£7.2bn savings: IT and back office feel the Treasury knife

Shared services and outsourcing will be at the heart of a drive to cut £7.2bn from UK government's annual IT and back office costs.

The savings drive was announced as part of the government's wider Operational Efficiency Programme report, published today, that sets out scope for the public sector to save £15bn each year across a range of areas.

Part of the review tackling IT, authored by ex-Logica CEO Martin Read, said that the key to delivering these savings will be sharing and standardising the back office and IT systems used across central and local government.

The £7.2bn savings will come from £34bn that the public sector spends on both IT and back office processes each year and should be delivered within the next three years according to the report.

"Public sector organisations with more than 1,000 employees should conduct a systematic review of their functions, systems and processes to drive simplification and standardisation. Reviews should be carried out by the end of 2010 to 11," the report said.

"This should lead to significantly greater sharing of services and potentially increased outsourcing."

Public sector IT systems are highly fragmented, comprising of many different types of hardware and software, with money being wasted on different departments running separate systems performing the same job, according to the report.

Shared back office service centres would consolidate and reduce the number of separate systems and processes currently used by government departments, councils, health trusts and police, it added.

The review highlights savings of 20 to 30 per cent on like-for-like services gained through the NHS Shared Business Services Centre, the joint venture between the Department of Health and Steria that provides back office services to more than 100 trusts the report said.

As well as backing increased use of outsourcing and shared services, the report recommends much tighter governance of IT projects, with ministers given regular updates on high risk projects, addressing recent concerns from Westminster insiders that failings in public sector IT were often kept secret until it was too late to put them right.

It added that government CIOs and the Office of Government Commerce Category Boards should also be given powers to ensure that common IT infrastructures are purchased across the public sector, rather than it being left up to individual government departments to purchase separate systems.

Sureyya Cansoy, head of public sector programmes for UK IT trade association Intellect which was consulted for the review, said savings gained from the review should be reinvested in IT projects to transform public services.

"It should not be assumed that the annual spend on IT could just be reduced from £16bn to £12bn. The government should recognise that IT can be used to transform public services and further cut costs elsewhere," she said.

To read the report's full recommendations on IT and back office savings, click here.