Government departments should evaluate strategic value of IT

One of the first acts of the coalition government in the Comprehensive Spending Review was to freeze forre-evaluation all IT projects costing more than £1m as part of chancellor Osborne’s call on Whitehall to cut £95m from its general IT spend. More than 300 related projects have been reviewed and work is under way with departments to stop or de-scope contracts worth £1bn.

Whitehall departments, local authorities and other public sector bodies are expected to deliver £7.2bn of annual savings in IT and back-office spending by 2013-14. In doing so, the aforementioned reviews should actually look beyond cost and take the time to evaluate the strategic value of IT. Even if the public sector saved a fraction of this amount, it would be worthwhile and would lead to improved services; for example, patients not having to give the same information over and over again to be entered into different hospital systems.

A look across the Atlantic could be helpful as new data estimates that the US government could slash an astonishing $1tn (£630bn) from its expenditure by 2020. A recent report submitted to the US National Commission on Fiscal Responsibility and Reform considers proposals to reduce the federal deficit. It argues that these eye-watering savings can be made by harnessing technology to reduce waste, decrease duplication and attack fraud.

The proposals are nothing crazy: consolidation of datacentres, eliminating redundant networks and standardising applications. The US could save an estimated $200bn by applying advanced analytics technology to reduce fraud and errors in federal benefits. By transitioning antiquated, paper-based processes to digital records management for federal forms, the report claims $50bn in cost savings could be made in the next decade.

No rocket science there, but rather lessons from real-world expertise, technology and organisational changes that are already working successfully in the private sector.

For the public sector in the UK, standardisation of systems offers a huge opportunity. Whitehall’s Operational Efficiency Programme report observes that technology is fragmented across the public sector, with very little coherent management information available on spending. Just as many private businesses have found that silos of incompatible IT systems deployed tactically at a regional or departmental level can create unnecessary complexity and cost, the government is now waking up to the fact that its IT has been spread across many organisations without strategic direction – incurring unnecessary work and cost. A programme of standardisation, rationalisation and pooling of shared back-office systems across the British public sector is hideously overdue.

Many private sector companies have already been through the pain that the government is currently experiencing, slashing non-core IT spend during the downturn. But there is now a growing recognition of the competitive business value that technology can deliver. Spending on IT globally is enjoying a recovery after the economic turbulence of recession. New research from IDC reveals that international sales of software and hardware have now bounced back from a nadir. The research predicts that software spending globally will rise by four percent, hardware spending by 11 percent and services expenditure by two percent. Overall, IDC forecasts an increase in tech expenditure of six percent.

Where and when the axe will fall on UK public sector technology remains undetermined, but remember IT is not just a cost on the ledger – a sentiment which many FDs at Financial Director’s recently launched Technology Forum share. The fact is, both the public and private sectors’ technology can save far more than the cost of its deployment and maintenance.