Government IT spending to come under scrutiny

In what could lead to a wide-ranging shake-up of government purchasing processes, the Office of Fair Trading (OFT) has launched an economic analysis of government procurement and the affects it has on competition and innovation. The study could have a significant impact on suppliers such as Microsoft.

The OFT has commissioned a general analysis of government spending habits to identify how they affect competition, create barriers to entry for new firms and encourage innovation. Spending on hardware and software is expected to play a significant role in the study, especially as a number of national and local government departments, including the NHS, have been evaluating alternatives to dominant products such as Windows.

An OFT spokesperson told silicon.com's sister site ZDNet UK that IT is likely to play a significant part in the study, but at this early stage she could not be specific. An OFT statement said: "One possible example is whether procurement practices might be restricting entry by new firms; another is whether they might be enhancing competition -- and its benefits -- through openness to new and innovative ideas."

Microsoft has already found itself under pressure from public bodies such as the NHS; in December, the organisation announced it was testing Sun Microsystems' Java Desktop in the hope that the Linux-based system could provide a cheaper alternative to Windows so more of its budget could be spent on patients rather than software licensing and maintenance.

NHS director general of IT Richard Granger said in a statement: "Our evaluation of the Java Desktop System holds the promise of allowing a greater share of NHS funding to flow directly towards improved levels of Patient Service. If this solution were to prove effective we could save the NHS and the taxpayer many millions of pounds whilst at the same time using rich and innovative software technology."

The study is expected to be completed in July 2004 and the results will be published shortly after that.

The notion of governments tailoring their procurement practices in order to influence the competitive landscape has proven contentious with some. Some government bodies in Europe and elsewhere are experimenting with mandating or preferring open-source software in public procurement, hoping to nurture local software businesses.

Organisations such as the Initiative for Software Choice, backed by industry giants including Microsoft, have attacked such efforts, arguing they distort the competitive landscape.

Munir Kotadia writes for ZDNet UK, silicon.com's Andy McCue contributed to this report