2010 | Lindsay Clark
government’s efforts to reduce spend on IT outsourcing could cost £200 million,
according to research firm ProBenchmark.
associated with re-tendering and negotiating new deals would in many cases
outweigh the benefits, the company found.
major central government IT contracts suggests that when existing contracts are
re-tendered, up to 80 per cent of buyers have no preference for changing
supplier because of the complexity of the existing arrangements and the costs
of making a change.
testing sounds right in principle but has huge costs in practice because of the
types of services being delivered by outsourcers,” said Probenchmark director
Simon Scarrott. “We are seeing re-bid processes take 18 months or more to
complete and costs to both parties of up to £8 million – even before transition
and redundancy costs are accounted for. That is too big a burden on buyers and
sellers of outsourcing services and is not economic. The tendering process in
its current form costs more than the savings it delivers – and that is not
ProBenchmark, while the total number of public sector sourcing contracts is
around 220, the priority target for re-negotiation in the next 24 months is the
90 deals valued at £5 million or more a year. Statistics from previous
re-tender exercises suggest that the cost of internal work and external
advisers for each one of these deals will be £250,000, on average. This figure
rises to £1.5 million or more for deals worth over £50 million a year. The
company estimates that the total cost of re-tendering in the current round of
public sector cuts will be at least £200 million.
government, however, said it would be able to reduce costs by as much as £800
million by negotiating with its largest suppliers, a huge chunk of which
addresses IT spending.