The UK government spends around £16bn per year on IT products and services to deliver public services but all areas of government are working to reduce their costs by 20% as a bare minimum and 40% as a stretch target over the next 3 years. That means a saving of at least £4bn.
One of the ways in which the government is looking to do this is through disintermediation, reducing the layers of the supply chain and contracting more directly with its suppliers. This process, if successful, provides an interesting dilemma for both the prime contractors and their suppliers.
Prime contractors either have to consider fundamentally different business models and approaches, or see their business and margins significantly erode. Suppliers who have traditionally not contracted or marketed directly to the government before, now can market directly and compete on a more level playing field, able to steer business back to their supply chains.
One thing is very clear; the government IT marketplace is changing radically and rapidly. Those agile and willing enough to change will gain market share, those who try to retain the status quo are likely to lose out.
Innovation is key. Innovation in new technology solutions can reduce complexity, deployment costs and operating costs. Innovation in business solutions that leverages technology will have the biggest impact on public services.
The smart suppliers to government will be getting their heads around the problem of how to reduce a £16bn marketplace to £12bn, provide £18bn of public service value back to the government and take opportunities from their competitors. It’s an interesting challenge and one that I relish.
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