Digitalisation in the public sector: The basics of digitalisation

Welcome to the latest episode of Gowling WLG's Listen Up podcast where we look at a range of topics trending in the legal and commercial landscapes.

Alexi Markham: Hi everyone, thanks for joining us today. This is the first of a series focusing on digitalisation within the public sector. In terms of why we picked this topic, what we are seeing as legal advisers to the public sector, is a general uptick in the number of procurements that we are being asked to support upon which relate to digitalisation programmes. And that is not really a surprise given the efficiencies that digitalisation can unlock and its ability to modernise how Government works. However, what we are also seeing is that digitalisation is becoming an increasingly important component in services that we would not have traditionally thought of as technology-focused requirements or technology procurements. And as a result, we are seeing legal, commercial and policy teams who have historically focused on more generic services being pulled into that digital sphere and the difficulties there as you come up against them, nuances when it comes to contracting for technology which are fairly unique to the technology market.

So, what we wanted to do is basically focus on the basics. We are going to be looking at a range of topics to try to equip you in going into technology-based procurements or procurements with a large technology component. So, we will be looking at things like, what is it we actually mean by digitalisation, what are the types of products that you are likely to need in order to support a digitalisation programme, and where typically are you likely to purchase those. We are looking in more depth at things like SaaS disaggregation, agile development and the procurement of AI, and then finally we are just going to finish up on data.

So, without further ado I will be passing over to one of my co-presenters, Jocelyn Paulley who is a partner in our IT and Outsourcing practice. We have also got Matt Harris who is a principal associate in our IT and Outsourcing practice who will be joining us on some of the later sessions in the series. Joss.

Jocelyn Paulley: Thanks very much Alexi. So as Alexi said, we are taking this back to basics looking at what do we mean by 'digitalisation'. A lot of people do not like technology terminology because they always wonder what is behind it but I think the comfort with this term is it's not really one of science it is more one of art, although when you start to dig in to it people like Gartner have put more structure around it and I think it's helpful just to look at some of this terminology so we have a collective idea of what we are focusing on.

So, the first step people often talk about is simply digitising the information that you have. So, that is simply means taking something that used to be in paper form or analogue as opposed to digital and putting it into a digital form, entering it onto a computer. So, you could think of something like digitising of medical records which has been happening over the last few years, simply turning the paper notes that doctors used to take into information that is typed straight into a computer and therefore a digital system. And if you think of this as a journey and as a progression to making more and more things that we do digital, the next step is then what Gartner calls 'digitalisation', which means taking that digital information you now have on a computer and putting more processes and information round it to actually transform a whole operation, so the way that something works. So, an example there might be something like e-commerce. You used to walk into a shop to buy something but now an alternative route you can carry out that same process, that same transaction, but through a digital medium, through using a computer and software.

The digitalisation generally allows processes to be automated and streamlined because it is all happening over a digital interface. And then the fullest realisation of that process is then what we tend to refer to as 'digital transformation'. So, this is really deep embedded coordinated changes of multiple aspects and facets of an organisation that transforms user journeys and business propositions and values. So, it is really taking a holistic view of an organisation and changing lots of things all at once.

Who is driving that within Government? Well, the Government Digital Service is charged with digital transformation and realising those ambitions. So, they are looking at better connected platforms, common platforms for better flow of data to bring more efficiencies, to make processes flow better, so platforms live Gov.UK/Notify, Gov.UK/Pay, Gov.UK/designsystems – those are all government-led initiatives to bring digital transformation into Government.

As I was saying, digital transformation is not just about using software, it is taking a holistic view of an organisation so that you use digital tools, software and cloud and digital interfaces. You change the processes so that they are digitally led, they are based around how the software works and that flow between individuals and different departments. And you give the people within your organisation the right digital skills to interact with those digital tools, so that they can change the way they work and have it based around using digital interfaces.

In these sessions, we are going to focus just on the tools aspect of digital transformation that you need to bear in mind if your organisations are talking about "we are going to undergo a digital transformation project", but the tools is only one bit and actually if the processes and the people do not change as well then it's not going to be a successful project because this is about all those initiatives working in tandem.

So, I said we are going to focus on the tools but we are going to take a really sky-high view of this at first because the point here is that there are lots of different types of contracts related to technology that you might need in the course of digitalisation, and this list is by no means an exhaustive list, it is just some of the types of terminology that you are likely to hear, so I wanted to give you a bit of familiarity with those. Starting with, what I might call a traditional software licence and support agreement when the software used to come on disks, and you would get a copy of a disk to download your software onto your laptop. You do not see so many of those nowadays. Through to design, develop and operate agreements, by which I mean specific bespoke made pieces of software that are designed for very specific requirements and within Government you are one of those sectors where you have some truly unique requirements for digital processes. So, you might have an agreement that has some design workshops; building of requirements, there is then a build phase where the supplier creates what you want; you test it and then it falls into operate i.e. the ongoing running, hosting and maintaining. You could slice and dice that down into different ways. You could have an agreement that is simply about the support of a digital system or is simply about hosting it. I am sure you will be familiar with Microsoft Azure and AWS as significant hosts of applications and systems.

We have the type of agreement that governs a lot of technology procurements now which is; as a service, software as a service, platform as a service, infrastructure as a service, or a deed 'X' signifying anything as a service, is the modern way that most technology is bought so that you are not owning assets and the costs involved are not CAPEX these are OPEX costs where you pay to have access to a digital service but where all the assets and ownership sits with a third party.

There are pros and cons to that of course, it means giving some suppliers maybe too much control or a lot of control and it means that these services are commoditised, so there is limited ability to change the risk balance or the way that service operates. So, whether or not you buy a particular technology solution becomes a procurement decision as opposed to something you can negotiate. But that is the way a lot of modern technology is built, and increasingly it is also, it has the ability to integrate very easily with other solutions. So, whereas we have seen trends over time to owning everything yourself to going everything outsourced and into the cloud, I think we are now coming back into a smarter space where people procure in different ways for different types of technology depending on the risk profile of the software and the data involved.

We have some other types of agreements. We have got a classic IT outsourcing, all very familiar with outsourcing trends and criteria. So, it is saying what it is and the kind of IT function that you wish to outsource. Master services agreement for professional services, consultancy, migration projects, and then systems integrator agreements which is when you have bought lots of different elements of technology and you need to stitch it all together to give you your architecture that you are going to operate from. Very relevant in the old world, still relevant in a cloud world, even though services are more inter-operable and using API technology you often still need someone in the middle to bring a system together to make sure all the data flows connect correctly and work as they should.

Alexi: Great, thanks Joss. So, having had a look at the different types of contracts that you may find yourself procuring we thought it would be helpful just to have a quick look at the some of the bigger routes to markets for government IT requirements. Hopefully you are all very familiar with the Crown Commercial Services frameworks but what we are touching upon here is some of the key Crown Commercial Services digital and technology frameworks. And I think there is a whole raft of them, I think there is over 64 currently but the spend tends to be concentrated in around six key frameworks, so G Cloud is by far the largest of the frameworks and that is the go-to framework for purchasing cloud-based computing services, particular COTS type solutions, and that could be cloud hosting, it could be cloud software, it could be cloud support. The number £3.5 billion is the number published by CCS as the current spend in the financial year, so it is a really large and busy route to market.

The second one digital outcomes, is the go-to framework where you need someone to design and build a bespoke digital product for you, typically using an agile approach. There are other lots on this agreement which you can use to find studio space to conduct user research or indeed to find users with the right characteristics to conduct your research and test your service. And the spend published by CCS for this particular framework this year is £1.6 billion, so still a really chunky budget being spent through that framework.

Technology products and associated services caters essentially for a quite a wide range of hardware products and software products and also associated services, so things like end user support service desks, integration. Unfortunately, CCS only publishes data for G Cloud and digital outcomes and so I did sort of scratch around the internet to try to work out the spend on an annual basis but the best figure that I could come up with is actually the amount that is put against the technology products and services to framework, where over four years there is an estimated spend of £8 billion, so you could take that as £2 billion a year potentially.

And then finally network services. Again, this one is projected to have a £5 billion spend against it if you look at the amount advertised for Network Services 3 and this is the route for accessing network infrastructure and communication services, so that might be cloud services, audio and video conferencing, radio, satellite networking. But I think the main takeaway here is there are some very heavily trodden paths to markets, so some of the key requirements then that you are going to require through the CCS frameworks.

That finished what we wanted to cover today, just on the overview of the basics and the next session is going to be having a more in depth look at SaaS contracts, so hope to see you then.

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