Councils risk wiping out LGR savings without early action on legacy technology

Councils going through Local Government Reorganisation (LGR) need to make early decisions about legacy technology or risk creating expensive and potentially insecure IT environments that undermine the anticipated savings from reform, according to Arcus Global.

Denis Kaminskiy, co-founder of the local government software provider, said authorities understandably expect their immediate priority to be ensuring services are “safe and legal” when new councils come into operation.

But that means more fundamental technology modernisation could initially take a back seat, leaving newly reorganised authorities operating multiple systems inherited from their predecessor councils.

“On day one, you are likely to have four or five systems operating under one roof, which is a challenge,” said Kaminskiy. “If that situation becomes permanent, LGR will not only fail to save the taxpayer any money, but is likely to cause more problems, delays and security breaches.”

Councils are already considering questions around how IT and security teams will be structured, alongside infrastructure, hosting, cloud, data ownership and skills.

However, Kaminskiy said the complexity of integrating existing systems should not be underestimated.

“No legacy system offers a quick path to integration,” he said. “Years of customisation, and bespoke integrations built because API provision has been so poor, mean that two councils on the exact same system, even the exact same version, may have completely different database structures, workflows and integrations.”

As a result, what can initially appear to be a consolidation exercise can effectively become a full migration.

Kaminskiy claimed that in recent examples of LGR, technology budgets have tripled or even quadrupled from their initial estimates.

Avoiding the ‘cheapest parachute’

The challenge comes as councils face significant financial pressures, potentially creating a tension between the upfront cost of technology modernisation and the longer-term savings expected from transformation.

Kaminskiy said the response varies significantly between authorities and is often determined by the strength of their technology leadership.

“Good leaders understand that trying to save money on IT rarely delivers a good outcome, because IT typically accounts for five to 10 percent of the cost of a given service,” he said.

“If you cut the cost of IT, you are not addressing the other 90 to 95 percent, and you may well increase the overall cost, because you strip out the automation and efficiency that IT can deliver.”

He added that Arcus had seen councils opt for what he described as the “cheapest parachute”, only subsequently to incur additional staffing costs that outweighed savings made on technology.

“Sadly, we have seen examples of this, where weak leadership opts for the ‘cheapest parachute’ only to find that they must hire three members of staff to mitigate saving £15,000 p.a. on licences.”

Where transformation or IT budgets are cut, Kaminskiy said authorities are more likely to remain with legacy providers or maintain older systems in an attempt to reduce costs.

Councils ‘not ready’ for AI

Legacy technology could also become an obstacle to another government priority: increasing the adoption of AI across public services.

Asked how prepared local government currently is to take advantage of AI, Kaminskiy said: “There is very little readiness.

“As the slogan goes ‘there is no AI without API’, and few legacy products have APIs that can truly deliver real access to any of their functions. LLM-style automation without context produces poor results, and working out what the AI has actually ‘decided’ and why often takes longer than processing the original request.”

He also cautioned against assuming that widely available generative AI tools can automatically be transferred into mission-critical public services.

“In the early days people talked excitedly about using off-the-shelf tools such as Copilot to write up notes and minutes, but results can be mixed,” he said.

“In an environment where decisions need to be enforced or defended in court, that opens the door to legal challenges, and that level of uncertainty is unacceptable in mission critical services.”

Instead, Kaminskiy argued that councils need core line-of-business systems that hold reliable data and provide universal, open APIs, allowing AI systems to access appropriate context without exposing information they should not be able to reach.

Authorities will also need a detailed understanding of their processes and workflows, he said, as well as the ability to manage potentially variable AI costs and a changing mix of models as adoption grows.

Skills gap adds to transformation challenge

Technology itself is only one part of the problem. Kaminskiy said digital skills shortages have left some councils without capabilities that will be necessary to manage complex transformation programmes.

“The skills gap is very real. Councils have been slashing IT teams for decades, and many are now missing critical functions such as database administrators, application managers or people genuinely skilled in managing a complex application portfolio.

“Many teams are focused on infrastructure alone, or have people wearing many hats who are overstretched.”

Suppliers can provide some of those capabilities, but Kaminskiy warned that outsourcing expertise does not remove the need for councils to retain the skills necessary to manage suppliers commercially and technically.

“A digital transformation programme needs good core skills and much more. Suppliers can provide some of this but at a higher cost. Suppliers also need managing both commercially and technically because the incentives can become misaligned.

“Ultimately, any successful transformation programme is a partnership between the two.”

LGR impact will take years to emerge

Despite the immediate attention surrounding reorganisation, Kaminskiy expects legacy replacement, cloud migration and AI adoption to have a greater impact on the local government technology market over the next two to three years.

“The true impact of LGR will show only in years three to five, because most councils will probably focus on ‘safe and legal’ on day one,” he said.

Some authorities, however, could use the period before their new organisations formally begin operating to undertake more fundamental transformation.

“They will prioritise transformation, including business transformation, during the shadow council years and will be quick off the mark, because there is only so much capacity in the market to support them,” said Kaminskiy.

He said councils should use that opportunity to replace legacy technology rather than initially attempting to combine systems that will subsequently need to be retired.

“My hope is that the more progressive councils quickly come to agreement and crack on with replacing their legacy tools, so that when the new council starts operating as one, they can quickly be integrated to provide high-quality services for the general public.

“I hope most will not try to merge dead-end solutions first like some of the early LGR Councils – that would be a massive waste of public money.”