UK Government Puts An End To The Gravy Days of Big Budget IT Initiatives: Another Nail for Large ERP Vendors?!

Posted on December 3, 2010


Cabinet Office minister, Francis Maude, speaking at a meeting attended by 31 major government suppliers including BT, Hewlett Packard, IBM and CapGemini, claimed that large-scale bespoke IT systems – many of which have gone significantly over budget in the past – would henceforth be replaced by less expensive and “off the shelf” offerings.

from UK government aims to clamp down on IT procurement overspends, Procurement Leaders, December 3rd, 2010

After the National Health System “NHS” spent more than $4 billion US to “create ideas” on automating its health care system, of which only a paltry $224 million US actually had an impact on patient care, it is not surprising Cabinet Office minister Francis Maude told companies such as Hewlett-Packard that the UK Government “will no longer offer the easy margins of the past.”

Given that vendors like Hewlett-Packard, who ironically struggled and ultimately failed to implement SAP within their own enterprise prompting one industry analyst to openly wonder why any company would want to deal with them if they couldn’t help themselves, have been paid hundreds of millions of dollars without delivering any real value, it is no wonder that “The days of the mega IT contracts are over.”

Let’s face it, with an 85% initiative failure rate coupled with the emergence of smaller vendors offering more technologically advanced Software-as-a-Service  or “SaaS” solutions that can be up and reliably operational within months if not weeks at a fraction of the cost, one might even be excused for asking Minister Maude what took so long?!

What is worth noting is that the UK Government is one of the first to abandon the risk-averse, belt-with-suspenders mindset that inextricably locked them into dealing almost exclusively with the “no one ever got fired for buying IBM” big firms.  This unsubstantiated view that smaller providers somehow represented an increased risk meant that many capable and technologically advanced vendors were relegated to an outside looking in status.

Unlike in the past, when I was an annoying voice of dissent telling companies to seriously reconsider their present contracts with large vendors, Maude’s assurance that the UK Government “will open up the market to smaller suppliers and mutuals” and we will expect you (addressing the large vendors) to “partner with them as equals, not as sub-ordinates,” sends a clear message both domestically, as well as to the market as a whole.  What is this message you may ask . . . that the gravy days are over and that we have now seen behind the curtain and realize that size does not matter in that the big companies actually lack the experience and expertise that is indigenous to the smaller, more focused  firms.

Of course this bodes well for larger firms such as a Capgemini who announced at the IBX Capgemini Executive Summit in early October that they were moving towards the adoption of the non-consultancy model in which over-arching initiatives that used to span years will now cede to a more strategic approach in which results will materialize within months or weeks.

Despite such an enthusiastic embracement of the new order, the key to a successful transformation from the old model will be heavily dependent upon Maude’s reference to an equal, non-subordinate relationship between the elephants and the mice.  In short, and through either a strategic alliance or an outright acquisition, the larger firms will have to resist the Oracle temptation to assimilate versus integrate.

Conversely, the smaller firms will have to ensure that they are indeed ready to emerge from what I have called the shadows of a boutique status to one of a featured player, upon which the lions share of performance expectations and the ultimate results will fall.

Everything said and done, this is no doubt a very exciting time in the world of public sector procurement.  Now if only Canada could follow the UK’s lead and also look to shed the shackles of its colonial, Rideau Club bigger is better viewpoint, we might actually be able to stem the southward flow of our brightest and best innovators.  Ahhh, I can still recall the days when the Union Jack and not the Maple Leaf was our flag, and we sang God Save the Queen in class every morning.