Good Governance - Effective use of IT

Written evidence submitted by David S Chassels (IT 09)

Author: David S Chassels CA. Current CEO of software technology company Procession plc, former partner BDO and executive with ICFC/3i.

The emphasis in this submission is on the supply of software applications with specific questions being addressed namely

Number 6 "What skills does the government have and what are those that it must develop in order to acquire IT Capability?" and

Number 10 "How well does Government take advantage of new technology developments and external expertise?"

Summary

The past

· Since closure of OGC Research unit in 2002 the UK Government has been the uninformed buyer

· The official policy has been that the prime contractors are expected to do the best for taxpayers

· None of the prime contractors have in place a review process to look for customer cost saving technologies

· The reality is that industry analysts are conflicted in being reliant on vendor revenue

The future

· It is vital Government understand what they are buying and they (not the prime contractors) chose outcomes that platforms technologies support best value and future proof investment by asking the right questions of the technology vendors (see Appendix B)

· Government as the largest buyer of IT need to be in control by being aware of innovative technologies that set new standards that others must reach if they wish supply government solutions

· There needs to be transparency in all relationships involving vendors the prime contractors and use of SME subcontractors, the latter should be governed by a code of conduct

· External advice can be valuable but needs to be impartial and free of vendor influence

Current position

There is undoubtedly a new attitude of support for innovation in IT coming from the now empowered Cabinet Office with some practical initiatives coming from the UK CIO office such as the "skunk works" and "hack days". However there are powerful forces to maintain status quo but to tackle the historical IT "mess" (see industry comments in Appendix A) will be a longer exercise that requires firm resolve.

1. Background

This submission is presenting evidence from the "journey" by Procession as it tried to attract attention of government with its innovative technology for use in IT contracts. However this is a typical of the experiences by many UK based innovative technologies and will give an insight to both the government issues and the nature of the way the supply industry works very often counter to the interests of the taxpayer.

2 Structure of the supply industry

Whilst the product set is "immature" the supply industry has all the characteristics of a mature industry where much consolidation has taken place over the past decade. We are now left with only 4 global suppliers of the core enabling technologies; 3 global giants IBM, Oracle, Microsoft and 1 niche player Progress. From such core technologies solutions are built either a custom coded solution or a "product" that addresses a typical business problem where the business moulds its activity to suit such solutions (It is called Custom Off The Shelf – "COTS"). In more recent years new "tools" have been built that address the building of specific business requirements but they remain part of quite a complex stack of technologies. Most are US backed and the best are acquired by the large vendors as they reach a sufficient sales traction to make an acceptable acquisition to the financial markets. Unfortunately this results in such "old" technologies being sold on to end users.

3 Innovation a vendor perspective

We now have a clear global domination by a few major US based players. They maintain such a position by building strong ecosystems of end user suppliers many of whom are UK Government suppliers. The investment by both groups is considerable and as such militates against step change innovation. This is a well known issue known as the "innovators dilemma". "If they adopt or make new products that are simple to implement and easy to use, they will lose their massive streams of services revenue. Their sales models are based on selling big deals. A switch to simplicity will crater their businesses". There are therefore significant vested interests that could be adversely disadvantaged with step change or what is termed "disruptive" innovation which rarely if ever comes from dominant suppliers.

4 UK Government on Innovation

In 2002 OGC shut down a research unit which was recognised as a resource that allowed a review on new technologies and methodologies. By chance Procession visited OGC in Norwich as the unit was closing. There was genuine interest but subsequently it became clear that any procurement of solutions and services was based upon relying on competitive tendering using technologies that prime contractors deemed suitable – an obvious conflict for such as IBM supplying both technology and services direct. Over the years whilst many departments sympathised and recognised the lack of support for innovation no one took responsibility. This came to a head in 2008 following a clear message from the then newly set up Treasury Efficiency Unit that anything in "IT" was responsibility of UK CIO office. An exchange and subsequent meeting made it clear that there was no mechanism in place to encourage innovation and that they relied on the prime contractors to do the best for taxpayers. The recent moves to bring all IT under responsibility of the Cabinet Office will remove such "misunderstandings".

5 UK Government contractors attitude on "innovation"

Over the 8 years it was suggested on several occasions by OGC executives that an approach to their "Catalist" suppliers should be made. Without exception such approaches just were not taken seriously. One made the point it was up to the customer i.e. the government to make such choices. There was one notable introduction following a meeting with OGC chief executive Peter Gershon and his deputy Bob Asserati who acknowledged they were not equipped to express a view and made an introduction to Capita. Despite diligent follow up Capita rejected out of hand with no meeting or even a discussion. (Just to put into a perspective Procession technology is regarded by many "state of the art" indeed such capability is regarded as the future of software by no less than Bill Gates). This just sums up the arrogance of the supply industry who exploited ruthlessly a customer who had no idea what they are really buying into.

6 So who does advise buyers on procurement of "IT"?

Truly independent advice is very hard to come by and from experience comes from individuals who have practical experience and understanding of the issues. The world’s recognised leading analyst is US based Gartner. However they rely on 25% of their revenue coming from vendors. Their research into new innovative technologies is woefully short of their claims and consists of a 40 minute telephone briefing of which half is selling their services. Their headline claim "LOOKING FOR ANSWERS?  World-class technology research to meet your needs" is quite sales driven and lacks substance. This is based upon a number of attempts to get them onside and also the experience of many others.

7 How do Government department specify requirements?

In 2009 we had an insight into the procurement of a new system at DWP for the Child Maintenance and Enforcement Commission ( CMEC) . This was a contract placed with TCS to be built in India at a cost of £50m with 2 years to build. This basically is a system to assist mainly mothers requiring help to look after their children where the fathers have failed to support. By good chance we had an insight into the specification after it had been awarded . In summary we were quite shocked this should have cost no more than £5m. The attached is a final letter in Appendix A sent to the then DWP Permanent Secretary. I concluded (after consulting informed parties) that specifying requirement from a systems perspective was at the core of the problem where requiring to using "old" components just ensures a complex and lucrative build for suppliers. Disturbingly no o ne has investigated our claims of the savings. Again this is evidence that no one was taking responsibility and highlights the importance of Government understanding just what they are buying into when they require new capability in applications.

8 How does Government take control for effective IT?

The following suggestions are based upon e ight years of pe r si st ence and discussions with many who have had the same concerns

· Become the informed buyer by understanding what is available. This requires asking the right questions see appendix B. These need to be directed to the suppliers of the core enabling tools namely IBM , Oracle and Microsoft. There is nothing to stop government specifying in their contracts outcomes required on the technologies to be used

· Such an e xercise should be on going to encourage innovation that is relevant to Government contract requirements. M echanism s can be put in place such as the proposed Government " skunk works " to both asses s and communicate expected outcomes to the procurement units

· Specifications should be driven by the people user (internal and external) requirements not driven by legacy components which may or may not have a role to play in the new end to end application

· Transparency in all relationships is a must just as is being adopted by this C oalition government in other activities. This would include b anning use of analysts who are paid by vendors and a code of conduct for prime contractors in dealings with sub contractors .

Appendix A

Text of Letter to DWP

17 September 2010

Sir Leigh Lewis

Permanent Secretary

Department of Work and Pensions

4th Floor

Caxton House

6-12 Tothill Street

London SW1H 9DA

Dear Sir Leigh

Government IT procurement and CMEC

I refer to our exchange of letters earlier this year. I have now a better understanding of the real problem which has resulted in the Department in particular and Government in general buying complex outdated thus expensive IT. Early this month an article appeared in ZDNet about the state of "IT". The title summed it up "IT today: Unsustainable, unhealthy and just plain screwed". It takes for granted the government is in a mess and basically supports my views that the large vendors have little interest in innovation. It concludes "Add it up and IT is a mess. And chances are your IT organization is a disaster too. The big questions: What are you going to do about it? Where do we even start?"

My experiences and investigations will, I hope, help DWP address these serious issues. I concluded quite quickly there is someone or group in DWP IT that are the real problem. It is not with Duncan Mcgugan who I meet up in Warrington. He may not have grasped the total capabilities thus implications of our technology (which even Bill Gates sees as the future) but he has a very sound understanding of the people and process approach.

In discussions with well informed people I conclude that your "systems/enterprise architects" are the problem. They dictate from a technical aspect of the existing system and not from a business perspective. I assume you investigated what happened to my original contact with DWP about a new approach and I can only assume this group dismissed it out of hand. I know from others who have in the past tried to suggest different thinking they are ignored with, as one person put it, a degree of arrogance only matched by ignorance of how business really works.

As for suppliers I have no doubt that they have been negligent in failing to "do the best for taxpayers", a flawed policy by the last government. However the feed back I have had is summed up by a comment I received from a supplier. "If the Dept has set out a procurement that asks for details of our apples and oranges we are going to score no marks for telling them that they are asking the wrong questions….." So they go for the £50m on offer, the fact it could be £5m is bad business for them.

As for procurement it is just a process where they work to set guidelines and instructions from the systems architects. I am sure the process was correctly followed and all boxes ticked but the whole process was flawed from the very start. As a result the DWP in one contract will have wasted in excess of £45m with more inefficiencies and costs to come under the consequentially flawed framework agreements involving seven large companies. I have to remind myself this is a system to help families where there is an errant parent. I suggested should be no more than £5m but in reality could be half that.

I and many others believe you have a seriously flawed approach to "IT". Of course you need systems people that understand the current complexity but to build new capability should be about your people working in their daily jobs to achieve outputs that deliver a good service to the public. It is a dynamic environment where there will be constant change whether through new policies or just looking to work in more efficient ways.

I believe you should have business analysts skill set in house who understand how people work and the information that is needed and from this new systems can be rapidly built. It is a bottom up approach. My recent papers sent to your office explain just how it can work.

Finally you may find of interest some research. Apparently it is recognised the quality of Government IT systems in the leading economies with the inverse link between that and the dominance of large ICT companies in that country. Unsurprisingly, but depressingly, the UK is singled out as the worst of the developed countries, with Holland ranked as the best.  You just have to look at the two structures. The Dutch focus on "expertise" and have a link to their scientific council and there are initiatives that encourage bottom up activity. In contrast the UK emphasis is on the policy and procurement process, no mention of "expertise" or research and a resultant top down command and control approach.

We as a country do not have time to pull our punches as we are in crisis and IT has certainly contributed but likewise adopting innovation can help fix. I write this with the best of intentions to contribute to trying to fix our country for future generations. I am pleased that the current government have such relevant changes on their agenda.

I wish you well in tacking this "IT" problem in DWP as I do not underestimate the challenges you face. As before I will be circulating this letter widely to interested parties.

Yours sincerely

David S Chassels CA

CEO

Appendix B

Questions to vendors on their technology

1. Agility in software to support change – this must surely be a priority? 

2. Ability to produce quickly prototypes reflecting the end user/business need to engage early feed back   

3. Ability to connect to legacy systems

4. Use of open source

5. How much custom coding is required to build custom solutions and is it accessible

6. Does any model capability reflect  what is actually deployed

7. Reusable features to speed up future development   

8. Flexibility in build of working user forms and ease of change

9. Ease of delivering as a service or from cloud (thin client?)

10. Scalability 

11. Shared service capability

12. How many proprietary tools are required to address the following and if branded under one toolset detail of when acquired or built, state of integration as one and lines of code or file size.     

· BPM focus on people and their processes

· Process engine  to ensure all works to plan

· Rules engine reflecting real world of compliance 

· Calculation engine automating system work

· State/ instance engine Real time feed back

· Workflow everything connected in right order 

· Audit trail, events, escalations = supporting control = empowerment

· Time recording supports activity based costing

· Real time reporting become predictive

· Build mash ups one screen multiple data sources

· Linked Ajax Grids faster access to related data     

· Roles and performers people and machines

· Management hierarchy who sees what  

· E-mail and correspondence control tracking external communications

· Collaboration by accessing remotely required files = efficiency in storage

· Data storage link between front office and back office

January 2011