Another government IT outsourcing project?
I can see where this is heading already....
Outsourcing giants must be rubbing their hands with glee after the National Employment Savings Trust (Nest) Corporation issued a tender for a £1.5bn contract to build the tech to run pension admin services. Nest is a UK government-backed workplace pension scheme launched in 2011 that has signed up more than 730,000 local …
18 year contract:
A contract signed 18 years ago would proudly have included compatibility with the then brand-new Windows XP. That's probably aged better than most other software from 18 years ago, and yet it is practically radio-active these days - people are throwing away multi-million pound CAT scanners because they can't take the security risk of it running Windows XP.
18 years ago we interacted with customers via phone. Email support would be modern. Twitter, slack etc were at least a decade from being invented.
18 years ago software releases were annual events, involving coordination of multiple teams, locked-down months in advance to order the hardware, frequently went wrong, were hugely expensive, had no production-type testing and delivered a fraction of the value we expect today. Modern cloud and devops is not perfect, but is light-years ahead in every dimension.
£1.5bn is three-times what it costed to create the IT system to run the UK's whole prison system: https://www.theregister.co.uk/2009/03/12/nao_probation_report/ - a massive overspend in itself. All this money to administer a pension scheme?
AWS halved its (Lambda) compute price last year, and how much of this was passed on to customers by the outsourcing companies? None.
Anyone will tell you: Outsource stuff that is undifferentiated heavy lifting. In-source what is risky, or is your key differentiator.
Maybe NEST has unique needs for administering pensions, compared to the dozens of other UK pension providers - I'm no expert. BUT you'd think everyone had realized by now that IT is risky and executing it well is key to nearly every organization's success. It makes no sense to outsource.
I worked on a large project for a government department in New Zealand about ten years ago (hence anonymous). They were (and still are) big proponents of outsourcing everything to do with IT and other services.
Now there are zero people employed by the agency who understand the system or even where to find the documentation that was provided. They reached out to me and I provided them the documentation as a favour and with the hope of getting some more work from them in the future. But when that time comes, if I were an unscrupulous sort, I could charge whatever I wanted became they have no ability to support the application or upgrade or migrate off it in-house.
This is the long-term legacy of all this outsourcing - the continued reliance on service providers for ever. Until and unless the organizations begin to bring the work back in house
£1.5bn over 18 years is £83m/year. That means the annual outsourced IT cost alone is 1.3% of assets. NEST currently levy an Annual Management Charge of just 0.3%, so it's not clear where the rest of the money is coming from. Personally I'd steer clear of a financial services provider whose numbers don't add up.
They charge another 1.8% on every contribution to your retirement fund. This was meant to be temporary to cover the cost of setting up the scheme, it doesn't look very temporary now. This tender seems like an outrageous ripoff of retirement savers to benefit big business.
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