OEP review, which examined public sector spending as a whole, was led by Dr Martin Read – former boss of services company Logica.

Read’s recommendations on how to cut spending in IT and back-office systems included better management of information, more benchmarking of systems and review of costs and “better governance of IT-enabled change programmes”.

One aspect of Read’s findings include the need to tackle the expense incurred from failed IT projects which have dogged the public sector for as long as it has attempted to make technology. In particular, the OEP report recommends that ministers should be fully briefed on the risks around large-scale IT projects.

“Strengthen the governance of IT-enabled change projects (including the requirement that ministers and accounting officers are regularly updated on high-risk projects and briefed on projects where the delivery confidence is not high),” the report states.

The history of government IT projects is littered with high-profile failures. One most recent example is the ongoing work to create a single UK database of prisoner record, the costs of which have spiralled to more than £500 million. The UK National Audit Office has criticised the management of the project claiming delays and bad decision-making have seen costs spiral.

The government claims that the EOP report is only the latest attempts to curb spending in the public sector. “These savings follow on from the significant overachievement of the Government’s efficiency target for the previous spending review. The Gershon efficiency programme, which considered spending between 2004-05 and 2007-08 delivered £26.5 billion of efficiencies against a target of £21.5 billion,” the report stated.

But despite the cost cutting nature of the review, no direct reference was made to open source technologies, despite claims that community developed software could help reduce IT spending by around £600m.

“Looking at cost savings that have been achieved by companies and governments all over the world, it’s estimated that the UK Government could reduce its annual IT bill by at least £600m a year if more open source software was used as part of an effective procurement strategy,” said Steve Shine, European vice president, worldwide operations, for open source database provider Ingres.

In February the government announced what it claimed was a new policy on open source that it said should “ensure maximum value for money for taxpayers”. Minister for digital engagement, Tom Watson said at the time: “The world of technology has moved on hugely since we last set out our thinking on Open Source, which is why it was so important to update our policy.”

According to a report from the National Endowment for Science, Technology and the Arts (Nesta), Attacking The Recession, the government should use the recession to reshape the economy around high growth areas such as digital media. The Nesta report stated that unless investment in areas such as green technology, digital media and healthcare are addressed in the budget, the UK could lose around £44bn in potential revenues.

The appointment of Read as a treasury adviser raised some questions when it was announced as the former Logica boss brought his retirement forward in May 2007 following a poor set of results by the IT services company.