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Public Sector: IT Projects

My Lords, this debate is long overdue, and I thank the noble Lord, Lord Lucas, for introducing it today. I speak as someone whose total professional career has been in the IT industry: first with IBM, as a systems engineer, and then as an entrepreneur in the services sector. I have also consulted for IBM and Hewlett Packard. I have never been directly involved in a big IT project, but I know people who have. I am indebted to all those who have helped me with their views, opinions and deep experience in the preparation of this speech. Political life is not always fair. An impression gains hold in the public psyche and once there it is hard to remove; and so it is with public sector IT projects. Rightly or wrongly, the general view is that Governments—this one or any other—are unable to control those large projects and as a result taxpayers’ money goes down the drain. The truth is that some projects go well and are unsung, but others go spectacularly wrong and grab the headlines. In my day, the government sector was a no-go area, light years behind the private sector. Less qualified people worked there. Decision processes went on for ever. Life was too short and the rewards uncertain. That has changed. Since this Government came to power, quite correctly in my view, the managerial emphasis has been on information. Without information, you simply cannot manage. Obtaining information is not easy, especially if you are starting with primitive systems. To bring departments from the Stone Age into the 21st century requires massive investment on new and mega-sized systems. That all costs money, lots of money. As they say, with £10 billion here and £10 billion there, pretty soon you are talking about serious money. Then there was an about-turn. In the late 1990s, all the IT companies became very focused on the public sector. That is where the money was. After the dotcom crash, when the private sector froze, the opportunity presented itself. The problem was that, unlike the private sector, the public sector was not equipped to handle such huge projects. It did not have the people, it did not have the culture and, in particular, it had to deal with snooping politicians who did not have a clue how to ask the right questions. I should like to analyse why public sector IT projects have had such a dismal time and then make a few suggestions as to how they may be improved. First, there is a problem of scale. It seems to me that the public sector has always favoured the big-bang approach—introducing a fully completed project in one fell swoop. That is a very dangerous game. It is far better and much safer to make the project as small as possible, make sure all the bugs are ironed out and then roll it out slowly. Then there is what I would call the major problem: the public sector fixation with contracts and penalties. I am afraid that that is part of the Civil Service mentality. Somehow the Civil Service believes that, if you make the contract tight enough and the penalties onerous enough, everything will come good. It is a mentality that says that the supplier is the bad guy who is out to rip us off, therefore we must use the power of the contract to protect ourselves. I have always had a simple mantra in business: sign the contract, stick it in the drawer and never look at it again. The day that you take it out of the drawer, you are in serious trouble. But, then, I come from the private sector, where we regard suppliers as partners. Our attitude is that there will always be problems, but we sort them out by sitting on the same side of the table, not glaring at each other across the room. Here is the truth about onerous penalties: they do not incentivise suppliers; they make them live in fear. Furthermore, no penalty, no matter how large, will ever compensate for a failed project. Then there is the problem with the departments’ personnel. Those huge projects take ages to spec, ages to negotiate, ages to procure and ages to implement. Those who start the project are seldom there at the end. How many civil servants are still in post after three years? No one takes responsibility for the project from beginning to end. Then there is the whole area of consultants. A few years ago, I was consulting for Hewlett-Packard. A new CEO was appointed in the United States. His first act was to fire almost every consultant—including me, I am sad to say. That action resulted in a saving of nearly $1 billion a year. Did the company collapse without those paragons of wisdom present? Not a bit of it. Freed from those interfering busybodies, the company has gone from strength to strength. Consultants are the curse of business. They are used as a crutch, a prop, to support third-rate management. They give senior management an opportunity to abrogate responsibility that should not be abrogated. They are used by insecure and inept managers to cover their backsides, so that they can say when something goes wrong, ““Ah well, the consultants recommended it””. It may seem obvious, but consultants, like lawyers and accountants, are all in it for fee income. Shortening the project by making it easy and simple is not in their remit. It is not how they are assessed at head office. Their incentive is to make every project as big and as complex as possible, and their hope is that it goes on generating fees for ever. I am not joking when I say that we would all be served if every consultant were fired tomorrow. Managers should stand on their own feet and take responsibility for their own decisions, and not hide behind the skirts of overpaid time-wasters. The result of bad practice in government departments is that many IT companies also behave badly. The suppliers overplay their abilities. They over-promise what they cannot deliver, they underbid on costs, and they try to recapture revenues every time the specification is changed—and the specifications often change. They get themselves into a terrible mess. Let us imagine, if we can, the state of mind that Accenture must have been in, as my noble friend Lord Warner said, when it withdrew from the NHS project. It cost the company £220 million—an amazing figure—to get out of the contract. Clearly, it judged that it was better to cut its losses than to continue losing money hand over fist dealing with the NHS. This is not a triumph of contract, but a total failure of the whole project. I am of the old school, but I really want my suppliers to make a reasonable profit when they deal with me. If they are happy, I am happy. If they are disgruntled, I will have problems. The Civil Service will never understand that, which is why it gets into so much trouble. An arrogance also pervades these big projects—a ““we know best”” frame of mind. If nothing else, it has proved beyond doubt that it does not know best. What can we do about it? First, civil servants need to be trained and educated about the nature of contracts and partnership. They should know that, in any project, we are all on the same side. There should be a senior responsible owner on every project. In the private sector, IT is increasingly deemed to be too important to be left to the nerds. One cannot imagine Goldman Sachs having a chief information officerat a junior rank. Data are life and death to an investment bank, and too important to be relegated. It should be the same in government departments. Here is a suggestion. Why does not the whole public sector adopt a uniform delivery infrastructure? Why not make it all one utility, from which various departments can work? Finally, on the human side of IT, why don’t we market what is out there? The noble Lord, Lord Birt, talked about all the projects that are out there. I bet that most people in the street have no clue about what is going on. A little marketing would really help to make them aware of it. My analysis is simple: make the project small, make the specifications tight, make the suppliers your friends, make the consultants redundant, and make the users want to use your project.