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Government IT Cost Containment at an Inflection Point

by Andrea Di Maio  |  January 25, 2013  |  Comments Off

Government organizations around the world have been on a continuous path toward greater IT efficiency as a result of overall spending cuts and budget reductions driven by the economic and financial situation in most of the developed world.

An excellent report recently published by the UK National Audit Office shows that recipes for IT cost containment applied by the UK government, especially in the area of better and more consolidated procurement, are delivering the expected results.

There are jurisdictions where there is still a lot of room for improvement when it comes to IT cost containment: insufficient coordination and standardization, complexity and devolution of decision making processes, conflicts of interest or even corruption get in the way.

But in many places, and the UK is one of them, IT cost containment has been relentless pursued, and one might argue that government IT organizations both at national and local level are close to the bones and to not being able to reduce their costs any further. On the other hand spending projections for the next several years in the same jurisdictions indicate that more savings are expected through headcount reduction and other measures to bring down operational spending.

For them, a proportional cost reduction is no longer an option. In order to sustain citizen services and discharge their statutory obligation, they will be force to automate, transform and digitize much further. Although individual technologies become cheaper,  the simple magnitude of the digitization ahead is such that IT spending cannot decline any further.

This seems to be confirmed by some Gartner data (in particular Forecast: Enterprise IT Spending for the Government and Education Markets, Worldwide, 2010-2016, 4Q12 Update – client access required), where especially at state and local level, but also at national level (albeit a bit later), a decline in IT spending reduction and a return to growth around 2014.

After years when government  IT professionals were struggling to prove the value of IT, we may be at a point where their business colleagues finally understand.

However more IT spending does not mean more IT spending by the government IT departments. The use of consumer and commodity technology is likely to shift IT spending from the IT department to IT users.

Therefore, in order for that spending to really help cushion the impact of overall budget cuts rather than be wasted into multiple streams, it is essential for  government CIOs to become good shepherds: they must strike the right balance between what they need to control and what they can leave to their IT users to choose.

Category: it-management  

Tags: cost-cutting  




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