Public Services > Central Government

Whitehall gets advice on how to exit major IT contracts

Matteo Natalucci Published 10 November 2017

Government Commercial Function document provides guidance on principles for disaggregation government organisations should follow when managing exits from “large expiring IT contracts”

 

The government has published a document  containing advice for departments  on how to exit and disaggregate  major IT contracts.

The document offers guidelines and several examples of the government’s experience of exiting contracts.

The document explains that in previous years, a number of government organisations entered into large outsourcing contracts, which were often single vendor arrangements lasting five to ten years.

The document indicated that independent analysis highlighted a number of concerns and issues relating to these contracts, noting that they no longer represent value for money and that their structures constrain the relevant organisations from modernising technical environments.

In January 2016, Cabinet Office initiated the ‘Ocean Liner’ Review focused on a future approach to contracting and delivery of Government IT, within the context of the Large Expiring IT Contracts (LECs). That report identified a number of challenges that should be addressed when exiting from LECs.

The government’s current policy is to move away from large, single vendor IT outsourcing contracts to multi-vendor, disaggregated environments, combined with in-sourcing where appropriate, and adopting a cloud-first principle.

The document provides general guidance on the principles for disaggregation which government organisations should follow when managing exits from LECs (typically technology contracts with a spend of over £20m per year).

It highlights critical tasks and key success factors for achieving the exit from LECs and transitioning to a new environment where a combination of multi-vendor and in-sourced arrangements are used for the provision of on-going services.

The government believes that disaggregating LECS gives organisations better visibility and control of systems and substantial cost savings.

The government said, “Disaggregation is complex, in reality it typically takes longer than anticipated (up to four years), is resource intensive and needs to be well planned and executed ensuring”.

“Recent reports and government reviews have shown disaggregation and multi-sourcing can achieve over 40% savings and provide access to the vendor ecosystems previously hidden behind prime contracts, enabling departments to understand and manage services better,” the government said.  

It added, “The term of any contract for services should be for the shortest appropriate duration, bearing in mind factors such as vendor investment, ability to take advantage of reducing costs of technology, attractiveness to the market, organisational costs and ability to manage frequent change, to enable flexibility on exit and to allow transfer to alternative providers and avoid vendor lock-in.

“For contracts for commodity IT this will be up to 2 years and between 3-7 for service agreements depending on level of supplier investment required, size of contract and market dynamics.”








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