How Much is IT?

Maybe 15 or 16 years ago I sat in a room with a few people from the e-Delivery team and we tried to figure out how much the total IT spend in central government was. All the departments and agencies (including the NHS) were listed on a board and we plugged in the numbers that we knew about (based on contracts that had been let or spend that we were familiar with). Some we proxied based on “roughly the same size as.”

After a couple of hours work, we came up with a total of about £14bn. That’s an annual spend figure. Of course, some would be capital, and some operating costs, but we didn’t include major projects (which would tend towards capital) so it’s likely that 70-80% of that spend was “keep the lights on”, i.e. servers/hosting, operational support, maintenance changes and refreshes.

That number may be wrong today given 10 years of tighter budget management and significant reductions in the staff counts for many large departments. It might be that the £6.3bn in 2014/15 published in an April 2016 report is now more accurate (total government spend that year was c£745bn). A 2011 report suggests £7.5bn. Much depends on the definition of central government (is the NHS in? MoD? Agencies such as RPA, Natural England etc?) and what’s included in the spend total (steady state versus project, pure IT versus consultancy on IT transformation and change projects).

Maybe our number was wrong, maybe the cost has fallen as departments have shrunk. Or maybe it’s hard to get to the right number.

IT is both “a lot” of money and “not much” – public pensions will be some £160bn this year, health and social care roughly the same, Defence as much as £50bn and Social Security perhaps £125bn.

But how much is the right number?It’s useful to know how much is being spent for at least a couple of reasons

  1. Are we getting more efficient at spending, reducing the cost of keeping the lights on and “getting more, or at least the same, for less”?
  2. Are we pushing the planned 25% (or 33% for the 2020 target) of spend towards SMEs?

It would be more useful to know what the breakdown of spending was, e.g. how much are we spending on

  • Hosting?
  • Legacy system support?
  • Infrastructure refreshes?
  • Application maintenance?
  • Application development?
  • And so on

Knowing those figures, department by department, would let us explore some more interesting topics

  • How much are we spending overall and how does that number sit versus other expenses? And versus private sector companies?
  • How are we doing with the migration to cloud (and the cloud first policy) and how much is there left to do?
  • What are our legacy systems really costing us to host, support and enhance? And when we compare those hosting costs with cloud costs, is there a strong case for making the switch (sooner rather than later)?
  • What is the opportunity available if we close down some legacy systems and replace them with more modern systems (with the aim of reducing costs to host, upgrade and refresh, as well as the future cost of new policy introduction)
  • If we don’t take any action and replace some of our old systems, what kind of costs are we in for over the next 5 and 10 years and does that help frame the debate about the best way ahead?

Linday Smith, aka @Insadly, produces some detailed and useful insight on G-Cloud spend, for instance, that tells us, based on data for April to July 2019 that spend on cloud hosting appears to have fallen from £94m in the same quarter in 2018 to £78m this year (he notes that there are some data anomalies that may make this data not so useful – I’ve commented on the problems with the G-Cloud data before and agree with him that it can be unhelpful).

It’s possible that this is a sign of departments getting smart about their hosting – spinning down machines that are unused, using cloud capacity to deal with peaks and then reverting to a lower base capacity, consolidating environments and using better tools to manage different workloads. It could also be a reflection of seeking lower cost suppliers.

Or it could be a sign that there are fewer new projects starting that are using the cloud from day one (because my overall sense is that the bulk of cloud projects are new, not migrations of existing systems), or that departments are struggling to manage cloud environments and so have experimented and pulled back. Alternatively, it could be that departments are Capex rich and because cloud hosting is an Opex spend, they’re actually buying servers again.

Some broad analysis that showed the trends in spending across departments would improve transparency, highlight areas that need attention, help suppliers figure out where to make product investments and help departmental CIOs figure out where their spending was different from their peers. On the journey away from legacy it would also show where the work needed to be done.

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