The Northern Territory government is finally taking definitive steps to remedy the disastrous impact its IT outsourcing policy has had on the territory's local IT economy. It has conducted an IT Forum to address some of the issues that some claim have "killed local businesses".
The Department of Corporate Information Services (DCIS), which manages the IT&T infrastructure of the NT government, began outsourcing its IT requirements in June 1999. But the government is now facing a $10 million IT budget blowout, according to Peter Toyne, Minister for Corporate and Information Services.
Bruce Diggens, managing director of Darwin-based integrator Asset Management Systems, said the implementation of the NT government's outsourcing policy has had a massive impact on his business, which specialises in spatial information systems and the government market.
"We saw an impact immediately after the outsourcing program started, particularly in midrange applications," Diggens said. "Because the desktop contracts were so large -- they signed a $200 million contract with CSC for desktop hardware and support and server management -- it meant they had no cash to feed the mid-range apps area.
"The NT outsourcing policy has soaked up government agencies' kitties so they can't spend money on licensing and so on from other businesses."
A number of the large outsourcing contracts went to multinationals such as CSC and DMR Consulting or large national companies like Dialog against whom smaller local businesses could not compete.
According to Diggens, the local IT community is far too small to see enormous contracts being issued to a select number of companies. A number of companies have had to shut up shop as a result of the implementation of the outsourcing policy. The companies that have survived have had to refocus their business and align themselves with the outsourcing companies.
Diggens said that not only is the local IT economy reeling from the massive loss of revenue occasioned by the large outsourcing contracts, but many of the government agencies forced into adopting the outsourcing policy are extremely unhappy about the level of service they are receiving and are looking to escape from their contracts.
Although the majority of agencies are only halfway through their outsourcing contracts, Diggens said that government agencies like utility provider Power and Water are already trying to buy their way out of their outsourced agreements. Andrew Hodges, executive officer of the NT Information Industry Association, said that Territory Health had also expressed grave concerns about the lack of service it is receiving from its outsourcer.
The NT government is facing a further cost crisis because all its systems are running on IBM mainframes, which cannot run a number of the contemporary applications used by the different agencies.
"The government is paying $20 million per annum for the provision of these mainframes," said Hodges, but because a number of agencies cannot effectively run some of their critical applications on the mainframes, they have put their applications on more contemporary platforms and have had to foot the bill by dipping into their discretionary spending funds.
The situation is so dire that the Northern Territory government called for an ITC Industry and government Forum, which was held on September 4, to address some of the issues surrounding the government's IT outsourcing arrangements and the detrimental effects it has had on the local IT economy.
"The government [under the new leadership of Chief Minister Clare Martin] has inherited an expensive and diabolical mess left behind by former IT Minister Peter Adamson, with government and taxpayers facing expected blowouts of up to $10 million," Toyne said.
The government is also recruiting new staff within the Department of Information and Communications Technology, such as newly appointed executive director Les Hodgson, to review the government's outsourcing arrangements to ensure it is getting the best possible value from the contracts currently in place.
"The whole issue of outsourcing government IT services and the impact of this policy on industry, government and individual agencies will also be investigated," said Toyne.
But local IT players like Diggens are sceptical about how beneficial the forum will be for the private sector. "The forum's agenda is about rebuilding SMEs in the area, but if there's no money left in the government coffers, then they're just pissing in the wind."
Government and private sector representatives agree that the NT government's outsourcing strategy has been a fiasco since its inception and that it failed to heed the warnings from the government-commissioned Humphrey Report, which clearly pointed out that a broad-based outsourcing policy would not necessarily benefit either the government or the private sector.
"The government is full of people who aren't businesspeople in their own right, but who are making business decisions," said Hodges.
According to Hodges, the government's misinterpretation of the requirements of the local business community is a central issue that must be addressed. "The level of collaboration between government policy and the private sector has been sketchy at best. This has to change."