Jerry Fishenden has started a good debate on his Microsoft blog having mapped the recent ONS public sector productivity data against IT spend and he wonders why the investment in IT does not appear to have positively impacted the productivity data.
I am not a statistician but I did ask one for her telephone number once, and she gave me an estimate. So I will leave it to Public Finance, the Times, and the FT to apply their forensic analysis but what they all say is this productivity link is hugely complex and fraught with issues but does pose many questions. However Jerry’s point that we should not be spending money if we cannot be certain of creating value is an extremely valid one and one that I whole heartedly support.
Some statistics that Jerry didn’t print; IT spend in the public sector is c4.6% of total public sector spending according to the Operational Efficiency Programme (pp48, 4.5) undertaken independently by Dr Martin Read. If I took Martin’s most pessimistic figure on IT spend it would push the overall percentage up to 5.3%. Following benchmarking undertaken by Gartner, a leading analysis and benchmarking company, they state that their global average is 5.9%, EMEA private sector is 7.7%, and the Gartner benchmark for 232 Government departments (63% USA, 16% Asia Pac) is 6.8%. My budget is 0.068% of the £16bn.
The £16bn that is quoted is not held or controlled centrally but is allocated across the thousands of Public Sector Bodies. These same bodies also run their own project portfolios.
Jerry is proposing two strands of work. The first strand is “working out which current ICT related to public services should be frozen, which fixed and which failed (and scrapped).” Absolutely, but it isn’t about IT, it is about what the project is meant to achieve in terms of outcome – transport, health, education.... So this should be a business review first. What is the purpose of the business? What does the business deliver? Is it still required? Is what is required being delivered in the most optimum way etc etc etc. Clearly from this any projects, or units, that are no longer required can be closed down, modified or redeployed to more important areas. Jerry says “this is the short-term tactical view of how to better optimise the existing ICT assets (and liabilities) of the public sector”
It would be right for any new CEO or team taking over a business to undertake a review and make changes, after all that is why they have invariably been appointed. Some decisions will be able to be made quickly. Others will need to be taken once the analysis has been done. We should not see this is a one off process, but a continuous process of ensuring that what is being invested in is still appropriate and indeed the investment will deliver the expected benefits.
Jerry restates two options for cost cutting. The first being a dramatic cut in IT costs, with 50% being suggested, the second being cutting the administration and overhead budgets of departments and letting them decide how they will spend their money. This seems hugely simplistic. First of all the IT budget is a budget of the business. The CEO/Accounting Officer should be allocating the money to deliver the agreed business objectives or policy outcomes. So if the objectives of the business indicate they can cut the IT budget by 50% so be it. This is not new, this is business.
The second option of cutting the administration and overhead budgets again happens today. In reality there will not be one single solution applied by a new CEO/Team, they are always likely to adopt a blend of approaches:
· First of all they will look to be very clear about what needs to be achieved. What objectives do they wish to achieve, over what period of time by area of the business. This needs to be as crisp and as specific as possible
· Based on the above, it is common for a review to be undertaken to ascertain whether what is happening today matches the new requirements. This is both a tactical review and a strategic review. It is right for things to be realigned, pruned back, stopped, undone, accelerating and new things added to the portfolio.
· To get the best results the CEO will wish to ensure that there is line of sight from the setting of the objectives through to delivery. He/she will want to ensure that governance is clear and ensure that accountability is clear.
Jerry has a s second strand “working out where and how technology now plays a key role as a policy lever, enabling a fundamental re-think and re-design of our public services” and makes a crucial point about the configuration of government in his post on rethinking the use of IT in public services, I will deal with this in a second post