Can startups save local government?

Neal Gandhi
Neal Gandhi
Chief Executive Officer and Co-Founder

A new report co-authored by London’s first Chief Digital Officer, Theo Blackwell, calls on councils to make greater use of tech startups to help tackle their £5.8bn funding gap.

But while breaking the stranglehold of legacy suppliers over council IT budgets can only be a good thing, piecemeal services delivered by local startups won’t be enough to deliver the transformation in local government we need to thrive in the digital economy.

I can’t argue with the suggestion that local government would benefit from a more pluralistic technology marketplace. A marketplace that is not dominated by a limited number of legacy providers with little incentive to innovate, or to disrupt their own business models. This could only be a good thing for local service users. But the solution to the local government problem of funding service delivery is much more complicated than the mere expansion of competition.

Balanced report, simplistic coverage

I’ve founded, run and advised various digital technology SME’s that work extensively with both central and local government. Myself and a number of others – Sacha Rook, Ciara MacCooey, David Biden, Sean Tubbs, to name a few – have worked tirelessly to challenge the siloed stranglehold that legacy IT suppliers have over councils – both as Local Government Officers and as external advisors. We haven’t just talked about it at a simplistic, academic level. We’ve been on the ground trying to break the model and create the new one. We’ve got the scars, made the mistakes and tested the theories. So, broadly speaking, I support Public’s hypothesis.

The report itself is pretty balanced, and doesn’t simplistically suggest that buying SME tech solves all council problems. But  most people won’t read the report, they’ll read coverage which, unintentionally, oversimplify the problem and boil down all the nuance to a single point takeaway like ‘councils [need] to do more to buy from start-ups and small firms’. Articles like this will shape opinion, and opinion eventually leads to officials buying stuff based on that opinion.

Here are my reasons for discomfort.

Long tails or fat noses?

Reducing local government’s long tail of technical debt through rationalising applications and transferring capabilities to modern, platform-based technology would be a good thing. But tactical buying of point solutions from SMEs or anyone else tends to create a fatter nose not a shorter tail. This has always been one of the major problems local government procurement and use of technology. Strapping apps on, even good ones, doesn’t fix how data, case management and information flow work in a council. Most of the significant change enabled by technology, at some point, has to interact with legacy systems, data and processes. There are ways to approach this, none of them easy, and most require leadership and business model changes, not just new applications. As Theo says:

“We need to fundamentally and permanently change the way councils operate – everything from their leadership, decision-making and citizen engagement strategies to their staffing, culture, data utilisation, structures and processes.”

Right. Buying technology from SMEs may be one part of that but it’s certainly not the most important part.

The numbers don’t add up

The main benefit identified in the article I linked to above is that local government will save huge amounts of money through buying modern technology from innovative SMEs. In particular, the view is that emerging technology (Artificial Intelligence, machine learning, Robotic process automation etc) will form a massive part of those savings. But how is the majority of local government corporate funding spent, on technology or on people? In my experience, it was about 80% on people and maybe lower single digits on technology. There is no doubt the value obtained for the technology spend was poor, but it was actually comparatively trivial.

I am working with a UK based RPA startup at the moment, and I know from running a local government contact centre that I could have probably reduced my head count by 20% to 30% had their platform been around in my day. But as they used to say in Father Ted, “that would be an ecumenical question” (replace the word ecumenical with political). In the end, there’s no magic fairy dust here. Digital technology does allow organisations to deliver much more with a fraction of the people. But automation, cloud computing, machine learning and RPA only deliver limited savings on their own. Only losing the posts that used to carry out those functions saves real money. In one positive scenario, new technology will allow councils to redeploy officers to front-line roles, which should mean greater job satisfaction and improved services, but it won’t deliver huge savings. Technology is going to force a debate about the role of the state and public-sector jobs, whether we want it or not. No amount of shiny new apps will get us out of that debate.

Government-subsidised failure

The idea that government spending could be used as some kind of back door incubator and investor for innovative UK based SMEs, post Brexit, is appealing. If that is what this report is really endorsing then it should say that, but moderate the claim that buying tech from SMEs will lead to the transformation of local services. But if “Government as an Investor” is policy, then we need to be careful that government spending doesn’t end up propping up failing, modish business models and businesses. Otherwise, we will be enabling a kind of trendy, Shoreditch-style British Leyland. Just look at the fuss caused in the press a few weeks ago by HMRC moving to AWS.

Multinational ≠ foreign

One small final point. Most of the multinationals called out in the UK Authority article are UK based. They might have become multinational, often through their local government contracts, but these are very much a British creation.

Time to stop playing at digital

In summary, innovative SMEs – good. UK local government having a thriving and plural technology market to purchase from – good. Introducing competition to dominant players – good. All these development would be good, but nowhere near enough to transform local services in debt-ridden Brexit Britain. It’s time to stop just playing at technology-driven digital transformation and hoping everything will be alright. It’s time to start surviving and thriving in the digital economy.

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Neal Gandhi
Neal Gandhi
Chief Executive Officer and Co-Founder