component trading: why procuring government it & services will never be the same again
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Component trading: Why procuring government IT & services will never be the same again. Dr Mark Thompson Lecturer in Information Systems, Cambridge Judge Business School ICT Futures Advisor, Cabinet Office Strategy Director, Methods. The future of procurement in government. Smaller - PowerPoint PPT PresentationTRANSCRIPT
Component trading: Why procuring government IT & services will never be the same again
Dr Mark ThompsonLecturer in Information Systems, Cambridge Judge Business School
ICT Futures Advisor, Cabinet Office
Strategy Director, Methods
The future of procurement in government
SmallerLess bundledService- & Outcome-orientedStandardisedBusiness case increasingly aligned to TOM concernsUtility-awareArchitecturally exposedTechnical-commercial hybrid
‘Transformational’ government?
‘Joined up’ public servicesDisaggregation & outsourcing‘Agencification’ private sector commercial practicesTop-down, managerialist conceptsBusiness people appointed to senior public sector rolesEmphasis on ‘customers’, ‘contracts’, and ‘projects’
…actually, this is not really what happened!
• Public sector aggregated supply, not demand
…sounds innovative, but…
…also:• No reference model across government; widespread “we’re special”• Government ‘outsourced’ strategy & architecture• Contracts priced for risk, which was never outsourced• ‘Intelligent Customer’ skills leeched away from public sector• Track record of “stupendous incompetence” and bungling
Bespoke, complex, siloed, duplicatory, risky, and constrained - but why would anyone want to do anything differently?
…sounds innovative, but…
“Government expects its outsourcing service provider to maintain the complexity rather than to simplify and standardise the work processes”– Senior Dell executive
An array of high cost programmes have run late, under-performed or failed (terminated) over the last 20 years:• Inadequate information, resulting in the Government being
unable to manage its needs successfully• Over-reliance on a small number of large suppliers and the
virtual exclusion of small and medium sized (SME) suppliers, which tend to be less risk adverse and more innovative
• Failure to integrate IT into the wider policy and business change programmes
• A tendency to commission large, complex projects which struggle to adapt to changing circumstances
• Over-specifying security requirements• Lack of sufficient leadership and skills to manage IT within the
Civil Service, and in particular the absence of an “intelligent customer” function in Departments
Baked-in failure: IT is a good place to start
How much does this matter?
105 outsourced public sector ICT projects with significant cost overruns, delays and terminations: • Average % cost overrun 30.5%• Total value of contracts: £29.5 billion• Cost overruns totalled: £9.0 billion• 57% of contracts experienced cost overruns• Average percentage cost overrun: 30.5%• 33% of contracts suffered major delays• 30% of contracts were terminated• 12.5% of Strategic Service Delivery Partnership
contracts terminated or substantially reducedAnalysis (2007) of 105 projects outsourced by CCG, NHS, LAs, public bodies & agencies with significant cost overruns, delays and terminations. Cost increases are often underestimated as numbers reported usually only include payments to contractors, and not costs born by the client such as additional client staff engaged.
An Intelligent Customer?The Government’s inability to act as an intelligent customer seems to be a consequence of its decision to outsource a large amount of its IT operations to the private sector.
The NAO noted that many IT contracts: Are for a government body’s whole ICT service, meaning that Civil Service Staff, knowledge skills, networks, and infrastructure have been transferred to a supplier. This has effectively locked government into specific contracts for the long-term.
Further issues to deal with
Lack of real understanding in governmentDisjointed, ‘initiative’ approachNo real mechanism for holding govt to accountNo concrete plans for cascading into depts‘Commercial confidentiality’ as barrier to transparencyIgnored recommendation to commission independent investigation into suppliersInsufficient attention to developing intelligent customer capability within govtNeed to engage in honest debate with question of public service redesign
However:Cabinet Office is starting with IT procurement…
Progressive recognition of:• Focus on outcomes, open standards• Commercial implications of emerging open platforms• Ability of ‘utility’ services marketplace to deliver citizen-based services
An emerging reality:• Processes & supporting IT were traditionally integrated & clustered
around supplier/technology• Dis-integration of existing service towers• Re-aggregation into blended services, clustered around citizen
…but the prize is public services itself!
Public service delivery will become unrecogniseable
Government will:• transition from focus on inputs to outcomes• play the emerging utility marketplace• become increasingly fixated on standard ways of doing things• ratchet up focus on TCO• dis-integrate• become a Component Trader• re-aggregate• redefine what ‘projects’ are
An undifferentiated outsourcing contract?
A clear idea of TCO across your business?
An idea of how you will be able to deliver new services, differently, using the utility model?
Confidence that you’re paying bargain-basement rates for bargain-basement commodities?
A Target Operating Model?
A comprehensive plan for exploiting the economics of the Open Innovation revolution?
…a way to transition from focusing on inputs to outcomes?
Do you have…
Certainty
Ubiq
uity
Low High
Novel
Common
…with a major impact on government
Common
Novel
Ubiq
uity
HighCertaintyLow
IT has become an economic model
Certainty
Ubiq
uity
Low High
Novel
Common
When new products, business processes or IT solutions are developed, by definition they will be novel and there will be considerable uncertainty about whether and how they will work
High
Common
Novel
Ubiq
uity
HighCertaintyLow
Certainty
Ubiq
uity
Low High
Novel
Common
There is likely to be relatively slow development of similar products initially whilst the market is developing and the knowledge about the product, process or solution is growing.
Bespoke products/services are expensive
Common
Novel
Ubiq
uity
HighCertaintyLow
Moving from innovation to commodity…
Certainty
Ubiq
uity
Low High
Novel
Common
As the market becomes more mature and the product/service better understood, more suppliers will enter the market with similar or enhanced versions
Innovation to commodity…
Certainty
Ubiq
uity
Low High
Novel
Common
Over time the product or service will become commonplace, with widespread knowledge about how to deliver it
Supporting the innovation-commodity process
Certainty
Ubiq
uity
Low High
Novel
Common Dedicated Shared Utility
Certainty
Ubiq
uity
Low High
Novel
Common Dedicated Shared Utility
Dedicatedservices are:- non-standard- higher risk- more
expensive- available from
few (or one) supplier
Commodity services
are:- standard- lower risk- less expensive- available from
multiple suppliers
Supporting the commoditisation process
CommonUb
iqui
ty
Novel
Low Certainty High
Different skillsets to manage these…
Certainty
Ubiq
uity
Low High
Novel
Common Dedicated Shared Utility
- Innovative thinkers and visionaries
- People who understand the market direction
- People who can identify best matches to your needs
- People who can manage multiple suppliers and negotiate best pricing
- People who can manage transition to commodity services
…and different activities
Certainty
Ubiq
uity
Low High
Novel
Common Dedicated Shared Utility
Supporting innovation
Helping transition to “commodity
services” Managing multi-
supplier commodity
services
Identifying which services are innovative and which are
commodity, and enhancing intelligent customer function to
manage appropriately
Enha
nce
inte
lligen
t cus
tom
er fu
nctio
n
A new way of looking at IT-driven services
Skilling up
OpenGovernment
Consumer-driven, standardisedutility service delivery models
Common components
Identity & security
Increasing transparency
Service-driven procurement models & practices
Interoperability & shared data
Culture change from delivery to commissioning
Public servicesStrategy
Public sectorarchitecture
requires
enabled by
driven by
supported with
made possible through
and credible by
Uphill battle: how things get watered down
OpenGovernment
Consumer-driven, standardisedutility service delivery models
Common components
Identity & security
Increasing transparency
Service-driven procurement models & practices
Interoperability & shared data
Culture change from delivery to commissioning
Public servicesStrategy
Public sectorarchitecture
requires
enabled by
driven by
supported with
made possible through
and credible by
Strategy, Reviews, Business cases, Architecture
Change Management & CommunicationNew HR ModelsNew Ways of WorkingTUPE & other Transitioning issuesService Delivery Transformation
Commissioning-based organisationsIntelligent Customer function Market ‘radar’Co-creation, revenue sharingShared services & JVsCross-charging modelsCloud/utility-based delivery models
Information Assurance & GovernanceData standardsInformation Architecture
Information SecurityCESG accreditationRole-based identity
TCO & driving usage transparencyBenchmarkingCommunication tools
Standardisation (process, platforms, data, MI)Reselling opportunities
New types of projects
The de-departmentalising of government
…an unprecedentedly radical agenda
Standardise
Agnostic & plural
Business processesService outcomes
SuppliersSupporting technologyCommercial delivery vehicle
Business processesService outcomes
SuppliersSupporting technologyCommercial delivery vehicle
PBG model EnduringNPM model
Services Integration
Dis-integration of services
Service re-aggregation
The need for a ‘roadmap’…
Complex landscape of technology and business processesRestrictive support and commercial models
Constrained
Standardised technology and business processesRestrictive support and commercial models
Harmonised
Starting the journey to utility / Cloud Services
Embracing
Maximising the usage of utility / cloud services appropriate to your business
Exploiting
Service dis-integration, profiling & differentiation
ICT
People
Process
Services
Dedicated Shared Utility
Example: Assessment of social care needs
In-house
Dedicated Shared Utility
OutsourceTransactional
Social EnterprisePartnering
Trading Co.Joint Venture
Government as ‘component trader’
Nature of projects in local government
Dedicated services Shared services Utility services
Nature of Organisation
Bureaucratic, vertically organised, hierarchical, formal, process driven, rule bound, policy and procedure
Matrix, collaborative, horizontally-organised, ambidextrous (exploitation and exploration)
Community-based, organic, self managed, discretionary effort, localism, ecosystem coexistence, emergent, reconciling dualities
Meta-capability Execution Aggregation Innovation
People Performance, compliance, quality
Boundary-spanning, depth & breadth, collaborative behaviour
Self-awareness, entrepreneurial, networked, informed market awareness/engagement
Networks Localised teamwork Knowledge transfer, learning pathways, collaborative networks, relational capital, shared meaning, cognitive awareness
Community activism, tribal connections, identity, values
Structure Routinisation, consistent standards, knowledge capture/objectification, work process prescription, formal processes, e.g. Performance management
Flexible structures, communities of practice, knowledge retention & sharing, shared culture
Community organisation, governance & representation
Technology Workflow, database infrastructure, KM
Collaborative tools Social networking, mobile technologies, market enablers
Building a component-based reference model
Opportunity
Market Maturity
Document Management
Mail / messaging
Payments
Workflow Cash receipting
“service A”
L&T Resources (on-line content)
Infrastructure services
Video conferencing (media services)
Mail (collaboration)
Payments (utility-based)
+ “service B”
Training provision
On-line resources (e-learning)
Payments
+ “service C”
Data Input
Processing
Third party payments
Output
+ “service D”
The future of procurement in government
SmallerLess bundledService- & Outcome-orientedStandardisedBusiness case increasingly aligned to TOM concernsUtility-awareArchitecturally exposedTechnical-commercial hybrid
Thank you for attending
Contact details:
[email protected]@markthompson1
0207 240 1121 www.methods.co.uk