We need to sing from the same hymn sheet

There has been a lot of scaremongering over the past couple of weeks concerning the cull of IT projects and supplier contracts by government departments under the new regime. The tone has focused on the impossibility of the task, with an underlying soundtrack of contracts being ripped to the notes of The Funeral March. The Treasury's aim is to save almost £100m across departments by delaying IT projects or stopping and renegotiating supplier contracts. But in my view, an objective of getting out of existing contracts with as little damage as possible, or driving down costs to unrealistic levels, is starting from the wrong place and is not the desired outcome. In reality, the drive for public sector cost savings should reflect the nature of the new political climate: coalition. The process may be challenging, but it should neither be combative nor confrontational. It can also generate both significant savings and greater return on investment, if both the departments and their suppliers come at the re-negotiation process from a pragmatic and realistic angle. Let's look at this from the supplier's perspective. What right-minded business is going to respond positively to the suggestion that they should just drop their prices? Why should they if they have a pre-agreed contract in place? The only possible winner is the customer but even that is only true in the short term. If a suppler agrees to drop its prices, they will try to regain their return, and the easiest target for this is to pare down service quality. It's also not true that you have to give something away to receive something. A contract extension, or delivering a reduced service, will certainly incentivise a supplier to reconsider their position, but that means giving away something when the cupboard is already largely bare. From the customer's perspective, government departments have gone from newly-merged, inexperienced clients, running some of the largest integrated IT projects in the UK (maybe even the world), to organisations with enough experience to recognise areas of overspend, poor return on investment, or service levels which have headed south since initial agreements were signed. The solution is dialogue; a genuine opportunity for two-way conversation. Many of the contracts are mature in their life cycle, when review and re-negotiation should be expected anyway. Because many of the government IT transformation projects undertaken over the last five to 10 years have been so innovative and complex, suppliers have naturally built in a degree of contingency, which the departments have willingly accepted. Now, with experience on both sides, departments are in a position of being able to offer clarity and assistance in refining the supplier service offering; identifying true cost savings; and assisting in improving return on investment. Both sides recognise the scale and scope of the challenges facing them. An honest conversation recognising both the areas of difference and similarity; identifying areas of compromise or where 'fat' can be trimmed from contracts; and readjusting expectations of outcomes and service levels, can lead to a successful and cost-saving IT coalition. Sound familiar? David Yip is a director of Xantus Consulting