Lose-Lose Scenario

The public debate on the efficiency of the public sector, spend behavior, ethics and governance of state owned companies and recently the government 2012 budget proposal have been interesting to follow. I pronounce this of course in a tone of subtle sarcasm. The same applies for public sector ICT spending. Legislation and procedural guidelines dictate the buying process and the end result are far from desired. Well it depends who you ask of course. The process is typically very long, very labour intensive for both buyer and vendor resulting in ridiculously high cost-of-sales, purchasing costs and structural costs.

A macabre example of this is the latest development in the metro negotiations with Siemens. The renegotiation process cost alone has been 35 million euros, only to reach a stalemate position. What is the impact of such a structural problem the public sector purchasing system? Firstly, in practice only large entities can afford to participate. Smaller, more agile organizations simply lack the manpower and financial capital to take part in an RFQ process. Secondly, those who do take part, the high cost-of-sales need to be financed with bloated, oversized, never-ending projects running on forever because the break-even point is easily a couple of years away. Thirdly, as the number of able candidates is reduced to those few regulars who have the muscle to do so, are true market powers leveraged; is the best provider really discovered?

As a citizen, I do appreciate the transparency of public sector spending, I wonder if it were at all possible to change the rules of the game? Who would lose if the buying process was simplified and the associated costs were driven down? It would at least open up the competition to more vendors and mark the start of a completely new ball game.

The government has recently started a strategy preparation process for redefining its ICT strategy. It is tightly connected to needs defined by e.g. much-debated centralization initiatives and simplifying the services distribution and communal governance systems. The list is of course much longer. The objectives have striking resemblance with what corporations have been doing for decades. And with challenges that ICT solution providers have addressed for just as long. In its essence, nothing is new and excellent solutions are readily available, there is even an abundance to choose from. In the corporate world that is. From an application and technology stand-point I have a number of Microsoft and SAP solutions to endorse. They’re actually a perfect combination of better usability and a comprehensive software application and technology suite proven on all scales. But my point isn’t about which technology is chosen or that the selection is choked by a fault in the system. My argument stems more from the service provider perspective and limiting the range of innovation to choose from.

Once the strategy is ready and implementation begins, there will be a monumental amount of work ahead and coming back to my earlier point, this will be shared by those same few large players who feed on this ground.

I honestly think that this is ultimately a lose-lose scenario. The only positive aspect is that smaller companies, as the one I represent, don’t need to bother deciding on whether to tender or not. As a tax payer, I am of course concerned about the eventual impact this lack-of-true-competition and heavy cost structure will have on those picking up the bill. I genuinely believe in ICT bringing true efficiencies and better solutions, but can there be a positive business case in all this? I suppose we are entitled to study it once it is published. And if we’re lucky, we’ll get to vote for it.

Or against it.

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Blog writer

Mika Tanner

Bilot Alumni