The biggest kept secret: How the public sector can reduce IT spend

In 2015, Chancellor of the Exchequer, George Osborne, set out the UK Government’s spending plans by asking public sector workers to make significant savings in a bid to reduce the deficit by 2020. Osborne stated that budgets would need to be reduced by one-fifth at the very minimum. There were also predictions that one hundred thousand public sector jobs would be shed. 

With this announcement came the realisation that IT departments within public sector bodies such as local councils, police forces and central Government are most likely to be hit the hardest as the pressure to do more with less intensifies.   

However, due to the public sector having one of the largest and most intricate IT infrastructures in the UK, simply choosing to cut budgets on any particular system could be detrimental to the running of everyday business within the sector. The process of finding cheaper alternatives  will require greater preparation and planning due to its complexity.   

In the past, an IT department would typically consist of desktop computers, servers, software licenses, website management and IT service support. IT departments incorporating fewer facets resulted in a much clearer, straightforward, and cost-effective budget. However, with the introduction of cloud technology, mobile devices and social media, reducing budgets becomes more complex as IT estates expand.    

With the public sector’s IT infrastructure being more complex than ever, knowing what to buy and the ROI of the purchase adds to the confusion. Yet, despite this complexity, industry insiders, commentators and even the UK Government see room to free up budget within IT departments. For example, in 2015 the Cabinet Office raised concerns about how much money the public sector was spending on Enterprise Resource Planning (ERP) software after it came to light that the public sector was spending approximately £290m on Oracle products, the spend has increased by the fact that there are so many versions of the software and support options and costs. This called for a review of cheaper alternatives. 

The problem with finding a cheaper alternative is that it might not be that simple. ERP software is deeply embedded within the public sector and simply switching to a more cost-friendly vendor could take considerable time to implement, cause unwelcome business disruption, and may also limit its efficiency.     

Nonetheless, with ERP vendors like SAP and Oracle charging between 14% and 22% of license fees for support and maintenance, there could be significant savings that are being overlooked and much needed by many public sector organisations looking to receive premium support and maximise their IT budgets. 

Myths and realities of cutting support costs 

A recent article published by Forbes suggests that Oracle’s support business makes up around 50% of their overall revenue with many organisations paying up to 22% of their license fee for support which they no longer use or may not need. The public sector feels this cost to be too high for the all too often reduced levels of support received which is causing high levels of frustration. Third-party support, or independent support, has emerged as a result of this frustration and enables organisations to outsource their software support and maintenance at a significantly lower cost, and with a high quality of service, compared to vendor support, providing immediate and ongoing savings of at least 50%. 

Despite Gartner predicting that 10% of enterprises will be leveraging a third-party for their on-premise ERP technical maintenance and support by 2020, there remains a lot of misunderstanding and confusion around third-party support. In particular, many people are under the assumption that the quality of support is compromised when outsourced to a third-party provider. Many organisations instinctively believe that the vendor of a particular software is the best provider to support that software, however this is not the case. Complex ERP systems such as those provided by SAP and Oracle require specialist, local knowledge which means the third-party support providers are filled with consultants that have either worked directly for those organisations or have direct experience working with them and are providing a far more comprehensive and bespoke level of service. 

Additionally, with public sector organisations under certain pressures to remain Public Service Network (PSN) compliant, there is some scepticism amongst executives who feel that moving to a third-party support provider would compromise this. Selecting a UK based third-party support provider means compliance is retained. As well as this, some organisations believe that moving to a third-party provider would damage their existing relationship with vendors and believe they won’t be able to purchase additional products if they move support. However, again, this simply isn’t the case. Support Revolution have been working with a number of organisations providing interim support and maintenance for de-supported software and helping them move back to vendor support when it’s the right time to upgrade. 

Third-party support operators offer a far more comprehensive service than the vendors, after all this is their main business. With Service Level Agreements, dedicated support teams and a more bespoke package, it’s no surprise that more public sector organisations are looking at these alternatives. 

As public sector organisations remain under such significant pressure to reduce budgets throughout their IT departments, executives need to begin looking at ways they can make viable immediate and ongoing savings and not simply cuts which could impact the efficiency and overall impact of their departments. For this reason, software support and maintenance appears to be one of the most obvious choices when looking to make savings, it’s important that those within the public sector are aware of the support and maintenance options available to them.   

The public sector is changing faster than ever as budgets continue to be squeezed and execs are under pressure to make savings across various departments. As we move forward into a period of increased uncertainty, the need to save additional budget will only intensify, meaning that public sector executives need to develop new ways of thinking and should research third-party support options in order to improve service levels and take advantage of the genuine savings that are available to them.   

Mark Smith, CEO, Support Revolution

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