06 Aug Why is Public Sector changing so slowly? – The Change Roundabout
Public Sector needs drastic change, but major centrally run projects haven’t been successful and the localisation of decision making has pushed responsibility to hundreds of public sector organisations, all responsible for running their own procurements and making their own decisions.
This makes a coordinated Public Sector strategy hard to implement and coupled with the rate and intensity of change, means Public Sector is years behind the technology curve.
The Private Sector is really starting to reap the benefits Cloud Solutions provide. However, with the advent of significant changes to data protection, auditing and accountability with the continual increase in cybersecurity threats, organisations today are at a much higher total risk.
Interestingly in the Private Sector, we are seeing a significant change in ICT culture. This has traditionally been very hands-on, the ability to touch and play with kit has been very high on the desirability list of IT Directors and Managers. This has changed with CIOs and CTOs far more focused on making ICT invisible and hands-off, the requirement is to ensure that processes, policies and people evolve at the same pace as the technology and transformation.
This is not to conclude that the Private Sector knows best and has all the answers (Carillion is a good example of that) but as Tim Marshall, former CEO of Janet (UK) says “Never before have we experienced such fundamental challenges to the provision of our public services. To respond effectively we desperately need a revolution in our procurement and contract management processes underpinned by new inclusive partnerships between public and private enterprise.”
Public Sector is generally in a vastly different place. Today’s technology would have a huge impact on optimising services within Public Sector so why aren’t they embracing it? This presents a fundamental question.
Is Public Sector underfunded, inefficient or both?
Regardless of your views on this, what is apparent is that Public Sector is struggling to cope. It either needs a serious cash injection to maintain the current machine, a significant transformation to improve it or both.
There are many reasons that only 30% of NHS Trusts and 61% of Central Government Departments* have adopted any kind of Public Cloud. Supplier lock-in, legacy technology, security and a lack of cloud skills are some of the obstacles the Public Sector faces as it tries to evolve.
Public Sector needs to deliver better outcomes for citizens, to do this it needs greater collaboration and sharing of information, it needs automation, machine learning and process optimisation.
It also needs the senior leadership in place who have the desire to make this happen. Many have tried, they come in with a clear remit and the desire to make change for significant, positive impact. They are met with a workforce who have seen people come in, give big announcements, fight the machine and then leave, usually 18-24 months later – dejected, exhausted and frustrated.
However, one of the largest obstructions for Public Sector change is the Change Roundabout. The Bermuda triangle of control and inflexibility is the death of innovation and a weight around the neck of change.
Public Sector procurement has fundamental challenges
Zero risk profile
It used to be that Public Sector could get away with an almost zero risk profile, by running full governance, committees, endless documentation, debates and eventual action.
This laborious, outdated process takes significant time and money; both of which are increasingly scarce resources that could be put to better use elsewhere. The very nature of a zero risk profile is itself causing increased risk. Zero risk profiles are extinct!
The primary objective of a procurement
The primary objective of most procurements is to ensure the decision cannot be challenged, what is being procured, how it will be used and for what purpose is secondary.
Working with SME’s and utilising innovation is a government directive, so why are so few winning so little?
Craig Robinson from StableLogic believes“Public Sector cannot buy innovation unless multiple suppliers can quote for exactly the same services that are available on a Government framework, some of which only get updated annually. The nature of this means it isn’t innovation it’s a standard service.
This along with a zero risk profile and a need to ensure the procurement isn’t challenged makes it close to impossible to buy innovation.
Pretty much all innovative services tend to be Opex based subscriptions where services are consumed and continually updated. Public Sector is Capex or grant funded for a specific period of time and therefore lends itself more to a buy and build model – which is the existing model with high upfront costs, replacement cycles, people, complexity and legacy.
Most SME’s deliver Public Sector services through a major corporate supplier who adds a margin to the services. This is seen as a lower risk to Public Sector but means the SME’s aren’t making the margins in that sector, so it’s less attractive.”
The Price War
It’s also evident that due to the pressure to reduce cost, Public Sector is placing a significant scoring on pricing, with some tenders having a 70% weighting on price and 30% on capability.
Ask the KFC management team what happens when you buy cheap!
Many tenders are withdrawn due to unrealistic budgets and expectations. This is happening because Public Sector has bought from big companies who know how to win tenders with complex pricing models that favour the supplier through adds-on and additional charges.
Public Sector procurement is trying to close this off, which is understandable, however they are now often asking for fixed ‘all in’ pricing with a vast array of variables, with far too much risk now put onto suppliers. So again, only the big players with the resources to win tenders are doing so. Many of them being the incumbent because the replacement program fails.
The challenge with looking at every single element in a modular way is that you end up in a price war with yourself. It’s always cheaper to do nothing, you can always find a ‘cheaper’ solution. The reality is that the costs are just somewhere else.
The second challenge with the price war is that the existing organisation is geared to maintain what it already has, not what it could / should have. Therefore it will incur additional costs to fill the skills gap that exists between these environments. This is undesirable as it increases rather than decreases short-term costs. Those running the existing environments often see a new environment as a threat and can be resistant to supporting the change.
Might sound like a new Rambo film, but the reality in the Public Sector is the average tenure is extremely high, especially when compared to the private sector. 30% of civil servants are over 50 with a greater than 10-year tenure (the average age is 47) 10% are under 30 and the vast majority of Senior Management and Executives are 50-59**.
The challenge here is not the age of individuals, it’s the combination of age and tenure and the impact that has on culture. The lack of ‘fresh blood’ means there is a lack of new ideas and a lack of change. New employees who join straight from completing education don’t want a job for life and to be told, “see you in 35 years when you can get your pension”. Those that do stay quickly become indoctrinated into the existing culture.
Many of the people caught in the cycle within Public Sector are good people, they joined to make a difference and still want to.
The Leadership Challenge
Leaders who want to make a real digital change need to start with their risk, governance and procurement practices. If the processes that directly impact on progress don’t evolve then any progression within the sector is impossible.
Digital change programs do not need to be huge ‘boil the ocean’ programs or tactical changes which simply keep you in the ‘here and now’. They can be simple strategic statements and policies, for example:
“We will no longer buy, own and operate any network or hardware infrastructure equipment and will adopt a Cloud first strategy.”
What action do you take when someone within your organisations goes against your strategic policy?
If there are no consequences your transformational program has already failed! So, to drive digital transformation, start by reviewing the internal risk profile, governance structure and procurement processes and culture, alongside a strategy that has a consequence for those who do not follow it could be an interesting place to start.
Cirro offers transformational services to Private and Public sector organisations meaning we can share learning and best practice. We work with best of breed innovative providers who meet high standards of governance and accreditation. Our Cloud Services and Professional Services are available through G-Cloud.
Talk to one of our team to discuss your requirements
Tim Marshall OBE holds several roles in Public Sector Organisations