Tuesday, July 15, 2003

PFI + IT = gone

Kablenet pick up on today's report from HM Treasury on the use of PFI for IT projects. Interesting stuff, with some clear and bang on points about why it's hard to make such deals work: - The "fast pace of change" in IT, requirements often shift making flexible contracts and renegotiation necessary - It is often difficult to clearly define areas of responsibility between client and contractor as IT is increasingly integrated with other business systems. - There is a lack of third party finance in the PFI IT market, making it difficult to achieve any value for money; - IT costs are more often dominated by ongoing demands rather than up front investment I've often puzzled over PFI for IT. PFI is all about knowing the risk, pricing for it and then charging for it. With IT, especially in government, the risk is hard to know, harder to keep constant and therefore harder to price and charge for. So, a smart supplier assumes the risk will be enormous and charges correspondingly, but will be underbid by a sharper operator who believes the risk will be smaller.

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