Who is going to be the big digital winner after the 2015 general election? Congratulations to anyone involved with smart ticketing on public transport – you’re in for a good time. The one area that all three of the Conservative Party, Labour and the Liberal Democrats have committed to in their election manifestos is to develop nationwide smart ticketing, particularly on the railways. Who’d have known?
As for the rest of the technology sector, while there is not quite the same universal commitment as those lucky smart ticketing types (and by the way, sign up whoever does their lobbying now), there is enough common purpose to get a view of the digital priorities of the next government, whoever they may be.
High-speed broadband roll-out is assured – if you’re in the 95% of easiest to reach properties at least. If you fall outside that area, best vote for the Lib Dems and their promise of 99.9% household availability.
The future of the Government Digital Service (GDS) is secure – even if Labour has taken the opportunity to score a few political points in blaming the outgoing coalition for GDS failing to hit its target of having 25 “digital by default” exemplar services live by the election. The Lib Dems’ manifesto was the only one to specifically mention extending the GDS remit to local government, but Labour has previously made a similar promise and Tory chancellor George Osborne made it a Budget commitment last month.
The parties all recognised the importance of backing and investment – in varying degrees – for the UK’s science and technology research base, for digital skills and apprenticeships, and for helping to create and grow tech startups.
But the most contentious topic remains that of data privacy and state surveillance. The Lib Dems stand out as the party offering most change, with their digital bill of rights. With Labour and the Tories, we’re likely to see continuance of internet snooping by the security services, albeit with slightly more oversight under Labour.
But has any party really given us a vision of a future digital Britain? Not really – it’s mostly different flavours of the same trends seen across the past five years. There are still so many more things we could do for the benefit of us all, if only our political leaders had a grasp of the potential.
So here is one policy we would like to see delivered by the time we come to the next scheduled election in 2020 – for politicians to be educated in the true opportunity for technology to radically transform the UK for the better.
Last month, I wrote in this blog about the problems that caused the new rural payments digital service to be withdrawn from use by farmers and replaced by paper forms. The system was one of the 25 “exemplars” that the Government Digital Service (GDS) intended to showcase its digital transformation drive.
GDS needs to be challenged to live up to its mantra of “make things open, it makes them better” by being open about the problems, what caused them, and what was being done to resolve them.
Just today I came across the latest GDS quarterly progress report, published on 27 March, a week after the rural payment service was withdrawn. The report was published quietly and without fanfare in the run-up to the dissolution of Parliament, and GDS along with the rest of the Civil Service is in “purdah” during the election campaign and unable to respond to journalist queries. I haven’t seen any other publications cover the quarterly report, so it seems there was little attempt made to publicise its release.
If you read it, here, you would think that the rural payments problems had simply never existed. You might even fail to realise that rural payments was one of the critical exemplar services in the first place.
In a section of the report titled “Service transformation”, it highlights “seven more exemplar services went live this quarter” – the list fails to include rural payments, which went live in January.
The report continues: “By the end of March, a total of 20 exemplar services were available for public use. Four services are in beta development and one is in alpha. Home Office, Department for Work and Pensions, HMRC and Department for Business Innovation & Skills /Land Registry will continue work to deliver these remaining five exemplars, building digital by default services that meet the needs of their users.”
No mention whatsoever of the work that Defra is having to do to remediate the rural payment problems for future use.
Under a section titled “Exemplar projects: what we’re learning” the report says: “We want departments to learn from this transformation work and to use exemplars as templates when redesigning their own digital services. We’re also looking at how organisational structures and culture need to adapt and staff skills need to improve.”
And that’s it – no mention of the lessons that may need to be learned from rural payments, one of the exemplar services, and why it failed to meet user needs.
Eventually rural payment does get a mention in the report, as one of the first services using the new Gov.uk Verify system for identity assurance – but again, no mention of the problems farmers had using the Verify service.
Admittedly, the report was no doubt close to being finished when the rural payments service was withdrawn, and GDS was under time pressure to publish the report before purdah began a week later.
But the total absence of any mention of the rural payments problems in an official GDS quarterly progress report is extraordinary. Not even one sentence, added at the last minute, to acknowledge what happened. It leaves GDS open to accusations that it’s not just failing to be open when things go wrong, but seems instead to be airbrushing rural payments out of its exemplar history altogether.
It’s great to see so much debate taking place on social media – and hopefully in the real world – following Martha Lane Fox’s Dimbleby Lecture broadcast on BBC1 last night. Regardless of what anyone thinks about what she said, if her talk starts a widespread debate about the role of the internet and the digital economy in the UK, then it was a success.
I completely agree with the principles and aims that Lane Fox outlined – better digital inclusion; get more women into IT; tackle ethics and privacy; better broadband; public service reform; and get more politicians to understand the opportunities and issues around digital technologies.
I’d like to think these are all issues that Computer Weekly has consistently highlighted. Let’s all get talking about them. If anyone can catalyse the debate, it’s Lane Fox, with her public profile, drive to succeed, and contacts with business and government leaders.
But I’m far less convinced about Lane Fox’s proposal for a national institution to tackle some of these issues – what she has called “Dot everyone“. It seems a very old world solution to a very 21st century challenge. It risks accusations of elitism – gathering the digerati into one great public body to tell everyone else how great digital is.
Let’s not forget that the internet became what it is due to ground-up support – nobody in positions of power or influence decided that we would all use the web, that it would become so central to everyday life for so many people. If some great public body had said that 20 years ago, it would probably have doomed the internet to failure.
Equally the criticisms of today’s internet giants – Google, Facebook, Apple, etc – and the idea that they need an institutional counterpoint ignores the fact that those companies became giants because we all use them. That doesn’t absolve any of them from criticism as they exhibit increasing tendencies towards corporate megalomania, but the great thing about the internet is not only that anyone can use it, but that anyone can stop using it. Facebook grew from nowhere because it engaged people; if we all get fed up with it and use something else, we can still make it go away.
To me, the idea of a national institution places it apart from the people it wants to influence. If there is one thing the internet has taught us, it’s that in a digital world, leaders need to be a part of the network, not apart from it.
The real challenge is that politicians need and expect a hierarchical society – indeed, they will do everything they can to protect and maintain it. If the social impact of the internet is truly ground-up, then at some point the irresistibly rising digital tide will meet the immovable hierarchical rock of institutionalised establishment, and then things get really interesting.
Perhaps proponents of a national digital institution will say its function is just that – to be the bridge between those two forces, engaging with the establishment in terms it can understand, while empowering the network to enable change. But the danger is an establishment-backed institution instead becomes a barrier to keep the hierarchies of power at the top. We already have plenty of public institutions, and you only have to look at some, like the BBC or the NHS, to see what happens when the establishment decides it doesn’t really like them the way they are.
In the UK we have yet to see the emergence of the sort of ground-up political movement that can only exist in a digital world. The closest we’ve seen elsewhere is the Pirate Party, which came to influence in libertarian Sweden and has gathered a following more widely, winning seats in the European Parliament and 5% of the popular vote in Iceland’s 2013 election.
Perhaps that suggests the UK has not reached the digital maturity needed for that sort of change and that degree of challenge to the establishment. Plenty of people (me included) throw around the phrase “digital revolution” very easily and carelessly, when perhaps the natural process of social change is more measured. But that change will come – inevitably, inexorably, unstoppably.
As the UK gears up for what promises to be the most dramatic and unpredictable general election in a generation, we can already see signs that the public is turning against the old way of things with its rejection of two-party politics. Nonetheless, we know the country will still be led by one of only two men – both steeped in their own form of establishment background. The stirrings of ground-up change – or at least, the desire for change – are there.
A country governed by the principles of the network not the hierarchy would solve many of today’s economic challenges. A new, federated model of central and local government to address devolution, enabled by “government as a platform” technologies, is just one example. A national broadband infrastructure to connect everyone and not just the commercial needs of one or two semi-monopolistic telecoms suppliers, is another. Investment in digital skills to help tackle unemployment and prepare in advance (for once) for the automation of blue-collar jobs, is yet another. I could go on.
Whoever forms the new administration, the next five-year Parliamentary cycle will see the most digital government ever. It will also see the generation that grew up on the internet reach their late 20s and start to emerge as young business leaders and budding politicians. Many of them will be bashing their networked heads against the hierarchical walls of establishment. It’s going to happen.
So let’s keep going with the debate that Martha Lane Fox has started; let’s make noise, make headlines, broaden the network, engage with everyone. In her lecture, Martha challenged journalists and editors to do their bit. That, for sure, is a challenge I hope we can rise to.
The failure of the rural payment digital service last week – and its subsequent replacement by paper forms – is not the IT disaster some would claim, but it is an embarrassment for the Government Digital Service (GDS).
The project, budgeted to cost around £154m, has not seen all that money wasted. Only £73m has been spent so far, and very little of that has been wasted either. The system will still be developed, and will be used for next year’s round of farming subsidy claims – or that’s the plan at least.
The cost of failure this year amounts to the unbudgeted processing of paper forms, and the cost and effort involved in trying to correct the performance problems that have so far proved insurmountable. That’s probably several million pounds that nobody wants to have spent, but it’s tiny compared to past IT disasters.
GDS chief Mike Bracken’s words in a speech to the Institute of Government in October last year are worth quoting now:
“No policy or service we civil servants think up will ever work in practice the way we thought it would in theory. We must start out humble, and rapidly iterate in response to the messy reality of real users using real services,” said Bracken.
“We should say to critics in the media or elsewhere that failure is an essential part of government, just as it is in private enterprise. And the cost of failure should be tiny, dwarfed by its rewards,” he said.
“The cost of failure is only enormous if you plan to launch with a big bang on a fixed date in a couple of years’ time, with the world’s media and public watching – but before you’ve really started the work to understand how to best meet the needs of the people who will use the service. Big bang was fine in 1986. It is a disaster waiting to happen in 2014.”
Those apposite words frame the three issues that need to be addressed in the light of the rural payments problems.
1 – How does agile work with immovable deadlines?
For many years, one of the most frequent causes of government IT failures was the immovability of political deadlines. When the tax credits system fell over under the Labour administration, it turned out that testing was bypassed to meet the political deadline set by then-chancellor Gordon Brown. That’s a great example of what Bracken meant when he talked about avoiding fixed dates and big bangs. But the “messy reality” of government is that some deadlines will always be fixed.
If it weren’t for an EU deadline of 15 May (since shifted to 15 June) for farmers to claim for the new Basic Payment Scheme policy, the rural payment system might have had time to be fixed. In the end, that fix didn’t happen in time. GDS is left red-faced because farmers have been complaining about performance problems with the digital mapping tool since they started using it earlier this year.
Few would argue that avoiding big bang launches is a bad thing. Similarly, few would argue that the iterative approach preferred by GDS’s agile strategy is a bad thing. But in government, there will always be fixed deadlines, like it or not – and GDS needs to show that the iterative approach can still work in such circumstances when there are problems along the way.
2 – Was this a prototype or not?
The digital service launched to farmers was, in GDS parlance, still only a beta version. According to the GDS Service Design Manual – the current bible for government IT developments, mandated by force of Cabinet Office minister Francis Maude – a beta is: “A fully working prototype which you test with users. You’ll continuously improve on the prototype until it’s ready to go live, replacing or integrating with any existing services.” Only after a service has passed its public beta phase is it classified as a “live” system by GDS. But farmers were told that this was the mandatory route for making their claims.
The rural payments service was launched to all 110,000 farmers and 1,200 land agents to be used for the very live act of applying for their annual subsidy payments. As one source put it: “Beta is bullshit in this context”.
Farmers wouldn’t understand the digital concept of alphas and betas – all they wanted was a system that worked. Why wasn’t the service launched as a beta to a smaller group of users – preferably the more digitally literate – knowing that they were a test service, while planning from the start to use a paper-based alternative for the remainder of users? That way the developers learn, and they can better prepare for scaling up the service and for what Bracken has called the “edge cases” of farmers who need more digital assistance or live in rural areas with poor broadband?
Iteration, and learning as you go along, is commendable – but was it appropriate for the circumstances here, with a system launched to the entire user base, as the only option for making a claim, with a fixed deadline ahead?
3 – Make things open
Mike Bracken also wrote last year about, “Making things open, making things better“. One of GDS’s most prized – and widely applauded – principles is “make things open”. It refers to open source, open standards, coding in the open, and an open culture, with GDS staffers regularly blogging about the projects they work on, in a reversal of historic civil service practices and secrecy.
But now, when something has gone wrong, the shutters seem to have closed. The Cabinet Office press office suggested Computer Weekly talk to Defra, the department responsible for the policy. The Defra press office said we should talk to the Cabinet Office.
Now is the time for GDS to be completely open about what has happened. There is a growing perception among farmers and the media that the rural payments service is a failure, that the money has been wasted, and all the work done so far has been abandoned. In a vacuum of information from GDS and Defra, rumour and speculation turns into damaging fixed perceptions.
Rural payments is arguably the biggest hiccup for the GDS digital strategy so far. Other services that have gone live have generally worked well – register to vote, carer’s allowance, power of attorney, prison visits, online drivers’ licence details have all been successful digital launches. But rural payments is perhaps the biggest and most complex of the GDS digital exemplars to so far reach this stage.
The model for this service is classic GDS – multiple, smaller suppliers instead of one or two big system integrators; agile development; multiple off-the-shelf products instead of heavily bespoked versions. This is what we are told will be the model for much bigger services to come, such as online tax accounts, and the Universal Credit digital service – systems that would cause national political repercussions if they failed. It’s the model by which the future “government as a platform” will be built.
Furthermore, critics of GDS have warned of an over-focus on the web front-end and user experience, and a lack of attention to the thorny, IT-led area of scaling back-end systems and integrating with legacy IT. We know that the core of the problem with rural payments was difficulties between the front-end mapping tool and the back-end rules engine. Servers were hitting 100% utilisation and falling over, which suggests a scaling issue in the back-end software or the integration layer.
But what were the problems exactly? Were the suppliers to blame? What are the next steps to a resolution? What was broken? We just don’t know.
That is not “making things open”. Openness is to be welcomed, but it cannot only apply to the good news. The true test of openness for GDS is now, when something has seemingly gone badly wrong.
So over to you GDS – make things open, so we can see how you are making things better.
It’s rare that I’m inclined to congratulate George Osborne, but recognition is due to the Chancellor for making his latest budget the most tech-friendly ever.
Every year, Computer Weekly is inundated with press releases before the Budget from various interest groups calling on the Chancellor to include this or that technology policy. Typically, the day after the Budget we then get the follow-up release chastising the Chancellor for failing to deliver on their hopeful wish-lists.
But this year, few could complain – the list of supportive announcements was long. Tech startups, science and technology research, internet of things, driverless cars, smart cities, skills, broadband, mobile networks – all received funding or government support of some form.
The government’s digital strategy even underpinned one of Osborne’s headline-grabbers – the abolition of tax returns, made possible by the planned introduction of personal online tax accounts and HM Revenue & Customs’ real-time information system for tax collection.
There is little doubt that whoever wins the election in May, digital and technology will play a bigger role in the next government than ever before.
Labour must be a little frustrated – since the party’s digital government review was released last year, the coalition has slowly nicked most of Labour’s most popular recommendations. Osborne added another – extending the remit of the Government Digital Service (GDS) to help local authorities with their digital plans (although the Cabinet Office was unable to offer any further details on this, which makes you wonder how much they knew about it beforehand).
Some of the announcements promise to be truly transformational – not least a commitment to produce a standard banking API to open up the big retail banks’ data and systems to new entrants.
We are, slowly, getting the UK onto a digital roll. Whoever wins the election must commit early to protecting, continuing, and preferably accelerating this momentum. The UK has a genuine opportunity to be a world leader in the digital economy, for the betterment of everyone – creating jobs, wealth and social opportunity; improving healthcare and education; making this country a base for science and technology innovation that is the envy of the world.
We look forward to whichever party or coalition of parties is willing to accept and deliver on this defining challenge for the next Parliament.
Does IT have a problem with people?
That’s a question I found myself asking, after listening to the speakers at a BCS event last week. It’s not a new question by any means, but when you consider a few topical challenges facing IT leaders and the IT industry, it’s one that perhaps gives an insight into the radical changes taking place through the technology supply chain.
In companies, the question goes to the heart of the changing relationship between IT departments and their users – the rise of “shadow IT” and “bring your own device” (BYOD) have come about as a rebellion against the historic “command and control” culture of most IT teams.
In government, it relates to the mantra of “user need” espoused by the Government Digital Service (GDS); it goes into how GDS wants to change the procurement and delivery of IT in Whitehall, and the irritation that seems to be causing for IT suppliers.
Let me explain.
One of the speakers at the BCS event was Will Whitehorn, Richard Branson’s right-hand man and currently president of Virgin Galactic, Branson’s ambitious space travel business. His simple explanation of Virgin’s approach to risk and failure should be mandatory listening for anyone involved in IT. He highlighted lessons that the IT sector – typically so risk averse – is only starting to learn.
From Whitehorn and other speakers, there were, for me, three key points to consider.
IT today is led by products not people
Whitehorn gave an example of Virgin’s focus on customer needs throughout its supply chain, which came from his time setting up Virgin Trains, and in particular its West Coast main line franchise. Virgin wanted a totally new train design to meet its goals for speed and passenger service – the end result was the Pendolino tilting trains in use today.
Whitehorn went to suppliers and outlined what their customers wanted, and told the train makers to design and build something to meet that user outcome. He felt that was delivered.
Consider by comparison the typical conversation between an IT leader and their suppliers, where an explanation of business outcomes and user needs typically leads to the offer of a “solution” based on a series of products. “You want to increase customer service levels by 10%? Here – buy my CRM software!”
The IT industry has yet to understand and manage risk well enough to meet that user need challenge – and its thinking all too often is not yet mature enough to go beyond products. There must be a huge opportunity for any suppliers that can genuinely offer user-focused outcome-based solutions in that way – but where are they?
IT thinks “big” when it needs to deliver “small”
“Risk means accepting failure” said Whitehorn, and explained how this was a fundamental principle behind the success of Virgin Group.
The company has grown big by keeping its parts small. Every Virgin-branded business operates independently of every other, so if one fails, the overall brand is not harmed.
Failure is a particular challenge for Whitehorn at the moment, after the tragic crash of Virgin Galactic’s test plane last year – a disaster that Whitehorn said is likely to be proved as human error, not equipment failure. But he said that Virgin always knew that going into space was likely to bring high-profile failures along the way, and that the end goal is worth the risk.
But the way they manage that risk is by keeping things small.
Compare that with the historic approach to IT delivery, of “big bang” projects specified to death at the beginning then failing to meet user needs once finally completed. The move to agile – or, better described as breaking down projects into smaller tasks, individually managed and delivered within an overall architecture (for those who recoil at the word “agile”) – is an overdue response to that monolithic approach to IT.
It’s not about waterfall vs agile – you can use waterfall techniques in smaller tasks as much as you can agile. You can see it coming through in the datacentre too, with the growth of microservices and container technology – keep things small, even within the constraints of something inevitably large such as a corporate datacentre (or better still just put it in the cloud).
The IT industry has always liked to use engineering analogies to explain how it works – that delivering IT projects is like building a bridge or a skyscraper. I’ve never been comfortable with that analogy. The best and better analogy I’ve heard recently is from consultant Mark Foden, who said IT has to be grown like a garden, not a bridge that has to be built.
A garden needs a design and an architecture – big plants at the back, small ones at the front; matching colours; hard landscapes mixed with soft – but each element of that garden is independent of the other while intrinsic to the whole. Each plant needs individual nurturing; each pathway laid and maintained. To make the whole garden a success needs different approaches for different elements – shady plants that don’t need much water; sun-lovers that need regular feeding; different flowers that bloom at different times as long as you treat each according to their needs.
In IT, you see too many adherents to one methodology – we are waterfall; we are agile; we use Six Sigma; we use Lean; etc. Ironically, IT is not binary; it’s not one thing or the other. It needs a flexible (and often complex) mix that recognises the different needs of each element, focused on users not on a finite set of supplier products that in reality vary very little from each competitive offering.
Trust your people
Perhaps it’s not surprising that so many IT leaders are not entirely trusted by their CEOs. Too many big failures, too much over-run, too many unhappy users. But it is true to say that too few boardrooms really trust their CIO.
Another BCS speaker, Phil Pavitt, global CIO of Specsavers and former HM Revenue & Customs CIO, made the point that the people in your own IT organisation almost always have the answers to the questions that matter – they just need to be trusted, and to have an opportunity to step forward.
Pavitt bemoaned the typical state of big corporate IT, with expensive consultants brought in to gather information from employees, then report back what they said as if the consultants were the enlightened ones.
I recently talked to a highly experienced CIO, someone with success in major multinationals, who had been employed to overhaul IT strategy and delivery at one of the highest profile organisations in the UK. He has recently left – of his own accord – as a direct result of a new leader of that organisation who insisted on bringing in a consultancy to audit every element of that strategy after it had been completed.
Risk aversion and a lack of trust towards IT are endemic. IT needs to earn that trust, and to convince CEOs to trust them.
Perhaps it’s inevitable that technologists feel more comfortable with neatly defined products that meet a clearly defined purpose. People are complex and unpredictable – how can you deliver IT to satisfy such flaky users who don’t really understand IT in the first place?
But this is where IT sits today – at the cusp of change from a product-focused industry to one that is able to deliver user-focused, outcome-oriented business (and personal) offerings composed of small, interchangeable components, with no single points of failure. IT still wants to dictate to its users; its users now know enough to say no.
Perhaps that’s the biggest challenge for the maturing IT community as it seeks to exploit the digital revolution and sit at the top table of business and government – to become less risk averse, to manage failure better, and to put people first.
With 90,000 people attending this year, Mobile World Congress has become one of the definitive events on the technology calendar. Nobody is surprised to hear experts saying mobile is the number one issue – and the same applies to corporate IT.
Computer Weekly’s annual survey of our readers’ IT spending priorities shows that mobility has leaped to be the top priority for IT leaders with 42% of respondents implementing mobility projects this year – well ahead of the second placed issue, compliance at 31% (see graph, below). As recently as 2012, mobility didn’t even feature in the top 10 IT spending priorities.
As mobility has risen, so has cloud. In our latest survey, for the first time more organisations are increasing spending on cloud than for on-premises IT – a significant milestone. In 2012, the research described IT leaders’ cloud plans only as “modest and moderate”.
But tracking the survey over the last three years shows not only that mobility and cloud have risen naturally to the top, but they are accelerating at the expense of almost every other category of spending. The strategic shift to mobile and cloud in corporate IT is really happening, and is now unstoppable.
Slicing into the survey data also shows a notable fact – demonstrated in the graph below. If you look at readers’ responses on technologies typically associated with digital transformation – areas such as collaboration, big data, social media and virtualisation – you see there is a significantly higher tendency for spending in such product categories among those companies also prioritising cloud.
Cloud is not just a major shift in IT delivery, it is a signifier of greater intent to transform the IT estate using emerging technologies. For IT suppliers, that’s hugely significant. If they are not having the cloud conversation with their customers – or are simply tagging a “cloud” label onto their existing products – they are missing out on nearly every other major IT change taking place at that organisation.
For companies such as IBM, HP and others, desperately trying to protect revenues from legacy products and unable to grow sales from emerging technologies sufficiently fast to replace them, that’s a huge problem. Who would seriously have thought five years ago that Amazon would become the dominant force in cloud, at the expense of such bellwethers?
For those IT leaders whose employers are still reluctant to invest in mobile and cloud, it may soon be too late – their competitors are changing the game at an accelerating pace.
The government this week touted its success at delivering on a policy objective to put 25% of all purchased spend through SMEs – in 2013/14, that amounted to £11.4bn, slightly ahead of target at 26.1% of all spending.
But, at the same time, many SMEs are up in arms about the way they are being treated by Whitehall, and in particular the Cabinet Office procurement agency, Crown Commercial Service (CCS). The numbers published by the Cabinet Office tell one story, the market seemingly tells another. So which is true? Let’s examine the official figures that make up that 25%.
Direct vs indirect spending
First, it’s important to understand what the goal was. That 25% consists of direct spending – contracts between government and SMEs – plus indirect spending, which means large firms passing some of their government business to SMEs as subcontractors. Of the 26.1%, direct spend was 10.3% and indirect 15.8%. So in contractual terms, about 90% of all contracts by value still go to big companies.
But government relies on those big firms to report back how much they spend with SMEs – the number is not audited, and is based only on a survey of its 500 largest suppliers. The Cabinet Office admits that “the approach to indirect spend should be regarded as indicative”. The indirect figures add a few further caveats:
- “MoD total procurement and direct spend figures are for the core department only, therefore excluding its Executive Agencies and NDPB.”
So, the Ministry of Defence – by far the biggest spending department – does not measure the SME spend through its many external agencies and non-departmental public bodies (NDPB), of which there are 29 different organisations.
- “FCO direct spend is based on UK spend only”
The Foreign and Commonwealth Office (FCO) – most of which is, inevitably, housed overseas, does not measure direct SME spend in all those overseas operations.
- “Data as reported by suppliers for central government with no departmental association”
This is the description given for £1.5bn of indirect SME spend – 22% of the total figure – that is not attributed to any Whitehall department. This means that large suppliers claimed they passed £1.5bn of money to SMEs, but cannot account for which departments that work is attributed to. Really? For more than one-fifth of all the sub-contracts to SMEs across all large suppliers, the prime contractor has no idea what department that work is for, or cannot associate the work with any department? That sounds somewhat convenient for those big suppliers, all of which have been pressured by the Cabinet Office to demonstrate an increase in their SME spend. The government admits that the indirect spending figures have not been supplied by departments, so it appears we are to take the word of the large suppliers entirely on trust over that £1.5bn portion of the spend.
Look next at the direct spend – the numbers for which the government can account for itself through contracts placed with SMEs. Those figures have flatlined – representing 10%, 10.5% and 10.3% of total spending respectively in each of the last three financial years.
In the year before – 2010/11 – only 6.8% of spend went direct to SMEs; the prior year it was 6.5%. The jump from 2010/11 to 2011/12 went from £3,200m to £4,439m – an extra £1.2bn. The Cabinet Office attributes that leap to the new coalition policies introduced at the start of the parliamentary cycle taking effect. It was suggested to me by a source that the measurement methodology for tracking SME direct spend changed between 2011 and 2012 – although the Cabinet Office denied this.
So what did cause that jump? The two main policies introduced in 2011, alongside some changes to process such as a mystery shopper service, were:
- Advertising tenders below £100,000 (tenders greater than £100,000 were already advertised)
- Abolishing pre-qualification questionnaires (PQQs) for contracts below £100,000 to make it less onerous for SMEs to bid for business.
So, in theory, the only real change for SMEs was in their ability to win contracts worth up to £100,000. There is not yet any published evidence to suggest that from 2011 SMEs suddenly won a greater share of the contracts above £100,000 that were already being advertised.
It’s true that in government IT there has been a push to smaller contracts, which opens up more opportunities for SMEs – but the main vehicle for that is the G-Cloud framework, which launched in February 2012, so cannot have accounted for any of the £1.2bn increase in the prior year.
G-Cloud has been widely applauded and has awarded more than 50% of its spending to SMEs – but the total amount spent through G-Cloud since its inception is still only £431m to the end of 2014. Clearly G-Cloud made no contribution to that £1.2bn leap in 2011/12 – and has not had a material effect as overall direct spending has flatlined since its launch.
How many SMEs?
So, we are left to assume that most of that £1.2bn additional annual spend came about as a result of SMEs winning more contracts worth up to £100,000. Even if you take a generous outlook and say that the average contract value was the highest amount of £100,000, that would imply 12,000 new contracts won by SMEs. That’s 1,000 per month, or about 50 every working day. Somebody in CCS would be getting through a lot of ink signing all that paperwork.
Of course, if a lot of SMEs won a lot of contracts worth over £100,000, that would account for a greater chunk of the £1.2bn – but that would have happened anyway, as the 2011 policy changes were mostly focused on opening up smaller contracts. If you were generous, then perhaps 1,000 SMEs won contracts worth £1m on average that had never before been won by SMEs, and that would account for most of the £1.2bn. That’s still four contracts every working day.
But the government has not been able to say how many SMEs have been awarded direct contracts – Computer Weekly has asked, we’ve not yet had an answer – but it seems unlikely to be 1,000 additional firms, and even more unlikely to be 12,000. So where are all the SMEs that won that extra £1.2bn?
It’s also possible the definition of an SME includes individuals providing temporary services through a company of which they are the only employee – fairly common practice for contractors, to reduce their tax burden. But does direct spend with individual contractors really support the ethos behind the desire to grow UK small businesses through the government estate?
If you apply the same logic to the indirect spend – which increased from £2,946m (6%) in 2011/12 to £6,909m (15.8%) in 2013/14 – that’s an increase of nearly £4bn annually. At an assumed average contract value of £100,000, that’s 40,000 additional contracts with SMEs let by large suppliers in a year. Again, you might ask – really? Where are they all?
Not lies, just statistics
There is no evidence to suggest the government is lying about its SME spending – but even a casual, entirely non-forensic analysis like the one above raises some significant questions over the extent to which government largesse has really been spread around the UK’s SME community.
Of course, the existence of a policy to increase spending with SMEs is welcome, and is clearly having an effect – even if nearly three-quarters of all spending still goes to large suppliers.
G-Cloud has been hugely popular – most SMEs that have engaged with it love it, and some have grown so much as a result they can no longer be categorised as SMEs. But G-Cloud was not created by CCS, which still appears to prefer old-style procurement frameworks managed by outsourcing giants such as Capita, which are coming increasingly under fire from disgruntled SMEs who say they are losing millions of pounds in revenue.
Plenty of SMEs who deal with CCS say they are less convinced that the purchasing agency has bought into the SME policy, and that CCS still feels more comfortable dealing with big suppliers where they can aggregate demand and use that to negotiate better prices.
The progress made on growing SME spending by the coalition government is very positive, let’s be clear about that – but it may not quite be as impressive as it wants us to believe. There is still much room for improvement.
No blood was spilled, but listening to the three main political parties debate their digital policies together for the first time this week laid out the battleground for their likely general election technology manifestos.
Computer Weekly, with help from TechUK and the BCS, brought together the Conservative, Labour and Liberal Democrat parties to face questions from an audience of IT executives about their priorities for supporting the tech sector and growing the UK’s digital economy.
Reassuringly, there was much agreement between the three. On further support for the burgeoning tech startup sector; on expanding the work of the Government Digital Service (GDS) and supporting local authorities in their digital plans; and on the need for reforms around data protection and privacy – all three parties concurred.
You can read all about the debates in our coverage here:
- Digital Question Time: Growing UK tech
- Ed Vaizey: Ambition to have local government on one platform
- General election 2015: Major parties focus on tech agenda
And you can watch video highlights from the event here:
- Digital Question Time: Political parties discuss the tech agenda
- Digital Question Time: How will the next government support the emerging tech startup sector
But perhaps the most significant theme from the debate was the need for better engagement between politicians and the IT sector.
In past elections, the IT community has been at the back of the room, desperately waving its hand in the air for the politicians to take notice, trying to tell them how important it was. This year, for the first time, the main parties have invited us forward to sit closer to the front.
There is widespread recognition – at last – that technology can and must play a major role underpinning some of the major reforms needed in the UK in the next five years, in the economy, health and social care, national security, education and welfare.
The IT community has, justifiably, pointed to the lack of digital literacy in Parliament, urging MPs to become more aware of how technology can help deliver the changes they all call for. But all three of our panelists – digital economy minister Ed Vaizey, shadow digital government minister Chi Onwurah, and the LibDems’ Julian Huppert, agreed that IT itself needs to become more politically aware too – “The challenge for the tech industry is to meet politicians half way,” said Vaizey.
And they’re right. For the digital community, your time is now – the doors are open at last. There has never been a better opportunity to engage with the UK’s political leaders and show them how technology can make all our lives better.
The financial services industry has yet to experience the digital disruption that radically changed other sectors, such as retail and media. But the influence of the commoditisation of communications, processing power and storage – more popularly known as the internet and the cloud – is going to hit finance too, that much is inevitable and unstoppable.
Arguably, the 2008 crash protected the banking industry from such disruption – increased regulatory scrutiny made it impossible for new entrants and restricted innovation from existing players. But everyone can see the cracks emerging from the lack of digital investment – those ageing, batch-processing mainframe transaction engines at the core of every major bank were simply not designed to handle real-time web and mobile services.
Governments have realised too, that they need to introduce more competition to the market, to reduce the dependence on the global players that let down the world economy so badly.
And what is the one, proven way to increase competition, and break down barriers to entry? It’s technology, of course. Once you could sell online without the cost of a physical store, it transformed retail. Once you could publish content on the web without the cost of a printing press, paper and ink, it transformed the media.
We are seeing the emergence of new, challenger banks based on digital technology, which do not suffer from the complex, legacy IT that the incumbents depend on. Also, banks find some of their services being cherry-picked by the new tech giants – payment services such as Apple Pay, for example, not to mention Paypal. Research suggests more of us will use smartphones to pay for things than credit or debit cards by 2020.
Some banks are responding, of course. Barclays is pushing hard on new mobile services, and even providing training in branches for children to learn coding. Santander is going further, and taking on the cloud suppliers at their own game, offering cloud storage to corporate clients. If data is the new currency, there’s a logical progression to store it with your bank, even if the chances of one bank building the scale of cloud infrastructure needed to compete with Amazon, Google or Microsoft is unlikely.
Banks still control the global flow of money – but trends like Bitcoin are starting to demonstrate that even here, technology can offer alternatives.
The big finance players are vulnerable – even if they don’t want to see it – in the same way as Woolworths, Blockbuster, Comet and others were vulnerable and missed the digital boat. Expect the banks to go through a decade now that will change their industry as much as the last 10 years has done for so many other sectors.