The government's decision to cut the cost of contracts with IT suppliers may not adversely affect the bottom line of those suppliers, according to a government supplier and a top analyst.

Fujitsu, one of the government's IT providers, has signed a memorandum of understanding with the government to help cut costs in the public sector. However, UK and Ireland CEO Roger Gilbert revealed that reducing those costs does not represent a significant challenge for Fujitsu, as the government was paying inflated costs anyway.

"We can deliver the cost savings to the government in a number of ways," Gilbert told Computing.

"First, technology is inherently getting cheaper. So contracts that were awarded three or four years ago on the basis of competing prices then are worth less now, just by the nature of the way costs are being driven down in the industry."

He added that, beyond that, there is now a greater recognition in government of the value of shared services and collaborative procurement; which can also deliver cost savings.

Sarah Burnett, a senior analyst at Ovum's government technology practice, advised that government needs to forecast and manage costs better to get value for money.

"Government departments need better visibility of their expenditure so that they, along with the different parts and levels of the organisation, can see what they are working on and where they might be making mistakes, such as not realising that they're allocating money twice for the same projects," she said.

Burnett added that government departments should price contracts based on the value that the contract generates.

"Rather than pay on a quarterly basis, government should look to put the burden of proving value generation on the suppliers, especially in the case of longer-term projects," she said.

She added that while long-term contracts should not be avoided, due to the inherently decreasing value of technology over time stipulations should be made to ensure contracts continue to generate value for money.

Fujitsu's Gilbert added that suppliers must work on having a stronger dialogue with government in order to ensure that each party's priorities are being met as cost effectively as possible.

"The industry could reorganise itself differently too," said Gilbert. "For example, where two suppliers are supplying two departments with the same technology, if they can communicate with one another and say to government: ‘If you're willing to restructure your contracts, then so are we,' we would be able to deliver a better service for less money."

Source: http://www.computing.co.uk/ctg/news/1928812/fujitsu-urges-government-improve-processes