Public Sector Tech: Game Over or New Opportunity?

In 2010 the new coalition government announced its plans for £6.2bn spending cuts in the current financial year. George Osborne anticipated that approximately £95m of those cuts could be achieved through reductions in IT spending. A further £1.7bn savings were to be made by delaying or culling existing government contracts and projects.

We've seen some of Labour's key tech projects – including the controversial ID cards scheme and associated National Identity Register – face the axe, while others, such as the NHS National Programme for IT, have been drastically scaled back. New IT contracts are being capped at £100k and the government is looking to renegotiate existing contracts where possible.

Given that the software and IT industry relies on the public sector for almost a third of its revenue, what do the cuts mean for IT service providers? Does this mean massive redundancies or great opportunities to update IT systems?

In the long term, the £100k cap on projects might mean an end to the dominance of the larger IT providers and create opportunities for small and medium sized providers. In fact, the government has said as much. But is this realistic? How can the public sector join together, share resources and IT budgets and still implement a project for £100k?

The cuts are forcing public sector bodies to look to more collaborative ways of procuring IT services to achieve cost savings. This is a great opportunity for cloud providers to sell solutions to the public sector. Westminster City Council, for example, has already made a decisive move towards shared services and the cloud – having recently entered into the shared services arena with Hammersmith & Fulham and Kensington & Chelsea. A similar arrangement is being put in place at Newham and Havering Councils. This means these bodies are sharing their IT budgets and introducing a common platform between them. This is likely to lead to efficiencies and we anticipate that other public sector bodies will be watching this project closely. How long before others introduce this type of scheme?

The G-cloud project (a notable survivor of the cuts) for the creation of a secure government cloud computing infrastructure will, if realised, see all public sector software hosted on a cloud computing platform. Although the G-cloud has some serious hurdles to overcome – not least security and privacy concerns – the G-cloud presents a unique opportunity for both cloud and software providers, who might have previously faced difficulty accessing the public sector, to break into the public sector market by offering cloud services and using the cloud to host their products.

Have the public sector IT cuts affected your business? Have they led to you losing projects or presented you with numerous new opportunities?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.