Does outsourcing leave the government too reliant on suppliers? Competition watchdog probes government IT market

The Office of Fair Trading is investigating the state of competition in the UK public sector tech market, and whether it is too hard for small businesses to compete.
Written by Steve Ranger, Global News Director

UK competition authority the Office of Fair Trading (OFT) is looking at the state of the UK public sector IT market.

The OFT said the top 20 software and IT services providers earn about £10.4bn a year in revenue from the public sector in the UK, and said it is keen to ensure "that competition in this sector works well", and is asking for suppliers and buyers of IT in the public sector to "get in touch about their experiences".

"And why is this so important? OFT has the legal powers to initiate competition enforcement proceedings should it feel necessary and that could impact everyone in our industry," said TechMarketView research director Georgina O'Toole in a blog post.

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The authority said it is seeking to discover whether barriers to entry make it difficult for smaller businesses to compete and whether public sector users face high barriers to switching suppliers, such as restrictive licence agreements.

It is looking at whether some suppliers seek to limit interoperability with and use of competing systems, and whether outsourcing leaves government bodies dependent on suppliers' expertise, which undermines their ability to save money later on.

The watchdog warned: "Healthy competition in any market drives down costs, drives up efficiency and promotes innovation, while a lack of competition can hinder productivity and, in turn, economic growth."

It said while there have been many reviews of the procurement of IT by the public sector, few studies have examined whether aspects of the supply side of the market inhibit competition, said the OFT.

Small suppliers have regularly criticised the public sector for ignoring their innovations in favour of mega-contracts with giant suppliers, and have called on goverment to address this inequality. The government has been keen to get more smaller businesses involved with government IT, with innovations such CloudStore bringing in smaller suppliers and dramatically cutting costs.

OFT chief executive Clive Maxwell: "We want to hear both from industry suppliers and public sector users about how competition in this market works, any problems that they have experienced, and how it could be made to work better." Anyone who wishes to contact the OFT can email ict.consultation@oft.gsi.gov.uk by 18 August 2013.

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