BC IT Outsourcing 2018/19

The years keep on ticking by, but the numbers never get any smaller. The contracts are written for decades at a time, and change is hard so…?

In the UK, the review of IT outsourcing contracts was called the “Ocean Liner report”, with reference to how long it takes to turn one around.

That said, the curve of BC outsourced IT spending continues to march upward.

To what do we owe the continued growth? This year, no one vendor can really claim the lion’s share of growth, and yet every vendor except Maximus notched some modest growth. I would expect the $79M Maximus revenue line to shrink pretty quickly over the next couple years, as the MSP billing system winds down.

Maximus revenue won’t go to zero though. Having built out the infrastructure for collecting MSP premiums, they took that expertise and won contracts to collect court ordered family support payments. That vendor relationship got so intertwined with the Ministry that the Auditor General looked askance at it. They also used their position in the data flow to ramp up billings by taking on more responsibilities and adding to their systems.

This is one of the reasons that billings tend to go up-and-up even though outsourcing contracts are usually justified in the name of cost control and predictability.

From a vendor point of view, the beauty of an outsourcing agreement is that it lands you into the heart of a business, providing a privileged view of the opportunity space. There is nothing a client likes more (assuming they have the budget) then a vendor that can pro-actively provide a proposal to fix an obvious business problem. The fact that the visibility into those problems is monopolized by the incumbent vendor is just an unfortunate side effect. Over time, these little proposals can grow into whole new lines of outsourced work. If there is no internal capacity to support the new programs, the vendor just increases its share of government revenues.

The UK is as big and complex as BC (more so, of course) and they have reviewed their major outsourcing contracts, and exited a few. Iain Patterson, who wrote the “Ocean Liner” report, saw incumbent vendors, and their bias towards the (lucrative) status quo as a barrier to modernization:

Unfortunately, the main barrier that prevents departments from investing in these solutions is the contract landscape. Many still have large, legacy contracts using system integrators which affect their ability to change their technology estate. They’re faced with costly change control requests and complicated workarounds to link up cloud-based commodity solutions with their existing technology.

Unfortunately, there is no one answer to how to get out of the bind, except “very slowly and carefully”. As Patterson said:

“Understand the capabilities you have,” he said. “Understand what you’ve got as far as your contractual commitments. When the contracts expire, work with the companies that hold those contracts to try and change that landscape during the lifetime of the contract.

“And if you can’t do that, then we will try to do things in a different way. But we’ll come out of those contracts understanding what it is that we have in them at that moment in time, what can we commoditise in those, and where they are best suited to be delivered from, whether that’s internal, external, or whether there are things we can buy now rather than build.”

Turn that ocean liner, a little bit at a time.