Maude meets IBM and HP to discuss IT contract costs

9 July 2010

9 July 2010 | Lindsay Clark

Cabinet Office minister Francis Maude has summoned the government’s largest suppliers to a meeting in the hope of convincing them to drop their prices.

Suppliers including outsourcing giants IBM, HP and CSC have been set a challenge of supporting the government’s efforts in reducing costs in the current financial year and beyond.

Yesterday’s briefing with supplier chief executives, mainly from the IT sector, gave them the opportunity to meet informally with ministers and officials to understand the proposed process before the negotiation period begins, government officials said. The initiative is part of a programme of wider efficiency measures being driven by the government’s Efficiency and Reform Group.

Robert Morgan, director of sourcing consultancy Burnt Oak Partners, told SM suppliers were well protected by contract clauses, making it difficult for the government to reduce the price without paying compensation.

Suppliers have been convinced to drop deals in the past by the promise of future government work, but that tactic would be less effective in the current climate, he said. “There is no doubt about the austerity measures, so talk about ‘cake tomorrow’ is hollow.”

A better approach would be for the government to try to reduce IT service levels, allowing the suppliers to run contracts at lower cots.

Either way, suppliers were in no mood to be pushed around if they feel the government is being unfair, said Morgan. “They will not pull their punches, they can lay out the facts and fight back.”

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