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Government in-sourcing: It was never going to be that easy

Outsourcing 'your mess for less' no longer viable. So what is?

Comment Having thrown out the baby with the bathwater in its "outsource everything" drive beginning nearly two decades ago, Whitehall is now keen to bring tech staff back in-house. But how much roadmap does it have for breaking its soon-to-expire mega deals and for "transforming" IT?

The chief exec of the civil service, John Manzoni, has identified the need to bring in thousands of tech jobs in order to offset the major risk associated with a high number of "transformational" big projects. A paucity of skills has been a major contributory factor in high project failure rate, he has said.

It's a move some departments are already trying. For example, 250 Capgemini staff are being brought back in-house by HMRC – although it has hired a private company to help it figure out a strategy. The Driver and Vehicle Licensing Agency has also brought 300 staff back in house.

Similarly, the Home Office has confirmed it is trying to do more in-house. A spokesman points out that such a move is part of the government's plan to end the culture of awarding large IT contracts to single suppliers who are tasked with delivering a wide range of services.

"That's why we are building a strong, flexible team to deliver the Home Office's core IT requirements," he said. However, sources say the department isn't building up its in-house team in a way that would allow it to take on the 15-year-old contract with Fujitsu itself.

Departments are just starting to dip their toes in the water, yet the message has been clear for some time that they need to kick out their system integrators, many of whose decade-plus contracts are now coming to an end (albeit with a series of contract extensions to delay the problem).

What has been far less clear in the strategy is how it will replace those mega deals.

Certainly breaking up big contracts and "outsourcing in chunks" hasn't worked for the Ministry of Justice – whose Future IT Sourcing contract will at best be reset and at worst canned altogether, say sources. Neither has a centralised IT body sitting in the Cabinet Office in the form of the Government Digital Service done much to tackle delivering big new IT projects – as seen in the disaster around the Common Agricultural Policy IT system.

That leaves departmental in-sourcing as the only alternative left. But while it's all well to point out the disastrous strategy of deliberately divesting government of its IT skills and relying solely on the kindness of outsourcers, this approach is not without its problems either.

If the saying "you can't outsource a mess" is true, then surely the reverse is true, that you can't insource one either. Government departments need a clear strategy on how they are going to manage their new IT contracts, which will need to be more than simply an in-house version of the same deals let in the early 2000s.

A huge challenge in all this will be attracting and retaining the right roles – assuming departments actually want folk with proper technical skills and not more client-side middle managers. It's also unclear if departments are really willing to hire hundreds of more staff, when budget cuts mean they have to demonstrate an overall headcount reduction.

One source pointed out that for all their manifold faults, there are certain benefits to using vendors, as they are able to pay reasonable salaries, they don't need to put one-third pension contributions in, staff have a career ladder that can take them across businesses as well as across clients, they invest in comprehensive training, and they can sack people that don't perform.

"The answer is not to bring it all back in house," he said. "Instead have the very best in four key areas of skill: project management, architecture and design, procurement, and finance. You need to own those from top to bottom, then you contract out delivery in the pieces that make sense," he said.

None of that will happen overnight, and it's likely that most departments will continue to extend their big contracts for as long as possible while they try to work out a plan. ®

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