BSF Thread, Are BSF ICT Contracts Profitable for the ICT Companies? in United Kingdom (UK) Specific Forums; I was wondering if BSF ICT contracts are actually profitable? Does the fact that Ramesys is making operating losses say ...
6th February 2009, 07:06 PM #1
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Are BSF ICT Contracts Profitable for the ICT Companies?
I was wondering if BSF ICT contracts are actually profitable? Does the fact that Ramesys is making operating losses say anything about BSF ICT contracts in general? This post seems to throw some light on this and touches on some of the issues I was thinking of. I might also have read somewhere that sometimes there is just one bidder for some ICT contracts (I could be wrong).
Can anyone throw some light on this?
Last edited by dunbar; 6th February 2009 at 07:38 PM.
6th February 2009, 07:25 PM #2
In business nothing is a slam-dunk. Though BSF is in large part about profit, companies wouldn't get involved with it otherwise.
They buy a lot of baseline equipment in en-mass, create a large, generic network, then charge schools a higher price per-head than schools (give or take some) currently pay for their existing ICT, then charge them amounts on top of that for anything which isn't part of the baseline package.
Of course, this is a very generic picture, and isn't true for all, but it's the baseline idea.
The companies would NOT get involved if they weren't going to make a profit out of education, the same goes for the building firms.
Labour wants to be seen giving people great looking schools (we'll ignore whether they actually help, or hinder, education and the technology within), but can't afford it, business can, so business fronts up the money, business won't do ought for nought though, so their pay-off is to charge schools large sums of money over the life of the BSF contract to make both their money back, and getting involved with BSF a profitable enterprise. (to do things that schools can already do quicker, better, & cheaper).
Like any enterprise, if they screw it up, they'll make a loss, but that's business.
7th February 2009, 01:36 PM #3
As above, I agree. The companies aren't interested in improving education in this country they are just interested in a quick £.
Thanks to Sylv3r from:
farmerste (9th February 2009)
7th February 2009, 02:28 PM #4
wahey ... I get to come down off the fence and annoy people now. Warning, this post is not trolling, will offend some of you but is intended as a wake up to those of you who, like Grommit, have hidden your heads in the sands.
The companies involved are in it to make profit. They will want to make as much profit as they can but consider it like taxes and cows. To be successful with taxes it is like milking cows, you want the most milk for the smallest amount of moo! (pTerry explains it better than I can!)
Companies getting managed services contracts will not make a huge profit to start with. Some are doing it to keep existing business (eg RM) because if they don't take control do people honestly think that companies that already have a strong foothold will keep it if other companies get the contracts?
Other companies see it as a long term investment ... get it right now and it can be a cash cow for a number of years (remember that in the managed services it is similar to the experience that many have had with PFI ... the first 2 years are getting things to where the school needs them to be, the next two are getting a settled relationship and negotiating flexibility and then after that you see progress ... but the renewal / continuation after year 5 gets made in year 4 really ... so that it the MSP will only get dropped if they seriously cock-up).
The companies getting the contracts have a simple reality to manage. If they cock-up then it does not get continued. And other LAs will look at how those companies have done elsewhere and decide whether they want to go for it.
So ... simple fact ... the only reason why companies will not get involved is if they believe that they can still be a supplier whoever gets the contract (eg Apple), that they do not see it as a healthy risk and they have enough profit elsewhere (eg local government contracts and arrangements, other public sectors contracts such as MOD, or NHS) or they are hedging their bets.
Those that get involved are doing it for the long term and they know they will only keep getting contracts or keep them on renewal if they don't make cock-ups. The first company to get dropped because of failure to deliver will send a shockwave, and those of you who are in the process of being TUPEd have to be aware that *your* jobs are on the line if it fails. If the failures are down to the original design then the ICT architects will be long gone and it is down to you and your managers to sort out. If the finger gets pointed at you for being rubbish at your job then you will be treated in the same manner that you would be in other sectors ... a meeting without tea and biscuits, a little piece of paper and an empty box to put your stuff in as you get show the door. Get used to the idea that there will now be accountability.
Is it right? Probably not ... and when you are going through TUPE, making sure you know what training you will get, where the buck stops and what happens if you make the wrong decisions is going to be quite important to you.
Are schools going to be over charged for things? Quite probably (people already have posted evidence to that effect on individual purchase costs but until we start seeing some proper financial breakdowns it is going to be hard to show how much has been saved / lost in money and how much in things like innovation, etc)
To be honest, my gripe against BSF is not the managed service, the contracts ... and I do struggle with the ethics of companies making a profit without having the interests of the schools / pupils at heart ... it is the loss of flexibility and innovation. I do think more school could do with some structure, direction and accountability then is in place now. Deity knows that someone has to do it because it is evident that many schools don't have the skills or knowledge within the SLT to make sure things are right, and in spite of everyone here playing nice and a small core being sharing and helpful why the blood hell don't we have more examples of policies and procedures in the wiki. If we are all so bloody good then when do we not have sample backup policies and procedures, maintenance check sheets, examples of checking audit trails ... the list goes on.
LAs are producing some items and if you know of them then bloody well link to them! If you have good ones then share them, tell your LA about them, tell your RBC. It is actually easier to get a school to produce and share something than it is for an LA or RBC. The red tape behind me publishing something is a nightmare ...
There is no point saying "We know best" if people don't produce examples of this.
So ... there you go .. the gauntlet is down. Having sat on the fence for the last 3 years about where things are going with BSF and the state of IT support in UK schools ... it boils down to the fact that some people are doing good stuff, not enough people are sharing and you should not be surprised that someone is coming in and telling you what to do. Heck, even Tollbar BEC didn't put in an alternative provision proposal ... if that had been done then there would have been a good example of a school showing they could directly compete.
If you think you can do better then start telling people how ... and you had better make sure that it is comprehensive, is tied down to educational impact, and has good examples of how the innovation is having a positive difference.
Get used to the idea of change management. Get used to the idea of project management. Get used to the idea of financial management over 5 years or more.
I know that there are members on here that can do this, and do this already. I know there are lurkers who can add to this, but unless some of you start voicing how you make a difference then you can expect the companies to come in and have complete control.
Grommit hid his head in the sand in thinking that he could force a change by trying to subvert governors, etc ... you can't do it that way, it has to be by proving you can already do the job and then some. Even then it is unlikely that it will change that managed services will come in, but at least you can get the school to have more control based on existing good practices.
There ... is that coming off the fence enough.
7th February 2009, 02:47 PM #5
RM are typical for over charging, and whats worse sell something that dosent work.
7th February 2009, 02:50 PM #6
I'd argue this as I don't pay over the odds for things I do buy from them, and like every other company they have made and will continue to make mistakes.
Originally Posted by PEO
I doubt your post has anything to do specifically with BSF though and is more general and whilst I don't disagree with your statement, it's probably worth quantifying if you're talking about BSF, or voicing an opinion about RM itself.
7th February 2009, 02:53 PM #7
note taken. I guess its bit of both, I havent had anything to do with BSF yet although its all happening here.
Originally Posted by kmount
7th February 2009, 03:17 PM #8
Wow quite an onslaught there of managment type view points. I know that I am not qualified in the least to coment about most of these issues not being in the UK at all but from what I have heard from others on this forum I will make a few observations.
Originally Posted by GrumbleDook
Most of your points are about paperwork and procedure, how many people were actually hired with that kind of responcibility and allocated time to properly fufill this requirement. Was there managment support or even acceptance of this responcibility in their roll or would managment have simply been hostile to this extra overhead.
Does this point to a failing of the individuals or of the governance of the schools and the government for not enforcing clear guidelines and expectations.
The biggest questions is; do you think that it is right that those that did do their jobs well are being absorbed and having their job security and independance taken away because of failings that may not have been their own??
7th February 2009, 03:31 PM #9
One BSF contract I know states the managed service provider can only charge 3% above their cost price for any equipment the school requires. That cuts out over charging as an option.
RM are typical for over charging, and whats worse sell something that dosent work
Though having said that another consultant did brag about a 40k profit they were going to make on x on a train which was overheard by an LA representative and before the contract was signed x was amended to be 38k cheaper.
7th February 2009, 03:50 PM #10
Intentionally written in that manner, but done from a viewpoint of trying to translate it for others.
Originally Posted by SYNACK
If we are to hold ourselves up as IT Professionals then that also means dealing with the management side of things, that means paperwork There are standards out there for it and a chunk of it is based around common sense anyway. If you don't have it in your school and you fail to raise it as an issue then not only are you failing to protect yourself should something go wrong, you are failing to protect your school. If, when you took on the job, it said about this being your responsibility in your job description (often vague at the best of times) then it is your responsibility ... if not then you should have asked who is responsible. Some of this might just be getting your SLT to shout at the LA / RBC / Becta / DCSF for guidance ... other stuff might be to look at the standards that are available. Then again ... if your school does not practice any form of change management anyway (think how your school deals with changes of exam boards, new courses, changes of the school day, or new facilities as examples) then yes, you are on an uphill battle.
Most of your points are about paperwork and procedure, how many people were actually hired with that kind of responsibility and allocated time to properly fulfill this requirement. Was there management support or even acceptance of this responsibility in their roll or would management have simply been hostile to this extra overhead.
Ah ... good old blame management. I get bored of blame management as it often gets confused with accountability. Blame management is all about finding out who didn't do their job and saying it is their fault. This usually falls on either the lowest person in the system or the highest. Accountability is there to make sure you know where in the chain things fall down and sort it so it doesn't happen again. People don't have to lose jobs. It is about improving things rather than slating things ... a common misconception and is the bane of the life of anyone working in a bureaucratic system.
Does this point to a failing of the individuals or of the governance of the schools and the government for not enforcing clear guidelines and expectations.
Also remember that lots of schools want independence and control of themselves, but when things go wrong the local and central govt get blamed by the school and the school gets blamed by local and central govt. If you want control, then you have to have accountability.
For IT this is no longer directly in OFSTED so where the hell is it? Queue a heated discussion (take to another thread) about being set up for a move to managed services many, many years ago as soon as it was spotted that there was little or no control by school leaders over IT directly. Would this conversation be a different one if EG had started 3 years earlier? Perhaps not .. 5 years earlier then perhaps ... 10 years ago? Definitely.
You mean just like in other sectors when companies are not doing well and get bought out and the IT support gets merged (or even scrapped completely) with the large company's team, with some (or all) losing jobs from the failing / smaller company? It is not their fault either that sales drones are naff or teachers have little classroom discipline, or manglement are making wrong decisions about courses to run or how courses are taught, or what investment should be made in IT.
The biggest questions is; do you think that it is right that those that did do their jobs well are being absorbed and having their job security and independence taken away because of failings that may not have been their own??
It is almost an even playing field now ... doesn't feel nice, does it? I even think that the original question is not broad enough ...
Are outsourced contracts profitable for ICT Companies? What makes these contracts in the public sector viable? Is the Education sector any different to other parts of the public sector?
Last edited by GrumbleDook; 7th February 2009 at 05:00 PM.
Reason: Fixing quotes
7th February 2009, 04:06 PM #11
Let me just say I have no involvement with BSF whatsoever, however if there was no money to be made companies simply wouldn't be interested and wouldn't commit themselves to 5 year contracts (or however long it is).
Is BSF good value for money? I am honestly not so sure. The principle of BSF sounds fine. Quality services from companies with years of expertise, but then on the other hand, every customer, school and business my company works with all have different requirements.
Although I am sure there is a site evaluation and costing process, I do wonder just how many compromises have to be made to fit the one standard fits all approach? I am guessing "lots" is the answer which is why, in my opinion BSF will fall flat on its face sometime in the future. I think it limits innovation and creativity both from an ICT and the curriculum as a whole.
@Face-Man - The 3% markup on hardware isn't huge and to be honest I suspect the bulk of the profit will be on software and of course labour.
7th February 2009, 04:30 PM #12
wrong. The banks front up the money in the case of a private company seeking to win contracts....you may think i'm splitting hairs but it's an important consideration, because;
Originally Posted by Diello
with recent actions by govt, namely the prospect of quantitave easing with the help of the BoE, the govt. proposing to buy bad assets off the banks and other multi-billion pounds measures, one has to question the need for PFI in the current climate when a govt. with the help of the central bank can commit so much money to the credit crunch. think about it.....
the premise behind PFI is not that govts. cannot afford these projects, it's that they don't want the cost of these projects on the public balance sheet.
Remember brown's 40% rule ?....well, PFI would have broken that golden rule had it been included as would other things like pension liabilities. Now, as the govt. have long since jettisoned that golden rule and as borrowing, not including bank recapitlisations, goes north of 50% of gdp and as darling looks to borrow over 100bn alone next year, ask yourself what is the point of private finance initiative contracts when the govt. can move the fiscal goalposts so easily ?
Why can these projects now not be entirely publicly funded and added to the balance sheet and for the govt. to roll over that debt like all the other debts ?
Could it be that ditching the pet PFI idea is too much of an about turn and would cause too much embarassment, that they'd rather cut of they're nose and persist with it.
As for the profitability of PFI contacts, i don't know, as always the devil is in the detail of the contract. But it appears the contract winners won't go hungry. However, it's not unheard of for public-private IT contracts to not be as valuable to the contracter as initially assessed.
Last edited by torledo; 7th February 2009 at 04:33 PM.
7th February 2009, 04:47 PM #13
Go on humour me, what does make these contracts in the public sector viable ?
Originally Posted by GrumbleDook
economies of scale perhaps ?
the notion that the private sector would 'do it better' ?
OR that they are viable becuase of political expediency ? And becuase the govt. are in a terrible muddle wanting to maintain public investment but see private involvement as the key to success and are thus hooked on the drug of pfi.....now that really is muddled thinking. Is this another case of privatise the profits, and socialize the losses ? If so it would be true to form ?
7th February 2009, 05:04 PM #14
This is what I am asking? Perhaps I should rephrase the question to say what makes the contracts unviable and what makes in-house more viable?
Originally Posted by torledo
Or that they are viable because of political expediency ? And because the govt. are in a terrible muddle wanting to maintain public investment but see private involvement as the key to success and are thus hooked on the drug of pfi.....now that really is muddled thinking. Is this another case of privatise the profits, and socialize the losses ? If so it would be true to form ?
7th February 2009, 05:17 PM #15
Management response to that would be that since the paperwork would only need to be set up once, and only adapted occasionally then there is a cost saving.
Originally Posted by SYNACK
School response is the question whether that adaption would be bespoke enough to suit their school.
My question to members is do we already have the paperwork out there and experience to go with it, but just not sharing?
As a country we are media driven to blame someone whenever something isn't right. Audit trails are time consuming to set up, but there are good reasons for having them (including legal reasons). The same paperwork that is used to comply with information security guidance can be adapted for other areas ... how many people here actually have a real plan about what to do under FoI or DPA requests? I'm talking about why members should not abdicate their responsibilty, or shrug their shoulders and say "it wasn't my job, someone in manglement should have done it". We all know that really works well in tribunals or in the Courts.
As to blame management I have no interest in the actual appointment of blame I was simply pointing out that in many cases it may be a battle simply to costly to fight for some. I was simply assessing your opinion in the instance that they were unable to affect change to include said documentation in their time spent. If their managers wrote it off as a waste of resources and now they get written off for it in your personal opinion does that seem morally right. A MBA qualified and justified answer can follow if it makes you more comfortable.
And I have been reading too many vision documents recently to worry about MBA qualified and justified answers personally, but you have a point ... it could be beneficial for such a response to be made and then translated. It might help members who need to go through the same process with their manglement to get them to understand what they are doing and why.
Common Sense is part of the ideas thing that starts companies up ... there is little to show that it keeps them profitable to it gets shown the door. In fact, only common sense actually says that we should keep Common Sense.
I find it interesting that the US model of outsourcing all IT off shore seems to be spreading to other countries, sure our call centers get this treatment but not really proper IT support. It does seem that bad ideas have a natural breading ground in amongst the woolly heads of managers everywhere.
If only common sense was not practically illegal in corporations today perhaps everyone's money would still be worth what it was before the Americans shared hallucinogenic wore off.
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