The reduction in public spending will fall on central government departments, where spending reductions are estimated to average 19% of current spending budgets as well as on local governments, where central government funding to the councils is expected to fall by 26% of current funding levels over the next four years.
Saving has been identified in IT and related services. 300 IT projects, worth £1 billion in total, will either be scrapped or reduced because they have been deemed unnecessary, though the full details have yet to be detailed. The UK government expects to extend the reductions in spending with major IT vendor suppliers by £800 million in 2010 through renegotiations.
The UK government face dilemmas over its future IT strategy. IT is a key enabler for structural reductions in public services costs but only if it is accompanied by successful technology services implementation, defined as: on time, within budget and without the scope creep that is driven by political expediency and political agendas.
The UK government requires the help of major outsourcing firms for a longer-term IT strategy to achieve its spending cuts. Yet, there is possibility that the public sector will resort to outsourcing purely as a means to deliver quick savings. Outsourcing is likely to end in failure if the UK government embarks on it purely as cost reduction exercise.
Outsourcing has to be a strategic decision that introduces a long- term change in IT deployment. Public sector jobs will be lost in the process, though they will be lost whether or not the UK government extends the use of outsourcing services. Some positions will be surplus to requirements and because outsourcing involves offshoring of services.
Outsourcing provokes an ideological debate among those who believe that outsourcing from the government to the private sector is bad and creating more public sector jobs is good. Offshoring exacerbates the debate because it not only reduces the number of jobs and takes them to the private sector but takes those private sector jobs out of the national economy.
As a result of its proposed cost reductions, the UK government has created the ideal environment to establish a long-term IT strategy using outsourcing. But the government has a dilemma and it is a political dilemma. Does it face short-term unpopularity of higher unemployment or embark on a journey to fundamentally change the way it deploys IT services and use IT services to contribute to public sector cost reductions.
Source: The Times of India