Level playing field key to achieving better return on $16bn ICT investment

Massive cost savings and greater efficiencies are within reach for the Federal Government thanks to a bold decision to review its use of information and communication technology (ICT), which represents a $16 billion investment.

As one of Australia’s leading providers of enterprise software solutions, TechnologyOne Executive Chairman Adrian Di Marco said the opportunity to provide a submission was the first step in the process which, hopefully, would see open and robust discussion between suppliers and Federal Government on a better way forward.

“We felt well qualified, as a provider of software and services to more than 40 Federal Government departments and agencies, to lodge a submission to this crucial independent review,” Mr Di Marco said.

“To be able to clearly state our case on how we see our own Federal Government improving on its use and management of ICT is a unique and compelling opportunity and I believe there are some clear solutions within easy reach.”

Sir Peter Gershon, who will report back in September to Federal Minister for Finance and Deregulation, the Hon. Lindsay Tanner MP, wrote to major ICT suppliers seeking submissions by 30 May 2008 on a number of areas including:
  • Whether aggregation or standardisation would drive economies-of-scale benefits for the Federal Government
  • Whether the use of off-the-shelf products without customisation is inhibited by Federal Government requirements
  • How the Federal Government compares with other government clients elsewhere in the world, in the Australian private sector and in state/local government.

In TechnologyOne’s response, Mr Di Marco recommended that:
  • aggregation and standardisation be achieved through the instigation of panel-based contracts for key solution areas with three or more approved vendor organisations appointed to each
  • the Government’s requirements for back-office systems can largely be catered for with off-the-shelf products
  • independent consultants involved in the selection of solutions for Government, not be allowed to subsequently provide any services for these projects.

Mr Di Marco said that creating a panel will encourage a competitive environment and lead to significant cost savings, which would not be possible if a single ‘whole of government’ solution was selected.

“History has shown that it is important to ensure a competitive environment is maintained, so that tax payers can be assured of the best possible price,” he said.

“Where there is a panel of suppliers this will lead to continuing competitive tensions which will deliver ‘on going’ innovation, cost savings and improvement in quality.”

Mr Di Marco said that such a panel would also ensure that Federal Government departments are not forced to adopt a one-size-fits-all approach, but that they are each given freedom to choose the most appropriate ICT solution to meet their needs.

“A panel approach will also minimise risk to the government, as they will not have all their ‘eggs in one basket’, and it will allow them to progressively add or delete suppliers from the panel, and simplify the process of migrating to a new panel supplier when needed,” he said.

“A panel of solutions will also create a level playing field and allow Australian companies to effectively bid for government contracts, something that is not possible where the whole-of-government approach is taken.

History has shown time and time again that when whole-of-government contracts are issued, local Australian vendors are not successful and business is secured by multinational companies, even though, in the vast majority of cases, Australian vendors can provide software solutions much more competitively than multinationals.

“The Australian ICT industry does not expect special advantages but we do believe Federal Government has a responsibility to ensure Australian vendors are not disadvantaged by procurement process and policy.

“It is also critically important that Government is committed to regularly reviewing the performance of vendors on the panel to ensure that solutions provided to departments are cost effective, continue to be technologically sound and continue to provide relevant business solutions in the future.”

Mr Di Marco said there had been a number of instances where government departments and agencies had spent good money after bad by trying to fix legacy solutions instead of transitioning to new systems that would meet requirements well into the future.

“The practice of factoring in previous sunk costs of legacy systems is fundamentally flawed as it locks in non-performing systems,” he said.

Due to broader commercialisation of off-the-shelf products, Mr Di Marco said that if the Federal Government opted for such products, they would be more cost effective than custom-developed solutions.

“Off-the-shelf products can largely meet the Federal Government’s ICT requirements provided these products have a proven track record, can be easily configured to meet Government needs, and cater specifically for Australian conditions such as changes in legislative requirements for human resources and payroll.

“Ultimately it is important we do not see a repeat of what has happened in other states that have selected a single whole of government solution, that has resulted in departments being forced to take a ‘one solution fits all’ approach, seen costs escalate, and government departments ultimately locked into long term supplier contracts. Such contracts have not delivered a competitive or a quality outcome, yet because of the significant sunken costs and associated migration risks the underperforming supplier has remained well past their due date.

“I think the Federal Government has a historic opportunity to learn from the lessons of the past and adopt a competitive approach that will be good for both the departments, the tax payers and the local ICT industry.”