The public sector market for bespoke software is in decline.Intelligent procurement across Government is leading to the development of shared services which can be reused across departments. Opportunities do exist but these comprise either prototyping new forms of digital engagement using open source software; or digitizing offline processes of which Connected for Health is the multi-billion pound flagship.
In this environment the companies that flourish may be small and innovative or large and strategic. The average digital agency will struggle to match the energy of a creative hotshop with its low operating costs or the breadth of experience of a public sector giant.
New digital specialists are thriving:
- Marcoms agencies – planning and delivering online campaigns
- Product developers – creating games and apps that can be distributed online
- SaaS vendors – reducing the cost and improving the reliability of software
- IT businesses – who support and manage business operations
The Home Office’s drugs strategy is delivered through Frank a health information campaign delivered across all media. A ‘full service’ digital agency cannot compete with a Marcoms specialist who can obtain better rates for media buying and offset their creative costs against advertising revenue.
Product developers create rich media applications or develop program software for business, education or leisure use. Broadband has revolutionized the distribution model for these products which can be purchased and downloaded directly from the developer. It is difficult for a mid-sized agency to compete against product developers who can spread the cost of development and marketing against sales from their back catalogue.
Platforms, such as Webjam, enable customers to build social platforms, publish content and run their own online business. As open source and licensed software moves digital engagement into the mainstream the demand for custom development falls.
Even the largest IT businesses are vulnerable to the Transformational Government agenda. But they do have business strategy, solution design and operational expertise which will remain in demand as long as public services are contracted to the private sector.
The upside of the continuing financial crisis and pending election is that government is looking at ways to deliver public services more efficiently. Properly valued online tools can reduce costs in untold ways (1 online tax disc renewal = 1 Saturday morning).
Companies who innovate will flourish. Scale is no longer important. The proliferation of public sector tweets is a salutary reminder to those companies who believe they have a grip on Government IT and communications. My advice, invest in the next wave of disruptive technologies.
