Govt ‘overlooks’ Irish IT firms in awarding contracts

11 Oct 2005

The managing director of one of Ireland’s oldest IT firms has hit out at a growing situation whereby an estimated 75pc of the Government’s spend on IT goes to the top 10 IT services companies and “gilt-edged” consultancies.

The revelation comes in the aftermath of last week’s embarrassing €150m Personnel, Payroll and Relative System (PPARS) debacle.

The Health Service Executive met on Thursday of last week and decided to suspend the further roll out of PPARS until a review is complete. It also decided, as a precautionary measure, to suspend further work on another computer system, the Financial Information Systems Project, which has already consumed some €30m in consultancy fees with no part of it yet implemented.

Tony McGuire, managing director of Systems Dynamics (pictured), said that despite the political capital that can be made from such high-profile IT disasters, there are issues that the politicians on both sides of the Daíl need to recognise, but appear to be ignorant of.

“Ireland has a strong indigenous IT industry that creates software products and provides services to the corporate and government sectors. While few of these companies are of any significant scale, there are many that are well known on the world stage and many more that are as sophisticated and knowledgeable in their disciplines as any of the major international brands. Based on known figures for the total spend on IT services in the economy, at least 75pc of the Government’s spend on IT goes to the top 10 IT services companies, all of which are big international names. So why is it that all the major contracts for IT systems that government bodies award are given to these big international companies?

“When we ask the awarding bodies this question, the usual answer is ‘We are not paid to take risks with public money’. The implication of this response is twofold: Firstly, that there is no indigenous company that is of sufficient scale and capability to take on the project without significant risk. Secondly, that by awarding the contract to a big international company at a big price, there is an assumed insurance against the risk of the project going wrong.”

According to McGuire, there are many indigenous software and service companies that have significant experience of delivering sophisticated IT systems in the corporate and government worlds. “It would appear that their failure to win government contracts is more to do with lacking a gilt-edged name than anything else.”

He warned that having a gilt-edged name provides no insurance policy against failure, as recent events have shown. “There is an unspoken belief that if a firm is big and has a global name it is a safe choice carrying no risk for the selecting public servant. Rather similar to the beer ad, a virtue can be made of being reassuringly expensive. But rather than continuing to support this attitude, there is a clear need to address the risk-averse culture of the public service, as was identified recently by Brendan Tuohy, secretary general of the Department of Communications, Marine and Natural Resources, when he noted the need to support reformers and risk takers.”

McGuire argued that awarding time and materials contracts with no fixed deliverable and no fixed schedule will inevitably lead to massive spending. “We all recognise projects have over-run in that past – roads, rail systems, hospitals and many others. But if a contract was awarded to build a road with no specification, no particular direction and no deadline, then we would be assured that it would cost many times the original estimate.

“It is entirely in the hands of the government department that is purchasing the IT system to provide the governance necessary to bring the project to a successful conclusion. This means ensuring that the specification meets the business needs; that there is good project governance in place; that there is an achievable deadline agreed with the supplier and there is a project steering group that has the knowledge and ability to oversee these complex projects.

McGuire warned that continuing to award significant contracts to the gilt-edged names has a damaging double effect on the country. “Firstly, it penalises the indigenous industry because they are not massive companies. But it also prevents these companies from winning business in their own country, which would allow them to have the critical references and experience that they need in order to grow to significant scale. Secondly, the government departments are foregoing the opportunity to have innovation as one of the main themes of the systems and services they are developing. Small companies must be innovative to survive. Very often big companies do not bring and do not encourage innovation.

“Ignoring the need for innovation in government purchasing is a disservice to the indigenous IT industry and to the economy of the country,” McGuire warned.

By John Kennedy