Tony Travers’ presentation at Socitm09 set the likely financial scene for local authorities over the future years:
* Increased demand for services due to the recession
* the need for increased support for NGOs
* the need to assist more in economic development
* at best, 0% grant increases for all councils
* a tighter cap on Council Tax
Speaking to several attendees from the supplier community at the conference, there was widespread belief that – perhaps – this much increased pressure on LA’s will at long last force many laggard councils into the significant changes in processes that can not only reduce costs significantly but also, potentially, provide a better service to citizens.
Anecdotal evidence from several suppliers who supply self-service solutions, supported the view that currently several authorities are unprepared to adopt self-service and/or abandon traditional high cost channels of service delivery, as they cannot stomach the implied loss of staff. Procurement decisions are, in many cases, still being left to the departments and staff likely to be affected by the adoption of self-service, i.e. “Turkeys voting for Xmas” – unsurprisingly resulting in no, or slow, adoption of such cost-saving initiatives.
It’s disappointing to note that these laggard authorities give local government a bad name in the efficiency stakes, even though the top quartile of LA’s have already moved to high levels of self-service, taking the pain of staff cuts in their drive to reduce costs. I just hope that this top quartile will not be penalised in the future as it becomes easier for laggard authorities (who currently have plenty of slack) to reduce costs, whilst top quartile authorities who have already reduced costs significantly find it more difficult to reduce costs even further.
Looking forward, for suppliers, it’s clear that my forecast for 2010 onwards remains valid – indeed, I now definitely believe that, for public sector software suppliers, poor revenues will undoubtedly continue into 2012 and possibly beyond....
Monday, 27 April 2009
Operational in-Efficiency Report
Snuck out on the morning of last Wednesday’s budget statement was the 92-page final report on the Treasury’s Operational Efficiency Programme. In theory the 20-odd pages on Back Office Operations and IT should have made for interesting reading as it seemingly identified some £7.2b of savings.
However, those readers that take the time to view the document soon realise that the document merely supports the setting of targets for saving of some £4b on back office operations and £3.2b on IT, with no detail or outline plans for how those savings will be made.
Even worse, the paper identifies that Central Government doesn’t know how much it spends on back office operations and IT, let alone how such expenditure compares with the private sector. Indeed, the findings summary states that “examination of back office operations and IT has focused on the need to improve the collection and integration of management information into departmental processes, and to introduce benchmarking and performance reviews. [The] work on IT has aimed particularly at better governance of IT-enabled projects, and greater standardisation and simplification of IT across the public sector.”
Estimates of expenditure on IT across the wider public sector vary from £12.5b to £18.5b – let’s say it’s £16b – against which we must be able to make some savings – let’s say 25% - giving savings of £3.2b – that’s sounds OK - let’s go with that. (I believe that the authors could have been far more scientific, but in practice they must have been stymied by the lack of any meaningful financial information on the real costs being incurred).
The report hints at the types of savings that can be made by the use of shared services and outsourcing, but makes no commitments to the introduction in any named areas. As ever, decision seem likely to be left with the departments and organisations themselves, with no clear plans other than to start measuring how much it really costs now.....
Although the OEP report indicated that it had found it difficult to get information on costs within Local Government (“it is hard to conduct a detailed analysis of this expenditure as it lies in a very devolved landscape”), I believe that local authorities have a much better handle on their costs that central government bodies. Last Thursday at Socitm09, Tony Travers suggested that the OEP report effectively increases the 3% Gershon target for savings to 4% for Local Government. Hardly challenging in the current environment, and I would not be surprised to see this raised further by a new government.
However, those readers that take the time to view the document soon realise that the document merely supports the setting of targets for saving of some £4b on back office operations and £3.2b on IT, with no detail or outline plans for how those savings will be made.
Even worse, the paper identifies that Central Government doesn’t know how much it spends on back office operations and IT, let alone how such expenditure compares with the private sector. Indeed, the findings summary states that “examination of back office operations and IT has focused on the need to improve the collection and integration of management information into departmental processes, and to introduce benchmarking and performance reviews. [The] work on IT has aimed particularly at better governance of IT-enabled projects, and greater standardisation and simplification of IT across the public sector.”
Estimates of expenditure on IT across the wider public sector vary from £12.5b to £18.5b – let’s say it’s £16b – against which we must be able to make some savings – let’s say 25% - giving savings of £3.2b – that’s sounds OK - let’s go with that. (I believe that the authors could have been far more scientific, but in practice they must have been stymied by the lack of any meaningful financial information on the real costs being incurred).
The report hints at the types of savings that can be made by the use of shared services and outsourcing, but makes no commitments to the introduction in any named areas. As ever, decision seem likely to be left with the departments and organisations themselves, with no clear plans other than to start measuring how much it really costs now.....
Although the OEP report indicated that it had found it difficult to get information on costs within Local Government (“it is hard to conduct a detailed analysis of this expenditure as it lies in a very devolved landscape”), I believe that local authorities have a much better handle on their costs that central government bodies. Last Thursday at Socitm09, Tony Travers suggested that the OEP report effectively increases the 3% Gershon target for savings to 4% for Local Government. Hardly challenging in the current environment, and I would not be surprised to see this raised further by a new government.
Friday, 24 April 2009
Gladstone produces sound interim results
Gladstone, the supplier of software solutions and services to the leisure and education markets has announced a sound set of interim results today. Despite the current economic and financial environment, turnover has not reduced, and underlying operating profit was up 6% to £698k.
However, on the negative side, as predicted in my last post, Gladstone has incurred exceptional costs of £690,000 - primarily as a result of the costs associated with defending Constellation's hostile bid – and continued with capitalising the costs of development of its new product, £352k in the 6 months.
I was fortunate to have a meeting with Gladstone’s Chairman and Chief exec, Dr Said Ziai, last month and was impressed with his confidence in the business. As well as the significant exceptional costs incurred in fighting off Constellation, the fight and EGM undoubtedly deflected management time away from driving the core business forward, but Said was confident that the business would be successful as the Constellation issues reduced and the new developments came on stream.
I regard Gladstone as one of the “old style” of software houses – cash in the bank (available for funding development in a recession and/or acquiring distressed competitors) – clear market leader - and yet having realistic plans for growth over the coming years, recognising the current financial situation and not looking for excessive growth.
A prudent company that will, in my estimation, survive the recession and, once we see the green shoots of recovery, will power ahead.
However, on the negative side, as predicted in my last post, Gladstone has incurred exceptional costs of £690,000 - primarily as a result of the costs associated with defending Constellation's hostile bid – and continued with capitalising the costs of development of its new product, £352k in the 6 months.
I was fortunate to have a meeting with Gladstone’s Chairman and Chief exec, Dr Said Ziai, last month and was impressed with his confidence in the business. As well as the significant exceptional costs incurred in fighting off Constellation, the fight and EGM undoubtedly deflected management time away from driving the core business forward, but Said was confident that the business would be successful as the Constellation issues reduced and the new developments came on stream.
I regard Gladstone as one of the “old style” of software houses – cash in the bank (available for funding development in a recession and/or acquiring distressed competitors) – clear market leader - and yet having realistic plans for growth over the coming years, recognising the current financial situation and not looking for excessive growth.
A prudent company that will, in my estimation, survive the recession and, once we see the green shoots of recovery, will power ahead.
Thursday, 23 April 2009
Socitm – a conference of two halves....
I’ve just got back from today’s socitm09 National Conference at Stoneleigh, and whilst most of the content was informative, it was also quite depressing....
The morning sessions focussed on the future – Tony Travers giving a broad brush view of the impact of the Credit Crunch on future funding (more about that in a later blog post), Richard Allen a refreshing presentation on unlocking the power of local information, and Rose Crozier on how socitm is at long last listening to, and focussing more on the needs of, its members. Although the messages were in some cases setting strong challenges for the future, there is clearly an uphill struggle for Local Authority IT departments and their staff over the coming years.
The afternoon session, however, was spent looking backwards and did nothing more than to emphasise how the majority of local authorities have not embraced the Internet and the use of electronic self-service sufficiently to reduce costs significantly. Martin Greenwood seems to have drawn the short straw to encourage LA’s to “use the concept of ‘avoidable contact’ to reinvigorate transformation”, and Dhanushka Madawala gave examples of the work Hillingdon had undertaken to reduce avoidable contact – all very basic stuff, but apparently necessary for many authorities....
(I will own up to having skipped the last session on “Digital Inclusion, LA’s and the third sector” in favour of attending IBM’s presentation on Business Process Optimisation).
Yet the exhibitors gave a far more encouraging message on what (presumably the upper-quartile of) Local Authorities are doing. Far from re-enforcing basic messages on Internet usage, suppliers were extolling their LA customers’ use of Web 2.0, blogs, Twitter and the like to try to really communicate with their citizens. Very encouraging.
Can so many other LA’s really be burying their heads in the ground and failing to embrace modern technology and, amongst other uses, adopt self-service to reduce their own costs?
The morning sessions focussed on the future – Tony Travers giving a broad brush view of the impact of the Credit Crunch on future funding (more about that in a later blog post), Richard Allen a refreshing presentation on unlocking the power of local information, and Rose Crozier on how socitm is at long last listening to, and focussing more on the needs of, its members. Although the messages were in some cases setting strong challenges for the future, there is clearly an uphill struggle for Local Authority IT departments and their staff over the coming years.
The afternoon session, however, was spent looking backwards and did nothing more than to emphasise how the majority of local authorities have not embraced the Internet and the use of electronic self-service sufficiently to reduce costs significantly. Martin Greenwood seems to have drawn the short straw to encourage LA’s to “use the concept of ‘avoidable contact’ to reinvigorate transformation”, and Dhanushka Madawala gave examples of the work Hillingdon had undertaken to reduce avoidable contact – all very basic stuff, but apparently necessary for many authorities....
(I will own up to having skipped the last session on “Digital Inclusion, LA’s and the third sector” in favour of attending IBM’s presentation on Business Process Optimisation).
Yet the exhibitors gave a far more encouraging message on what (presumably the upper-quartile of) Local Authorities are doing. Far from re-enforcing basic messages on Internet usage, suppliers were extolling their LA customers’ use of Web 2.0, blogs, Twitter and the like to try to really communicate with their citizens. Very encouraging.
Can so many other LA’s really be burying their heads in the ground and failing to embrace modern technology and, amongst other uses, adopt self-service to reduce their own costs?
Ordnance Survey’s new strategy....
Richard Allan’s socitm09 presentation (he’s the Chairman of the Power of Information Task Force) again brought up the serious data licensing problems that have been introduced by Ordnance Survey.
It would appear that their highly restrictive licensing of data is providing a major obstacle for the public sector to use graphical presentations of data – something that is absolutely key to good public access. I’ve encountered these sorts of problems with trying to negotiate access to NLPG, and it relates not to licensing but to payment – i.e. the licences are being used as an attempt to extract further funds from the OS customers - sometimes very significant sums.
This has surely been disjointed government at its best – one agency, OS, trying to cross-charge other government organisations (e.g. LA’s) – charges that the other organisations can’t afford, so the data doesn’t get displayed, and the citizen loses out. No wonder Google and Microsoft Maps are growing in use for displaying geographic data...
However, and perhaps in response to the criticism and competition, I note that the OS has today announced a New Business Strategy, which promises to focus on five key areas:
Promoting innovation – with an enhanced free OS OpenSpace service to allow experimentation with digital information and a clear path from this service to greater commercialisation;
Reforming Ordnance Survey’s licensing framework – so that it is much simpler to use Ordnance Survey data and services in other applications;
Reducing costs over time – to ensure that Ordnance Survey continues to offer value-for-money;
Supporting the sharing of information across the public sector – to enable better public policy and services;
Creating an innovative trading entity – to explore commercial opportunities around providing a better platform for consumers to access Ordnance Survey products.
I hope that this will result in a complete about-turn by OS on the fees for use of its data – personally I’m pessimistic – my experience is that strategies in the public sector can take years to implement (and sometimes implementations never see the light of day). The strategy is currently light on detail, but results are promised in the next year – we’ll have to wait to see what transpires over the coming months.....
It would appear that their highly restrictive licensing of data is providing a major obstacle for the public sector to use graphical presentations of data – something that is absolutely key to good public access. I’ve encountered these sorts of problems with trying to negotiate access to NLPG, and it relates not to licensing but to payment – i.e. the licences are being used as an attempt to extract further funds from the OS customers - sometimes very significant sums.
This has surely been disjointed government at its best – one agency, OS, trying to cross-charge other government organisations (e.g. LA’s) – charges that the other organisations can’t afford, so the data doesn’t get displayed, and the citizen loses out. No wonder Google and Microsoft Maps are growing in use for displaying geographic data...
However, and perhaps in response to the criticism and competition, I note that the OS has today announced a New Business Strategy, which promises to focus on five key areas:
Promoting innovation – with an enhanced free OS OpenSpace service to allow experimentation with digital information and a clear path from this service to greater commercialisation;
Reforming Ordnance Survey’s licensing framework – so that it is much simpler to use Ordnance Survey data and services in other applications;
Reducing costs over time – to ensure that Ordnance Survey continues to offer value-for-money;
Supporting the sharing of information across the public sector – to enable better public policy and services;
Creating an innovative trading entity – to explore commercial opportunities around providing a better platform for consumers to access Ordnance Survey products.
I hope that this will result in a complete about-turn by OS on the fees for use of its data – personally I’m pessimistic – my experience is that strategies in the public sector can take years to implement (and sometimes implementations never see the light of day). The strategy is currently light on detail, but results are promised in the next year – we’ll have to wait to see what transpires over the coming months.....
Wednesday, 22 April 2009
Contracting for developments using Agile methods
One of the questions I had following my article on Agile vs. waterfall methods, was how could customers contract with suppliers for developments using Agile methods?
As I’ve stated in previous posts on contractual matters, the key to success is to ‘define the deliverable’.
One approach is to go for a heavily documented Statement of Requirements and/or Specification (i.e. have a fairly well defined software deliverable), then look for a fixed price development. But this negates much of the benefit of the use of agile methods, and in my mind, the level of risk for the supplier could be too great (although new entrants to a market, who see the developed software as having some extra value – always assuming they retain the IPR – may see this as an investment to get into a new market). Beware that if a fixed price approach allows for multiple/costed changes for all changes to requirements (inevitable if true agile methods are adopted), then the original fixed price will be purely illusory.
On the basis that a complete SOR doesn’t exist, the development team will involve both customer staff (helping to define/refine requirements) and supplier staff, and will have no clear definition of the deliverable (although I regard an outline scoping document as the minimum for starting any such agile development). In such an environment, the easiest form of contract is a straight Time & Materials contract where the deliverable from the contractor is a number of “warm” bodies (although, hopefully, will particular application and/or technical skills and/or experience).
But such a T&M approach puts virtually all the risk back with the customer, and less-trustworthy suppliers may use the agile methods to encourage requirements creep and rework to ensure that their staff’s time on the contract is extended beyond original expectations.....
My discussions on these types of projects have shown the need to develop a trust relationship between customer and supplier – if a watertight contract is proposed so that companies who mistrust each other can work together, it will almost always fail.
As I noted in my earlier post, agile projects are much easier to run with in-house teams where the staff skills and experience are known (hopefully), and the team know that their performance will be measured by their success in getting a quality solution developed to schedule and on budget. If an external supplier is to be brought in, and management of the agile development retained by the customer, then the best contractual approach is one of a T&M form.
If the development project is to be managed externally by the supplier, then clearly during the procurement cycle, the customer needs to satisfy himself of the track record of the supplier in similar developments, prior to contract award. No one-size-fits-all solution exists for the form of contract – they all depend on too many variables ranging from the scope of the project to team size to outline budgets and schedules – but some of the recommendations I make include:
* ensure there is a broad goal for the project
* outline constraints such as budget and timetables upfront so the whole team is aware of them
* define standards for the project up front (UI, coding, data, documentation, testing, etc ...)
* as the development progresses, set detail goals every few weeks
* define in advance the level of customer involvement in the project (and ensure it is met)
* agree the priorities in order – budget vs. dates vs. functionality
* consider splitting the contract into multiple smaller contracts – some fixed price and some T&M – possibly using the “phased fixed price” approach I’ve discussed before
* consider a performance bonus for meeting defined targets (I know that the current trend is for negative penalties for not achieving targets – but I prefer the much more positive approach of bonuses – they’re much more motivational and, in my experience, deliver more successfully than the threat of penalties).
As noted at the beginning of this post, the key is to be clear on what the deliverables are, and then agreeing a pricing formula based on the level of risk to be accepted by each party.
P.S. As well as providing a “fire fighting” service for problem projects, I also provide consultancy to help new or existing projects proceed successfully and avoid becoming problem projects. If you would like to discuss ways of avoiding problem projects in the future, please contact me at Phil@systemsolveconsultancy.co.uk
As I’ve stated in previous posts on contractual matters, the key to success is to ‘define the deliverable’.
One approach is to go for a heavily documented Statement of Requirements and/or Specification (i.e. have a fairly well defined software deliverable), then look for a fixed price development. But this negates much of the benefit of the use of agile methods, and in my mind, the level of risk for the supplier could be too great (although new entrants to a market, who see the developed software as having some extra value – always assuming they retain the IPR – may see this as an investment to get into a new market). Beware that if a fixed price approach allows for multiple/costed changes for all changes to requirements (inevitable if true agile methods are adopted), then the original fixed price will be purely illusory.
On the basis that a complete SOR doesn’t exist, the development team will involve both customer staff (helping to define/refine requirements) and supplier staff, and will have no clear definition of the deliverable (although I regard an outline scoping document as the minimum for starting any such agile development). In such an environment, the easiest form of contract is a straight Time & Materials contract where the deliverable from the contractor is a number of “warm” bodies (although, hopefully, will particular application and/or technical skills and/or experience).
But such a T&M approach puts virtually all the risk back with the customer, and less-trustworthy suppliers may use the agile methods to encourage requirements creep and rework to ensure that their staff’s time on the contract is extended beyond original expectations.....
My discussions on these types of projects have shown the need to develop a trust relationship between customer and supplier – if a watertight contract is proposed so that companies who mistrust each other can work together, it will almost always fail.
As I noted in my earlier post, agile projects are much easier to run with in-house teams where the staff skills and experience are known (hopefully), and the team know that their performance will be measured by their success in getting a quality solution developed to schedule and on budget. If an external supplier is to be brought in, and management of the agile development retained by the customer, then the best contractual approach is one of a T&M form.
If the development project is to be managed externally by the supplier, then clearly during the procurement cycle, the customer needs to satisfy himself of the track record of the supplier in similar developments, prior to contract award. No one-size-fits-all solution exists for the form of contract – they all depend on too many variables ranging from the scope of the project to team size to outline budgets and schedules – but some of the recommendations I make include:
* ensure there is a broad goal for the project
* outline constraints such as budget and timetables upfront so the whole team is aware of them
* define standards for the project up front (UI, coding, data, documentation, testing, etc ...)
* as the development progresses, set detail goals every few weeks
* define in advance the level of customer involvement in the project (and ensure it is met)
* agree the priorities in order – budget vs. dates vs. functionality
* consider splitting the contract into multiple smaller contracts – some fixed price and some T&M – possibly using the “phased fixed price” approach I’ve discussed before
* consider a performance bonus for meeting defined targets (I know that the current trend is for negative penalties for not achieving targets – but I prefer the much more positive approach of bonuses – they’re much more motivational and, in my experience, deliver more successfully than the threat of penalties).
As noted at the beginning of this post, the key is to be clear on what the deliverables are, and then agreeing a pricing formula based on the level of risk to be accepted by each party.
P.S. As well as providing a “fire fighting” service for problem projects, I also provide consultancy to help new or existing projects proceed successfully and avoid becoming problem projects. If you would like to discuss ways of avoiding problem projects in the future, please contact me at Phil@systemsolveconsultancy.co.uk
Tuesday, 21 April 2009
Disney systems
Today’s advertisement for a Tender for a new Command and Control system for Lothian and Borders Police reminds me of a visit I made many years ago to a Scottish police force to view one of its brand new computer systems.
In discussion with one of the end users, in a broad Scottish accent, he described the system as a “Disney” system. Confused, we visitors from south of the border had to ask what was a “Disney” system?
Very simple said the officer – this function disney work, and that function disney work......
In discussion with one of the end users, in a broad Scottish accent, he described the system as a “Disney” system. Confused, we visitors from south of the border had to ask what was a “Disney” system?
Very simple said the officer – this function disney work, and that function disney work......
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