Gershon report to shake-up Federal Government ICT

Outsourcers and managed services providers could see their bottom lines hit should the newly released Gershon review into the Federal Government’s ICT procurement go ahead, according to one industry expert.

Released last week, the review slams the Australian Government’s use and management of ICT as weak. According to report author, Sir Peter Gershon, who also undertook a similar review of the UK Government’s procurement strategy, government ICT procurement was “neither efficient nor effective”.

“The current model of very high levels of agency autonomy, including the ability to self-approve opt-ins to whole-of-government approaches in the ICT domain, leads to sub-optimal outcomes in the context of prevailing external trends, financial returns, and the aims and objectives of the current Government,” he wrote.

One of his main recommendations is to slash the budgets of the largest 28 agencies (Defence excluded) with ICT spending in excess of $20 million per annum by 15 per cent, and those with a spend between $2-20 million by 7.5 per cent.

Gershon recommended savings from day-to-day procurement, estimated at $140 million in the first year and in excess of $400 million in the second and subsequent years, be put back into a central fund for re-investment into strategic project work.

Head of consulting for analyst firm Intermedium, Kevin Noonan, applauded the report’s broader findings, but said outsourcers and managed services providers delivering “business as usual” services to agencies could lose out as a result of spending cuts.

“Outsourcers will need to reposition themselves for new work, rather than just business as usual services, to provide their income,” he said. “The proposed cap on datacentre development will also impact services people.”

However, Noonan saw systems integrators and developers picking up new work around strategic projects.

With improved governance and more co-ordinated tendering, the cost and risk of dealing with government agencies could also improve, he said.

Australian Information Industry Association (AIIA) chairman, John Grant, said the government needed to improve efficiencies around procuring basic ICT, and called on the government to put together better frameworks and tendering processes for industry to respond to. He also applauded Gershon’s recommendations around governance, sustainability and better skills management.

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Gershon’s long-awaited review into government ICT, initially requested by Minister for Finance and Deregulation, Lindsay Tanner in April this year, was released October 16 and contained seven key findings and several recommendations.

It blamed weak governance mechanisms for the failure of agencies to realise benefits from ICT-enabled projects and identified a lack of scrutiny on funding.

It also flagged a disconnect between “the stated importance of ICT and actions in relation to ICT skills”.

Gershon also found the existing sustainability program lacking, and claimed the absence of a whole-of-government strategic plan for datacentres could cost taxpayers up to $1 billion over 15 years if a more coordinated approach wasn’t implemented.

Other recommendations included the establishment of a Ministerial Committee on ICT, and a 50 per cent reduction in the number of contractors used by agencies over a two-year period.

“IT areas have historically been beaten over the head about being business focused as a cover for underlying problems. But what Gershon is asking for is agencies be IT focused and ensure good governance,” Intermedium’s Noonan said. “This will have a large impact on government policy and delivery and a lasting effect on industry.”

Australian Computer Society CEO, Kumar Parakala, was supportive of many of Gershon’s recommendations and highlighted the call to implement a Ministerial Committee and Secretaries’ ICT Governance Board.

“In general terms we are quite alright with most of his recommendations and in fact, extremely happy with some of his recommendations because of the significant ICT focus,” he said.

But both AIIA and ACS warned against blind cost-cutting measures, arguing these could counteract the ICT innovations and improvements the review was striving to achieve.

“You can’t go and roughly cut your costs by 20 or 30 per cent in ICT, you have to carefully look at how the business is using IT and develop better and smarter ways of cost cutting,” Parakala said.

“All cost cutting measures, while ACS fully supports the estimates, need to be considered in full light of the business of the government and should be carefully undertaken so that the impact on tax payers is minimal. The last thing you want to do is go backwards on service delivery.”

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AIIA’s Grant pointed to competing agendas between Gershon’s review of the use and management of ICT and Tanner’s whole-of-government cost-cutting mandate.

“In private business, you invest when governance is weak, but here you have disinvestment yet a need to get improvements. We’re sceptical about what is driving this report – is it to reduce spending or improve IT?” he asked. “For example, the contractor cuts show government is not getting value out of contractors – to cut numbers is like the cart before the horse.

“Government needs to interact more with industry to get the best skills required for the best outcome.”