Former Chancellor of the Exchequer, George Osborne, set out the Government’s spending plans in November 2015. It was clear that public sector executives were facing a challenging five-year period. It would need to carry out some drastic changes by 2020.
The spending review outlined average cuts of 19% across unprotected government departments. There were predictions that 100,000 public sector jobs would be shed and budgets would need to be reduced by at least 20%. The pressure to do more with less is greater than ever.
Shortly after the announcement, it became apparent that financial pressures would fall heavily on public sector IT departments. With the deadline fast approaching and economic uncertainty on the horizon, where can public sector IT departments save significant costs?
ERP systems within the public sector
ERP systems such as Oracle and SAP are fundamental to the running of large organisations. They make up a large portion of IT spend across various departments. For example, in 2013 alone, the UK Government spent approximately £290 million on Oracle products. This level of spend led to the Cabinet Office in 2015 becoming concerned. The Cabinet formally asked various agencies to look at alternatives to Oracle in order to drastically reduce public spending on ERP software.
However, ERP software is deeply embedded within the public sector and simply switching vendors could be a huge disruption. Another significant cost to the public sector is the software and maintenance fees ERP vendors charge.
ERP support costs can consist of 22% of a customer’s licence costs for the first five years. However, the true costs often increase as the product ages. Customers find that they need specialist in-house skills to augment the vendor’s support. This is a cost that many public sector departments find themselves needlessly paying as day-to-day pressures limit their time to research, source and implement other alternatives that will deliver the same quality of support at a lower price.
Cutting public sector ERP costs
Third-party support providers exist to allow organisations that run Oracle and SAP services to receive best-in-class software support and maintenance from a team of experts and are able to ensure every customer can save at least 50% on support costs.
As the public sector attempts to reduce its IT spend, many IT departments find it hard to justify the funds needed to invest in forced upgrades to their software in order to continue receiving support. Third-party support can remove organisations from mandatory upgrade cycles. It can provide support for older versions of software that the vendors have abandoned.
In a 2016 article published by The Register, an unnamed government insider said: “The spend controls sound a mess – there is more getting through but also arbitrary challenges. The problem is it sounds like those running the controls don’t have enough tech knowledge but are following tick lists, which is only further irritating departments.”
Only change what you understand
The public sector has one of the biggest and most complex IT infrastructures in the country. This depth of its complexity means that it can often be confusing knowing what to buy and the benefits from the purchase. Software support on these systems is arguably the easiest concept to understand and purchase. Therefore, switching support providers could be the most obvious part to change in order to reduce IT costs.
The customer simply needs to record the systems they are running and ensure any service provider can provide support for the relevant systems. Then they need to source support from a trained team with the relevant experience, all of which are preferably based in the UK and security cleared, for an acceptable fee.
The simplicity of purchasing third-party support is perhaps its biggest weakness. Third-party support remains largely misunderstood by many public sector executives. This is despite predictions from Gartner anticipating wider adoption. At the moment, executives tend to assume that the right level of support can only be purchased directly from the vendor. They assume that external suppliers lack the understanding or insight to deliver the same level of service.
The public sector is changing faster than ever. Budgets and headcounts are now being reduced, and pressure to do more with less is increasing. New thinking and new ways of working are needed. While the public sector responds to this, moving support contracts to third-party providers offers a simple solution. It can dramatically reduce costs, maintain services for ERP systems and keep things running.