This post originally appeared on Public Spend Forum.
The Office of Fair Trading (OFT) and Competition Commission are clearly Good Things. Who could fail to think well of organizations that exist to promote fair business practices and competition, both part of the beating heart of every procurement professional’s belief system?
But sometimes, even the best make bad decisions. And the OFT decision to investigate the market for major IT suppliers to the UK government is, quite simply, a waste of their time and therefore our taxpayers’ money. Here is Reuter's report:
“The study of the market will focus on commercial off-the-shelf software, such as that used for administering benefits, and outsourced IT, which between them accounted for around half of the 13.8 billion pound public sector IT spend in Britain in 2011/12.”
I don’t criticize the review because there aren’t issues in this market. A small number of large companies dominate it, and there is certainly evidence that the UK government, citizens and taxpayers have not always been well served by HP (EDS), Accenture, IBM, Fujitsu, Capita, Cap Gemini, and the like—the top ten suppliers between them hold a 70% market share, according to a 2011 study by analysts at Kable.
Whilst there have been successes—getting your driving license renewed on line is a veritable pleasure, so high-fives to IBM for that—they have been balanced by some high profile fiascos and failures. The Rural Payments system that literally drove some small farmers to suicide; the Child Support System that didn’t support anyone other than the shareholders of the IT firms involved; the recent trials and tribulations of the new government Universal Credit system; they all show less than impressive work by at least some of the big boys of IT.
My issues with the OFT study is that we know why these firms have a dominant market share. I can tell them, here and now, without the cost and effort of a major investigation. And the point is that this isn’t a supplier-created oligopoly—it is a buyer-created issue. Over the years, government has driven business to the largest suppliers through its own actions. Here are some of the issues that I guarantee the OFT will report in several months time (as if they’ve just thought of them)!
- Government aggregates requirements to a point where only the largest firms can take on the work, for operational, financial or risk reasons. This can be an issue of sheer size, or it can be requiring a supplier to have a wide range of different capabilities. Now sometimes this is hard to avoid—if you want a national system then the temptation is to appoint a single national supplier. But chances to disaggregate and break work up vertically (different elements of a program perhaps ) or horizontally (by region or user)have been missed.
To read the other problems Peter foresees, click here.