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U.K. Government's $1.6 Billion Oracle Deal Spurs Outrage

Jan 25, 2013 (06:01 AM EST)

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Earlier this week the Foreign and Commonwealth Office (FCO), one of the smaller departments in the U.K. central government, announced a deal with supplier Oracle for an ERP (enterprise resource planning) system that could deliver contract value of up to $1.6 billion (£750 million) over three years.

The source of the money: an extension of an existing shared services platform inside the FCO. The reason for the deal: a plan to consolidate multiple disparate systems from the business software giant onto a few Oracle platforms that parts of the U.K.'s civil service could cooperate in using. The vision: savings of around 10% -- $118 million (£75 million) -- in operating costs, as Her Majesty's Government is a solid customer of this suite.

You could be forgiven for thinking this should have gone down well with U.K. government IT stakeholders. Admittedly, the headline figure is pretty high, but not unusually so. Without question, this is a commitment to traditional forms of IT procurement, not any kind of open source or the cloud. But given the expectations of that level of operational savings -- as the government can grab a single discount for all new Oracle contracts signed going forward as a 'single customer' buying products in bulk from one supplier -- and given the U.K. state's often ruinously poor experience with what its own lawmakers have called the 'oligopoly' of a few big system integrators that have glommed most of the work in big ministries, what's to worry about here?

[ Bidding has started for LTE spectrum space in the U.K. The state is excited, consumers not so much. Read more at U.K. Consumers Underwhelmed By LTE Spectrum Auction. ]

That was Monday. By Thursday, all hell had been let loose. The source of the heat was an outraged former government IT buyer, who went on record demanding the heads of the civil servants tasked with reforming the way IT is sourced and paid for.

"I could buy the Chateau de Versailles for that money," was one of the milder expostulations from Chris Chant, a highly respected former mandarin who helped set up the U.K.'s G-Cloud (Government Cloud) plan to introduce the cloud into the bureaucracy to reduce waste and end the days of feather-bedding and big checks for big suppliers.

Chant, who took early retirement last year and now lives in France, still has great credibility with U.K. IT commentators. He is often found using his popular Twitter account (@cantwaitogo) to discuss the ups and downs of his beloved North London soccer team, Tottenham Hotspur.

But in the last few days his Tweets -- supplemented by excoriating interviews with the U.K. computer press -- have displayed nuclear rage at the move, which he sees as blowing up all the good work the Cabinet Office, a part of the U.K. government apparatus that acts as a kind of central administrative resource for Whitehall, had been making in getting more value for money out of IT contracts.

"Why waste money developing and negotiating if you don't intend to use it?", "Ineptitude by Gov procurement", "This is 2013, not 1993", and "Government IT disaster" are just a few of his reactions to the deal, which he sees as Cabinet Office's chief operating officer Stephen Kelly and chief procurement officer Bill Crothers majorly dropping the ball. (He's also now suggesting they should quit, having let this deal through.) Possibly his strongest metaphor so far was to suggest the government has been "raped" by suppliers for 15 years and that this is "bending over"… you get the picture.

On a milder note, Chant also pointed out that the money -- at a time of crushing austerity as the U.K.'s political leaders squeeze costs to pay down debt -- could have instead paid for 1,000 nurses or the running costs of two state-of-the-art public hospitals for three years.

Chant told the press, "The saving is a typical old-school negotiation -- they should target costs of 10%, not savings of 10%... If this is the best Kelly and Crothers can do for government IT savings, they should leave their jobs and make way for people who know what they are doing."

"Oracle will be popping champagne corks," he added.

The deal underlines just how hard it seems to be for parts of U.K. government to work with anything other than the 'oligopoly'. The Coalition and the Cabinet Office has spent the last three years championing use of the cloud and calling for more use of SMB level players in contracts, and most commentators had seen some progress under all the rhetoric. But at least one U.K. IT analyst outfit, TechMarketView, has said the Oracle deal is an admission that most buyers remain unwilling to deal with any new players. Chant and others disappointed in progress to any other way of sourcing in government say that the only way to change that is for leaders like Kelly and Crothers to step in -- and they say that this shows they aren't.

Given the U.K. state spends at least $24 billion (£16 billion) a year on IT, this kind of row is more than unpleasant for firms like Oracle -- it may end up really mattering.

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