What licensed software costs the public sector

The figures on this page come from the National Audit Office, the Government Digital Service and the Local Government Association. Each source is listed at the bottom of the page with a link.

What the current arrangement costs

Estimated minimum UK public sector annual spend on digital programmes and technology.

£14bn

National Audit Office, HC 543, January 2025 [1]

Share of the technology budget going on maintaining existing systems rather than improving them, at organisations including the Department for Work and Pensions and NHS England.

70–85%

State of digital government review, January 2025 [2]

What maintaining a legacy system typically costs against a modern equivalent, measured on HM Revenue and Customs’ contracts for its oldest systems.

3–4×

State of digital government review, January 2025 [2]

Cost increases across five government digital change programmes, at least 26 percent above original forecast, alongside delays totalling at least 29 years.

£3bn

National Audit Office, HC 543, January 2025 [1]

These are national totals. Similar patterns apply at the scale of a single district council or NHS trust, which is where we work.

Most public bodies license their software rather than own it. Contracts often run for many years, and replacing a system that is in daily use is expensive, so organisations frequently renew even when they are unhappy with the supplier.

Why changing supplier is difficult

Systems are often bought on contracts lasting many years. Over that time, the staff who understood the original decision leave, more of the organisation’s processes come to depend on the system, and data is stored in formats that only the supplier’s software reads easily. Moving to a different system then becomes expensive and risky.

The National Audit Office found that legacy systems are “often supported by the large suppliers who originally provided them”, and that many have become “black box” systems over time, which makes them unattractive for anyone else to take over and run.

The Police National Computer went live in 1974 and has been supported by the same large supplier for many years. When the Home Office came to renew that support, it tested the market. No other supplier came forward, and the existing supplier was awarded a new contract worth £48 million in 2022.

£300,000

What it can cost a single council to exit a supplier contract in the revenues and benefits market, according to the Local Government Association. The Association reports that long contracts, high exit costs and a lack of alternatives keep councils with suppliers they are dissatisfied with.

Local Government Association, State of Digital Local Government [3]

A cost at this level usually makes renewal the cheaper option in the short term, even when a council is unhappy with the system.

Costs outside the budget

Licence fees appear in budgets, but the time that residents and staff spend working around poorly designed systems is not usually measured.

A week and a half

How long the average UK adult spends dealing with government bureaucracy every year, on the Government Digital Service’s own assessment.

State of digital government review, January 2025 [2]

Some of this time is unavoidable. A large part is spent re-entering information the organisation already holds, chasing reference numbers, or waiting on the phone where a service offers no other way in. Forty-seven percent of central government services and forty-five percent of NHS services still have no digital pathway at all.

Staff lose time in similar ways. Where a system does not meet their needs, staff often keep separate spreadsheets, and these are frequently maintained by one person, so the knowledge is lost when that person leaves.

The Government Digital Service estimates the unrealised saving from digitising public services at over £45 billion a year, between four and seven percent of public sector spend.

What changes when you own the software

A public body that owns its software outright has no licence renewal to negotiate. It can change the system when policy changes, employ someone to maintain it or pay us or another supplier to do so, and access its own data directly.

An owned system costs what it takes to build and to run. There is no annual licence increase set by a supplier.

125%

We charge the cost of the work plus a 25 percent operating margin, at a published day rate. We arrange hosting for what we build, and this is priced separately. The software, the record of every change made to it and the documentation belong to you, with no licence attached.

See the model for how this is priced and the calculator for what a given commitment buys.

Owning software has its own costs, and not every system should be built this way. Where an off-the-shelf product is the better option, we will say so. For many well-defined problems, however, building and owning the software can cost less over time than licensing it.

Estimating your own costs

To start a conversation, it helps to know which system you use, roughly what it costs each year, and what is stopping you from changing it. If we think you are better off staying with your current system, we will tell you.

Try the calculator See worked examples

Sources

  1. National Audit Office, Government’s approach to technology suppliers: addressing the challenges, HC 543, Session 2024-25, 16 January 2025. Figures cited: at least £14 billion minimum annual public sector spend on digital programmes and technology; more than £3 billion of cost increases and at least 29 years of cumulative delay across five digital change programmes; the Police National Computer market engagement and the £48 million contract awarded in 2022; the description of legacy systems as “black box” systems supported by their original suppliers. nao.org.uk
  2. Department for Science, Innovation and Technology and Government Digital Service, State of digital government review, 21 January 2025. Figures cited: 70–85 percent of technology budgets spent on upkeep at organisations including the Department for Work and Pensions and NHS England; legacy maintenance costing 3 to 4 times modern alternatives, measured on HM Revenue and Customs’ contracts for its oldest systems; the average UK adult spending a week and a half a year on government bureaucracy; 47 percent of central government and 45 percent of NHS services lacking a digital pathway; over £45 billion a year of unrealised savings, 4–7 percent of public sector spend. gov.uk
  3. Local Government Association, State of Digital Local Government. Figure cited: exit costs of up to £300,000 per council in the revenues and benefits market, and vendor lock-in arising from long contracts, high exit costs and a lack of alternatives. local.gov.uk