If market conditions weren't hard enough for System Integrators now the Office for Fair Trading (OFT) has got in on the act infering anti-competitive practices exist that act as barriers to entry for all but a handful of major IT suppliers. The barriers to entry cited inclue the costs and difficulties of switching because of factors such as the terms of licence agreements / contracts; lack of interoperability with other systems / software and the risk of disruption to critical services.
The OFT project will also examine the degree to which procurement practices interact with supply side anti-competitive practices and whether they could create additional barriers to entry in public sector ICT markets. Cited procurement processes that could be creating barriers to entry in various ways include:-
- smaller suppliers being deterred by overly-long and non- standardised pre-qualification questionnaires; requirements for them to have extensive track records and high financial turnover and lack of knowledge about procurement opportunities
- aggregation / bundling of contracts (for example local authorities purchasing together) acting as a barrier to entry for smaller suppliers that don't have the capacity to deliver the aggregated output
- framework agreements undermining competition on price by facilitating suppliers coordinating bids (for example by restricting the number of firms that can win contracts) or deterring suppliers from joining because of the up-front costs involved in joining a framework.
The OFT press release outlines the call for information to better understand more clearly the ICT products and services involved, who supplies them, the structure and operation of these important markets and the degree of competition between suppliers.
If the OFT receives information pointing to problems in the market, they go on to outline the options open to them which include:
- launching a market study into a specific aspect or aspects of the market
- initiating competition enforcement proceedings
- seeking voluntary action from the industry and\or public sector buyers.