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By | Kat Hall 20th August 2015 10:30

Whitehall IT running costs creep up again to £4.6bn

So much for Moore's Law: Costs of keeping lights on go up in Whitehall

Despite government plans to cut expensive contracts, IT running costs across Whitehall crept up by 7 per cent year-on-year to £4.6bn in 2014/15, according to a spend analysis by The Register.

The findings are based on official government figures from eight of the largest Whitehall departments.

The Ministry of Defence – which spends the largest amount on IT – was the only department to cut costs significantly, down by 4 per cent to £1.7bn in 2014/15.

Most of the IT savings the government has made to date have been due to the Cabinet Office's spend control process, applied to new IT spend rather than ongoing costs from existing contracts.

Last week the Cabinet Office claimed the Government Digital Service saved £390m in 2014/15 through controls, cancelled projects and "ICT Strategy savings".

Meanwhile, £7m had been saved by the GDS working with departments, as part of their "digital transformation" programme.

The increase in costs demonstrated the scale of the task the government faces in trying to reduce IT spend.

The government had expected digital services to reduce staff costs by processing transactions efficiently and introducing more customer self-service, said the The National Audit Office in its June report. However, the body said there is "little evidence" that departments are making the expected savings from digital services.

Alan Mather, former government IT chief, has previously written that many billions of pounds remain locked in transaction contracts, where most legacy applications remain. In a comprehensive analysis addressing the difficulty in transforming government IT, he notes the challenge of connecting back-end systems with the more "agile" front end created by the GDS.

He said: "Tackling transaction is both fundamentally necessary and incredibly hard, though most of that isn’t about the shiny front end – it’s about the policy, the process and the integration with existing back-end systems (which absorb some 65 per cent of the £12-16bn spent per year on [cross public sector] IT in government). There is a sense of 'Abandon Hope All Ye Who Enter Here'.”

Same as the old boss

Many of those transactional contracts are now coming to an end, such as HMRC's £10.4bn Aspire contract, which the National Audit Office has warned could be too risky to change by 2017.

Some departments, such as the Department for Work and Pensions, have already opted to extend deals with the likes of HP.

One insider commented that the government does not currently have a model that could work at scale to replace the system integrator or "oligopoly" of suppliers.

For example, the possible success of the Service Integration and Management (SIAM) "tower model" in saving cash by splitting up contracts has yet to be proved.

The Ministry of Justice was one of the first departments to move to the model and is now in the process of integrating the components under its "Future IT Sourcing tower model", but insiders have described its progress as disastrous.

"The SIAM model should be recognised as chaotic. We have gone from one-two vendors to 10-20 and no one has made the interim steps work," said one source.

An attempt to showcase a more "agile" approach toward big transactional contracts via the Rural Payments Agency's digital-by-default Common Agricultural Payments system also ended in disaster when the online interface had to be scrapped earlier this year.

The system itself has had a history of IT disasters, but the failure to apply agile principles and introduce a 40-plus suppliers approach means there is no demonstrable working model for this approach, either.

Another government insider predicted that many departments will opt for a big invitation to tender to replace their contracts, rather than take the more difficult disaggregation route.

"That will go out and all the usual suspects will bid, the incumbent will win because they magically know all about the requirements and the contract will be renewed, perhaps a few tweaks here and there and perhaps a little cheaper to keep the Cabinet Office happy," the source suggested.

"Meanwhile, the taxpayer has shelled out millions on [consultants] to run the tender process, which was actually a completely pointless exercise. Unless it's a website, in which case some tiny 'agile' company will win it."

In other words, the government's multi-billion IT running spend isn't likely to go down by much anytime soon. ®

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