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Public sector digital trends 2023 collection | Article

Market disruption brings new challenges

The IT industry will not be immune from recessionary and inflationary pressures in the coming year, and there will be a number of collapses, acquisitions and scaling back of growth plans, with a knock-on effect to public service clients.

Even Facebook, AWS and Microsoft cloud services are scaling back in recruitment and spending less globally. Smaller businesses may be forced out or acquired by others, leading to new fractures and risks for public service organisations dependent on their services. Notably in the UK, UKCloud went into liquidation in 2022, despite having experienced a successful decade, largely focused on services across government.

In the coming year, the implications of potential market disruptions for the public services will be felt in a number of ways, as illustrated below.

Risks of IT suppliers collapsing makes it doubly important in 2023 to ensure contracts allow for the recovery of data and an orderly migration to a new supplier

Supplier amalgamations may result in contractual renegotiations or increased costs to public bodies, adding to inflationary pressures

The rate of promised system upgrades, bug fixes and new innovative services may slow, and there may be cyber implications from this

Public services may be forced by suppliers into upgrades to lower-cost platforms, such as Cloud, at times that may not be ideal, with potential new costs

There could be a need to defer planned benefits in digital programmes, or to delay functional improvements in customer service strategies

There will be a knock-on impact on IT legacy modernisation plans, creating barriers, costs and risks that might otherwise have been avoided

Alongside these disruptions, the opportunities for IT supply to the public sector have never been greater, with a predicted significant growth in IT spend in 2023, especially in local government and health sectors (see Tussell for UK data).

The key areas public sector CIOs are reporting as being priorities for their technology suppliers include:

  • flexible support contracts that allow new partners to join
  • no forced upgrade, or cloud migration unless the business case justifies it
  • a strong match of ‘cost and functional’ expectations with reality
  • social value delivery and involvement
  • data and related cyber risk minimisation
  • contributing to the service road map and strategic objectives
  • supporting IT leaders by avoiding fragmented procurement.

2023 will also see a gentle growth in shareable contracts, especially to reduce the overhead of the more expensive technologies, services and tools, such as master data management and cyber protection.

“The ability to share technology across the public sector has become far more realistic, led by Low-Code, and No-Code …and resource constraints”

Andrew Boxhall, Technology Strategist, Microsoft

Public sector CIOs are well-aware of the cyber and resilience threats that are likely to come from within the IT supply chain, and there is likely to be more scrutiny of suppliers in procurement processes and routine compliance checks.