IT

1.29 The IT workstrand of the OEP builds on the IT efficiencies achieved as part of the Gershon programme. It is focused on delivering greater value for money from the Government's spend on IT and improving the delivery performance of IT-enabled change programmes.

1.30 As is the case for back office operations, there is a lack of reliable, consistent management information on public sector IT expenditure. Many public sector organisations do not hold detailed or accurate management information on how money is spent on IT within their organisations. Five different sources are available which measure UK public sector IT spend. These have been collected on different bases and produce a wide range of results for how much the UK spends on public sector IT. Taking account of the respective strengths and weaknesses of this data, this workstrand has estimated that around £16 billion per year is spent on IT across the wider public sector, although this figure could vary from as low as £12.5 billion up to around £18.5 billion. The largest area of IT spend is in local government, but it is hard to conduct a detailed analysis of this expenditure as it lies in a very devolved landscape.

1.31 Six different methodologies have been used to estimate the potential savings that can be made from IT expenditure across the public sector:

• benchmarking analysis: approximately 50 public sector organisations from local government, central government, the health service and the police take part in an anonymous CIPFA benchmarking process.¹¹ Whilst public sector organisations will not have the same IT requirements and may be at different stages of their IT investment cycles, the size of the variations should not be disproportionate. As for back office spend, savings have been estimated based on the assumption that the very worst performers can improve their performance to the top end of the lowest performance quartile;

• best practice case studies: encouragingly, there are several examples of best practice achievement in the public sector where significant savings in IT expenditure have been achieved and the quality of service improved. The programme has reviewed these case studies and used them as a basis for estimating the wider savings possible across the public sector;

• private sector comparisons: comparisons have been made of the IT costs of government departments with the most similar private sector organisations to evaluate the potential for savings. For example, this workstrand has compared the IT costs of transaction-intensive public sector organisations with banks and insurance companies and assessed the potential level of savings available;

• analysis of existing IT contracts across government: this method uses research carried out by management consulting firms into the costs of UK Government's outsourcing contracts and their assessment of the level of savings available;

• IT consulting organisations' view of the potential savings available: this method is based on input from private sector IT consulting organisations with significant experience of undertaking IT-focused cost reduction programmes across the public and private sectors in the UK and abroad; and

• international comparisons of IT spend: international comparisons of IT spend are difficult, however, Gartner12 and Kable¹³ have produced data on IT spend across major economies which has allowed IT spend of similar government departments around the world to be compared. This data has been used to assess the potential savings available in the UK.

1.32 All six methods involve estimations of one form or another. However, each method points strongly to the fact that better value for money is achievable from UK public sector IT spend. Overall savings of around 20 per cent of the estimated £16 billion annual expenditure (£3.2 billion) should be achievable without compromising the quality of frontline public service delivery. Some of the estimated savings will already be underway or planned as part of the current spending review period, but there is considerable scope to go further. This reduction in annual spend should be achievable by the end of a three year period. This is somewhat longer than the average timescales achieved in the private sector.

1.33 The estimated savings14 should be taken into account in determining departmental settlements. This process should, where appropriate, have regard to any significant savings that have already been achieved and to any substantial concentration of major IT-enabled change projects in particular departments. It is the task of management, both within departments and within their wider delivery chains, to determine how the targeted savings can best be delivered.

1.34 The programme has developed a suite of recommendations for public sector organisations to assist in the process of delivering these savings. In summary, these are to:

• improve the collection, reporting, benchmarking and review of data on IT spend across the public sector;

• strengthen the governance of IT-enabled change projects;

• strengthen Gateway assurance processes for all IT-enabled change projects;

• implement portfolio management processes to prioritise projects and resources and to reduce overlap and duplication in IT-enabled change projects;

• promote greater standardisation and simplification of IT systems, desktops, infrastructure and applications across the public sector; and

• develop the internal IT capability within the public sector and continue to professionalise the IT function.

1.35 The detailed recommendations are as follows:

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11 Data for 2006-07 from an anonymous sample of public sector bodies, CIPFA, 2008.

12 Forecast: Industry Market Strategies by Vertical Industry, Worldwide 2006-12, Gartner, 2009.

13 Overview of IT in the European public sector to 2010, Kable, 2007.

14 Approximately £1.6 billion of these savings are also included in the collaborative procurement savings, due to improved collaborative e procurement of IT.