Tough times ahead for Whitehall's ICT ambitions

Whitehall is struggling to make good on all its brave talk of change and reform, according to new research from analysts TechMarketView that says moving forward's going to start getting a lot tougher.

While progress so far has been 'slow and steady,' central government is really struggling to accelerate the programme now that it really needs to.

Meanwhile, it adds, the public sector software and IT services market cannot be expected to return to growth any time before 2014.

In terms of the government's progress so far towards achieving the objectives of its ICT strategy, the team says the Cabinet Office's Efficiency & Reform Group (as well as the Government Procurement Service) has been busy "putting the building blocks in place to move on from the 'Quick Wins' phase of the past year - cutting money out of Government ICT to meet budget cuts - and preparing for the 'transformational' phase, aimed at improving the efficiency and effectiveness of Government ICT for the long-term".

These early milestones, it contends, include increased centralised control, simplification of the ICT procurement process and a seemingly successfully embedded "presumption" against "large, unwieldy projects".

But, claims the firm, "the government is struggling to move onto the next phase," which in its view would mean harder objectives being met like agreement on technology and data standards, "disintermediation of current large IT deals" and rationalisation of existing datacenters (one of the original but still unmet aims of the whole G-Cloud idea, of course).

"Good progress has been made in the initial cost cutting phase," says Georgina O'Toole, who specialises in public sector at the analyst group.

"Talk within the Cabinet Office is now of 'acceleration'... whether that be in the speed that data centres are consolidated, in the speed with which government ICT moves to the 'cloud', or in the speed with which Public Services Network connectivity is achieved.

"We agree that the pace set by the Efficiency & Reform Group needs to pick up; not least because otherwise ICT market changes will outpace its progress (technology standards will evolve, cloud commercial models will move on etc). And UK government will only benefit from advances in technology if it can adapt its systems, processes and procedures quickly enough to cope with a new way of working.

But she questions whether central government ICT leadership has the capacity to accelerate the implementation of the ICT strategy into the all-important transformational phase.

She argues, "[Government] CIOs continue to work against the backdrop of a relatively unchanging political landscape where political, cultural, legal and economic barriers to change remain. Bureaucracy remains a feature, the nature of politics means that short-termism often dictates (but that means projects with longer timescales are left on the back-burner), and 'horizontal government' (as opposed to the existing vertical silos) requires a significant step-change in culture."

G for 'grafted-together' Cloud? 

The group also says we should start getting used to shifting priorities for the entire G-Cloud concept. Bottom line: think legacy renewal, not so much new stuff, basically.

"A sense of pragmatism seems to be finally entering the Cabinet Office Team's thinking," she alleges, where ERG "has taken time to reflect on the 'end game' and is now focusing on changes to commercials and methods of procurement rather than on the next 'sassy' technology".

"This realisation takes some of the emphasis away from moving UK government ICT onto the latest technology platforms. Instead, the emphasis is being placed far more on methods of procurement and the legalities involved. The Cabinet Office Procurement teams are now very much at the fore."

In parallel, the firm has also got out its crystal ball re the market for public sector ICT goods and services - and suppliers may not like what it's seen.

Definitely a bear market

The market declined by an unprecedented 5.5% in 2010, resulting in a market down to £11.5 billion. And in that year, it was the UK central government market was the worst hit by far - due to Cabinet Office project reviews and contract renegotiations - suffering a decline of 11.2%.

It's overwhelmingly likely the same factors will impact 2011, resulting in a similarly steep decline in the market of 9.0%. Worse: over the next four years, the market will grow by a CAGR of just 0.6%. On that basis, it argues, will take until 2014 for the market to reach positive growth territory in 'real' terms'.

Any growth that can occur may only be possible due to more outsourcing, or as it says, an increased uptake of business process services (BPS). The BPS market will grow by a CAGR of 6.4% over our forecast period, as most areas of the UK public sector look to outsource non-core back office services to the private sector.

Absent outsourcing and the rest of the IT services market - infrastructure services and application services - will decline by a CAGR of 2.2% over the same period, with a peak of just 0.9% growth in actual terms in 2014.

Factors to look for include a move to 'Cloud-type' commercial models, application and infrastructure rationalisation, the increasing use of offshore services, the trend towards smaller 'agile' development projects and the reuse of existing assets.

"Within the UK public sector, most growth in the SITS market over our forecast period will be thanks to business process services activity (though there will be strong niches in other areas e.g. business analytics). Our view is that activity in business process services - in terms of consultancy and advice, implementation and management - is picking up far more quickly than we had previous expected in nearly all subsectors.

"UK government remains a tough market for SITS suppliers. To grow business in this market will require careful identification of the subsectors holding the most potential. Suppliers will also need to maintain a good understanding of the progress made in implementing the ICT strategy.

"The most successful suppliers will be those that can support UK Government in achieving its priority objectives," warns the research.

Reactions to this analysis needs to qualified, cautions Katy Ring, Director of analyst group K2 Advisory.

"Our buyer [instead of supplier] focused research has already determined that the public sector is taking a DIY approach to setting up and running shared services centres in the UK. And we strongly believe there are enough strategically-focused public sector CIOs for this approach to work.

"Regarding growth and business process service activity, this is something we're seeing significant CIO interest in - particularly regarding Cloud-delivered business services. 

"Furthermore, our evidence for this is clearly demonstrated in the current research study we are running with a large number of UK CIOs."

The data is contained in two reports, UK Government ICT strategy: progress and direction and UK Public Sector Market Trends & Forecasts, available from the body's website (commercial terms apply).