The government’s Comprehensive Spending Review presents huge risks to the IT industry, the staff who work for public sector and supplier organiations as well as the wider running of the country.

That was the warning from prominent industry bodies and analysts in the aftermath of the Chancellor’s Comprehensive Spending Review. .

IT personnel will have to fight to be seen as more than a cost centre, and to demonstrate their critical position in improving efficiency of the public sector, they said. The government will also have to play its part by recognising IT professionals’’ talent, - something that would enable the adoption of smarter technology practices.

In the Spending Review, Chancellor George Osborne announced that departmental operational savings targets would be doubled to £6 billion. He also demanded IT improvements in a number of departments – most notably HM Revenue & Customs, which has been grappling with huge changes to its PAYE tax system – as well as better value from contractors in the NHS and Ministry of Justice.

David Clarke, chief executive at BCS, the Chartered Institute for IT, said the government needed to make it clear that it was interested in protecting and nurturing IT skills, and give more clarity on plans for schools and universities.

“We are lucky that the UK has some of the smartest people in the world with regards to how technology can be applied to achieve these goals and therefore reduce the impact on our information society. I hope that the government will maximise the talent IT professionals have to offer in this respect,” he added.

Clarke expressed a need to “continue to invest in upskilling our society” in IT abilities. “There is no aspect of today's society that doesn't require IT literacy; we must ensure that we improve our ranking in these skills otherwise the UK economy is likely to be further impacted.”

The government will look to service providers to cut costs, but needs to avoid being seduced by the cheapest option, according to Martyn Hart, chairman at the National Outsourcing Association.

“There is a danger that today’s announcement could prompt the public sector to outsource cheaply, at the cost of improved service, in order to achieve quick gains over the next four years,” Hart said. He argued that the right due diligence and planning would lead to success. “It’s clear that any project initiated on cost alone, is more likely to end in failure.”

Bindi Bhullar, director at Indian offshorer HCL, called for the government to look to its outsourcers for “outcome-based pricing models”.

In today’s announcement, the Chancellor slashed council budgets by 7.1 percent a year for four years, but devolved more decision making to local managers. Jos Creese, president at Socitm, the association of local government IT managers, said in a statement that this devolution was an “opportunity for a paradigm shift in local services delivery powered by ICT to achieve better, properly co-ordinated outcomes for residents and service users at significantly reduced cost”.

Warning against cutting “indiscriminately”, Socitm said the government needed to make sure IT projects focus on “the essential as opposed to desirable business outcomes”.

Industry analysts said that while the government was keen to cut cost centres, it needed to recognise that the right IT investment would quickly pay back in improved efficiency.

“This review was not just about cuts, it was about changing the way the government does business,” said Jan Duffy, EMEA research director at IDC.

Devolution of power to local councils will require “restructuring of processes and the information infrastructure that supports them”, cuts in police budgets will require improved technology, and the elimination of benefits fraud “depends on analysis of mountains of data and behavioural patterns”.

The government also announced a major overhaul to the welfare system, cutting £7 billion worth of benefits and introducing a single benefit system. This meant “significant changes” to payment and management systems, Duffy said.

There was a significant risk associated with cutting certain areas of planned technology, Forrester VP Andrew Bartels noted. “No doubt, some new projects can safely be deferred or cancelled,” he said. “But other new projects could help reduce non-IT government operating costs, improve client service, and help meet urgent public sector needs, for example in security.” 

IT suppliers naturally rallied against the idea of the government cutting technology budgets, but issued a tough warning on not letting technology slip into a poor state of repair.

Andy Sinclair, senior director at application management supplier Micro Focus, said: “Government agencies which have been delaying IT maintenance for some time already, due to budget constraints following the recession, will now have even less resource available to modernise their application portfolios and keep their business-critical IT systems up and running.”

With today’s budget cuts, he said, it was “even more important” for departments “to be able to visualise, prioritise and modernise applications to significantly reduce operating costs and maintain critical business functions”.

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