Same old same old...
£500M is like a tip to those suppliers.
What the gov should do is spend that £500M on learning how to stop signing up for ridiculous over-priced, over-constrained and overly-large IT contracts. Start by dealing with smaller companies where they have some respect for their customers -- the big boys would wipe their todger on your curtains after giving you one.
It's the same old same old. The gov's commercial people haven't got a hope against the big boy's top-flight lawyers. Civil Servants keep negotiating 'risk-averse' contracts that tie them in forever. Anyone working outside of central government would have a fit if they saw the prices the big-boys charge for quite basic services. Probably 10x more than is paid for by business on the open market, often much much more.
IT still isn't seen as a real job in the Civil Service (they don't even have IT grades, yet they do for vets, economists, lawyers...). The only way they can get competent IT resource is either by outsourcing or employing contractors -- and the outsourcers employ the same contractors.
It's pathetic; government need the IT resource but refuse to acknowledge that they need to pay accordingly, especially for specialists. So they leave themselves with the one option of paying through the nose for externals. It's like the civil service and/or unions can't get their heads around the fact that IT pays a lot more than other 'trades', so they stick their heads in the sand whilst being taken roughly from behind by the aforesaid suppliers. It's maddening that large businesses can deal with this challenge yet the Civil Service seem incapable (clue: if nothing else, technical specialists go on middle management rates, although Civil Servant rates for middle managers aren't particularly good).
As for software, they still don't buy core software as a single government entity; licences need to be purchased separately. Have they never heard of divide & conquer? Like cleave the head of Microsoft and Oracle and tell them the price for 5M to 10M licences.
Anon for good reasons.