Plug, play, pray: the pitfalls of public procurement of products and platforms

Shift 1: Going direct

Government departments are increasingly buying directly from product vendors and hyperscalers, bypassing traditional SIs. A major CRM vendor has seen the shift to direct relationships with major Whitehall departments, believing this “saves money and removes the disintermediary layer” of SIs. They argue that direct engagement allows departments to build internal capability and avoid vendor bias introduced by SIs. 

This approach mirrors private sector practice, where large enterprises often manage SaaS platforms internally. One major vendor highlighted the need for departments to grow their own capability through hiring, reserving SIs for specific development tasks. The goal for departments is seemingly to foster long-term relationships with vendors and reduce reliance on intermediaries. 

However, this model isn’t without challenges. The hyperscalers in particular emphasize that they are utility providers, not integrators. As one executive put it, “You wouldn’t go to your electricity provider and ask them to wire your plugs.” While departments may expect vendors to deliver end-to-end solutions, they may lack the capacity or desire to take on integration roles, and are seeking to avoid building bespoke solutions and delivery models that can’t be used elsewhere. 

There’s also a risk of overestimating the influence that direct relationships bring. While government can influence product features relevant to the public sector, it is rarely large enough to shape global product roadmaps. As a senior executive from a major vendor acknowledged, “a single department just isn’t big enough to do that.” Consolidating departmental asks may help, and where UK government can coordinate to act as a single entity, it can influence not only through scale, but also where it can innovate and create a market that others may follow. 

In some cases, departments have pushed vendors to go further than they are comfortable. One hyperscaler withdrew from a major UK government competition, stating, “If the requirement requires us to be a systems integrator, we’re not going to play.” This highlights the tension between departmental expectations and vendor business models. Our recommendation is that both departments and the centre (e.g. GCA, DSIT) consider carefully the implications of direct relationships in light of the developing competitive landscape and the longer term impacts on the UK technology industry, for both SI’s and SME’s. 

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Shift 2: Artificial intelligence is coming

AI is reshaping the technology landscape, and procurement must keep up. In five years, some SaaS products may become little more than systems of record, with AI agents handling user interaction. As one senior industry executive observed, “The differentiation is no longer your own product, but rather the AI that sits underneath it.” This shift favours vendors with strong AI capabilities or relationships. Traditional SaaS providers may struggle to compete with the likes of OpenAI, or Anthropic, whose scale allows for faster AI development. In some markets, smaller vendors may fall behind, increasing the risk of lock-in. 

The pace of innovation is outstripping the speed of government procurement. Traditional processes that can take are ill-suited to a world where AI capabilities evolve monthly. One supplier highlighted the need for more flexible models, such as annual recommitment cycles, to keep up with AI’s rapid evolution and to offset the need to define all elements of a changing service up front. This will require significant changes not only to procurement run, but also in contract management and budgeting. 

This also raises questions about data governance. AI thrives on data, and if that data is locked into a single vendor’s ecosystem (in particular in certain complex products), switching may become difficult. Procurement teams must now ask new questions from the outset: Who owns the AI models? Have we made clear our requirement for interoperability? Can we easily extract our data and insights? Can we integrate third-party AI? To adapt, government should seek to decouple base platforms from innovation layers, and potentially create a new role for SI’s acting as an “innovation integrator” rather than a builder of bespoke systems. 

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Shift 3: The right tools for the job

Many of the UK government’s procurement tools such as the Model Services Contract, buying frameworks such as G-Cloud, and the Procurement Act itself may be no longer fit for purpose. These tools were designed for a different era and often clash with how modern cloud and SaaS services operate. Vendors report that public sector terms frequently make participation difficult, and changes often have to be made mid-process due to lack of early engagement. 

All of the vendors we spoke with called for an urgent, open and collaborative effort to modernise these contracts, suggesting deeper engagement between government and SaaS vendors to develop standard terms that reflect the realities of cloud services. “Vendors won’t be competing on this basis,” they argue, but all would benefit from more appropriate terms that acknowledge the realities of their business models. 

Another issue is the focus on upfront cost over total cost of ownership. A senior hyperscaler executive described it thus: “Procurement is the flashy front-end sticker price conversation… someone’s got to go and drive the car for 10 years.” Without considering exit strategies, departments lose leverage and risk higher long-term costs. 

Procurement also remains fragmented across departments, leading to inconsistent outcomes and missed opportunities for economies of scale. The lack of consistent interoperability requirements in platform procurements, as well as different departments choosing incompatible CRM systems, may create long-term inefficiencies and risk. System interoperability must be embedded as standard wording in contracts and functional requirements.  

Other countries, such as Sweden and Estonia, have adopted more centralised procurement models with greater success. In the UK, however, strong departmental autonomy and weak central authority have hindered similar efforts. A stronger central procurement function, working with the Digital Centre of Government should act now to align strategies, set standards, and negotiate better deals. The experience of the 2021 Shared Services Strategy for Government that created the cluster model for back-office systems shows that it is possible for groups of departments to pool demand and consolidate requirements. The creation of the Government Commercial Agency and the work of the GDS within DSIT provides an opportunity to work with the departments to set a clearer, firmer direction to mitigate these risks, even without a powerful central mandate.

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Shift 4: Navigating vendor dominance

In seeking to engage with product and platform vendors, the public sector is increasingly operating in markets dominated by a few major players, with shrinking oligopolies as consolidation reduces competition and increases the risks associated with vendor lock-in if the ‘wrong’ choices are made. As a vendor sales lead warned, “You have no competitive leverage if you don’t know how to get out.” Long-term contracts, sought to achieve unit price reductions, may serve to further compound this risk. Once a department builds capability around a platform, switching can become costly and complex. 

The SI market has also evolved. While disaggregation opened the door for new entrants and the break-up of the UK SI market in the 2010’s, many large SIs are now aligning with dominant platforms. Accenture’s recent acquisition of a Palantir-focused solutions providers such as Decho in the UK and RANGR Data in the UKis but one example of this. This trend could limit implementation options and further reinforce lock-in. To mitigate these risks, government must plan for exit from the outset, insist on interoperability, and use collective bargaining power, with a stronger central procurement function to help challenge complacency and ensure better deals not only at the point of procurement, but throughout the lifecycle in contract management and renewal. 

There’s also a need to support SMEs and alternative providers, not only in service of the wider aspiration to increase direct spend with these organisations, but also as a means of developing sovereign capability in the long term. While large vendors dominate, smaller firms can offer innovation and flexibility. Government should consider how to create space for these players, through modular procurement, innovation partnerships, or by acting as a “ringleader” to coordinate smaller suppliers. 

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Shift 5: Commodities vs products

A recurring theme is the need to distinguish between commodities and products, and to procure them accordingly. Treating commodity services like bespoke products leads to over-specification, delays, and unnecessary costs. As one expert noted, “Conversely, treating complex platforms like commodities, focusing solely on price and ignoring long-term implications, can be equally damaging.” Departments may secure a good deal upfront but face escalating costs and limited flexibility later.  Adopting approaches such as Wardley mapping could support departments to make more effective strategic decisions about where to prioritise investment, where deep custom capability is appropriate  

The key is to adopt a strategic approach: simplify procurement for true commodities, and take a holistic, lifecycle-focused view for platforms. This includes budgeting for implementation, support, and eventual exit, and ensuring the right skills are in place to manage the product effectively. 

Many of those we engaged with also warned against the temptation to over-customise commodity platforms. “Adopt, not adapt” should be the guiding principle. Governments that resist this, insisting on tailoring platforms to their legacy processes, risk higher costs and reduced agility. New Zealand’s experience was cited as a positive example: the approach, led by the Government Chief Digital Officer, to standardise on a single platform and resist customisation, has achieved significant simplification and efficiency. This model strengthens the ‘digital centre’, moving responsibility for procuring ICT on behalf of most agencies to GCDO and away from most agencies and departments. Whilst the UK model of accountable departments makes this more difficult, it does present an alternative approach that should be considered. 

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Conclusion 

The UK public sector stands at a crossroads in technology procurement. To navigate the evolving of platforms, hyperscalers, and AI, it must modernise its procurement mechanisms, build internal capability, and adopt a more strategic approach. 

Key recommendations include: 

• Collaborate with vendors now to fix contract tooling and frameworks – embedding the reality of SaaS terms. 
• Strengthen central coordination through DSIT and DCA to align strategies and leverage scale. 
• Explicitly plan for exit and require interoperability from the outset. 
• Embrace AI, but ensure procurement processes are agile enough to keep up. 
• Treat commodities and products differently: procure each on its own terms. 

By applying these insights, public sector leaders can avoid lock-in, reduce costs, and deliver more responsive, future-ready services. 

How can Baringa help you? 

Navigating this environment requires more than technical know-how, it necessitates deep commercial expertise and a clear understanding of how digital transformation reshapes organisations.  

Baringa brings deep expertise in digital and AI procurement, advising on over £3bn of procurements under the recently instated 2023 Procurement Act. Our work spans both public and private sectors, giving us unique insight into the value, and complexity, of large-scale product and platform implementations.  

As an independent, client-side advisor, we don’t implement these technologies: we understand them, their challenges, and the strategic decisions they demand. This independence allows us to triangulate issues objectively and help buyers act with confidence to seize the opportunities of a new digital horizon.