Spending Review calls for tighter IT controls

The government's Comprehensive Spending Review (CSR), announced in parliament this week, could spell bad news for the IT industry, according to analysts and experts.

The CSR will encourage IT departments to review and make use of their current IT systems. This may cause an upsurge in the use of business process outsourcing (BPO), cloud computing and virtualisation, but analysts believe it will not spur the uptake of new enterprise resource planning (ERP) systems.

It's no longer the case that public sector back-office efficiencies can be met through new IT systems which increase the amount of automation and transparency within government, according to experts.

The Comprehensive Spending Review spells out the government's intention to cut departmental operating costs by £6bn.

Departments will have a certain amount of choice in how they make the cuts, but IT will inevitably be affected, according to Ovum senior analyst Sarah Burnett.

"The government has set the guidelines and the limits, and allowed the public sector to decide what it can invest in," she said.

"But the cuts are big, so big thinking is the way to go. Whether this means more IT or less IT will be for individual departments to decide."

Burnett suggested that, rather than the public sector cutting IT projects altogether, it is likely to focus initially on the better use of existing systems. This will mean more use of BPO and more pressure on suppliers to deliver successful business outcomes.

"Departments will not be looking to invest in new hardware or software. They are unlikely to start a whole new customer relationship management [CRM] project in order to make savings. They are more likely to start outsourcing the customer service processes," she said.

"Pressure on suppliers to deliver successful business outcomes will increase. I think IT suppliers will have to demonstrate that they are delivering value at certain points during a project. IT will be aligned to deliverables constantly. What will increase is BPO, starting with customer call centres."

While MPs have historically tried to prevent offshoring in the public sector, and have pushed for outsourcing to develop locally, the need for fast cost cuts is likely to alter this attitude, according to Burnett.

"There could be an increase in the government taking on offshoring because of the downward pressure on pricing. Suppliers will be pushed for less and, when an outsourcer has capabilities offshore, the move may actually happen," she said.

Joel Bellman, a director in Deloitte's public sector practice, argued that the review will drive big changes in IT management, and continue the government's shared services agenda. IT spending may increase, but this will be in specialist skills and software.

"Councils are already clubbing together for their back-office systems, such as IT and finance, and there is likely to be more of this," he said.

"I don't think there will be new systems, and there will not be new investment in hardware and software. Departments will just try to get more from their existing systems."