Information asymmetry and breaking the status quo

By Billy D’Arcy: Managing Director, Public Sector Business at O2

The economic concept of ‘information asymmetry’ is a phenomenon that can be observed in all walks of life. From car sellers to estate agents, insurance brokers to banks, all share a familiar characteristic. They all operate in markets where information asymmetry is prevalent.

But what exactly is information asymmetry?

The term refers to a situation where one participant in an economic exchange knows more than the other. The example of estate agents is largely cited, as their experience and expertise in the property market allows them to oversee transactions that are personally advantageous, while not necessarily being in the customer’s best interest.

I believe that in recent years, public sector IT procurement has been steadily becoming an environment where information asymmetry is rife. On one side, suppliers are trying to sell increasingly complex IT equipment, while often using confusing cost models. On the other side, public sector organisations are looking to consume more digital services and enable citizens to make the most of technology. The result? What economists would commonly label ‘market failure’.

I recently spoke of the need for suppliers to take responsibility when it comes to making the buying process as simple as possible for public sector organisations. I’m a staunch advocate of simplification, and I believe suppliers can go one step further by focusing on minimising all forms of information asymmetry. To achieve this, I would recommend that suppliers adopt the following simple principles:

  • Eliminate jargon – Telecommunications organisations can be as guilty as anyone of this, and it can be a primary source of confusion for both suppliers and buyers. As Einstein once said, ‘If you can’t explain it simply, you don’t understand it well enough’.
  • Clarity on pricing – Complicated cost models achieve nothing other than make it easier for suppliers to take advantage of information asymmetry. G-Cloud has been spearheading this principle with a framework designed around upfront pricing, and the Network Services Framework has also recognised its importance (as demonstrated by the increase in scope and flexibility in the supplier creation of Standard Service Offerings.)
  • Champion user experience – Suppliers need to put users at the heart of how they operate. The success of companies like Amazon and Netflix has been built around simple, easy-to-navigate digital platforms. Whether it’s catching the latest film, or procuring a range of mobile security licences, the user’s buying experience should be the primary consideration.

At O2, we strive to embed these three principles into everything we do. That’s why we launched our new public sector catalogue. Devoid of jargon, acronyms and incomprehensible abbreviations, and with pricing presented up front, it’s a wonderfully simple digital tool to make O2 even easier to do business with.

While information asymmetry will always be a part of life and a factor in market exchanges, as a supplier we can absolutely minimise this. We hope by doing this, our customers can focus on delivering for their citizens.

To find out more about what O2 can offer the public sector, click here.