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Chapter 2: Views from outside the Australian Government

  1. Better utilisation of ICT assets
  2. Shared services
  3. Standardised/coordinated approach to procurement
  4. Use of Commercial Off-the-shelf Solutions
  5. Need for standardisation
  6. Whole-of-government governance
  7. High costs of tendering
  8. The Australian Government compared to other governments
  9. Skills shortage 
  10. Green ICT
  11. Security Clearances
  12. Best practices

This chapter summarises the key themes raised by those outside the Australian Government (the Government) and represents the views of:

A total of 72 submissions were analysed, with 51 of these having been directly invited to provide a submission to the review (see Appendix D). This chapter also takes into account views raised during bilateral meetings and round table discussions with various external stakeholders and state government CIOs (see Appendix E).

2.1 Better utilisation of ICT assets

There was a general view across industry that there is a great deal of duplication of ICT systems, applications and infrastructure within the Government, stemming from the decentralised and independent way agencies have invested in ICT. Many submissions (29) commented on significant opportunities for the Government to realise efficiencies by rationalising, standardising, consolidating and sharing or re-using current assets. In particular, the following areas were highlighted.

2.1.1 Bandwidth and network infrastructure

Fourteen submissions indicated that aggregating and sharing network connections and gateways could achieve significant savings. One company pointed out that the Government often has 20–30 data network connections per regional city or town across Australia, with each agency implementing a dedicated connection to/from Canberra.

A few (4) also felt that the physical fibre that makes up the Intra Government Communications Network (ICON) is significantly under-used. It could provide a foundation for establishing a shared networked service infrastructure for a range of shared services, as well as delivering an even broader range of telecommunications services more cost-effectively.

2.1.2 Data centres

Industry believed that growth in technology demand is challenging the physical constraints on data centres globally, and the Government is no exception. Industry bodies pointed to the following factors as having an impact on the current data centre facilities of agencies:

In the absence of an overarching whole-of-government view on data centres, agencies tend to provide or source their facilities autonomously. This leads to unnecessary duplication across government of not only data centre facilities, but duplication in data centre operations, for example, specialised support staff and processes. Fourteen submissions indicated that consolidating agency data centre facilities has the potential to realise significant savings for the Government.

2.1.2.1 Capacity management

The review’s attention was drawn to analysts’ reports quoting average capacity utilisation of servers across the industry as being between 15% and 20% during working hours.19 Some felt that better capacity management would provide access to current untapped or under-utilised resources. In addition, a technique known as server virtualisation could make better use of existing processing capacity within and across agencies.

2.1.2.2 Storage

Industry commented that with data and information continuing to expand exponentially due to the increasing prevalence of digital content and the pervasiveness of legislative compliance requirements pertaining to data, each agency faces increasing storage requirements.

Consolidating storage into large repositories would drive cheaper per megabyte storage costs.20 In addition, consolidation would enable the delivery of differentiated high, medium and low availability storage services based on need.

2.1.3 Consolidation/integration of service delivery channels

Twelve submissions commented on the opportunity for the Government to enhance service delivery through integration and collaboration across agencies, particularly through single entry points for government information and services. Reducing the number of customer-facing government portals would provide government customers, citizens and businesses with a single door to access the majority of government services and reduce the cost of maintaining multiple entry points. A few submissions also mentioned the better sharing of other service delivery channels, such as face-to-face and telephone.

2.1.4 Business systems and applications

Some submissions (10) felt that opportunities could be gained from standardising and rationalising the myriad of business systems and applications agencies currently use, particularly with a view to better sharing and re-use among agencies. Related to this, four submissions commented on opportunities from rationalising software licences.

The state government’s submission identified that it has already seen the effects of rationalisation in its development environments. In its 2005–06 baseline, 50% of its agencies required at least four different application development skill sets, which raises training costs and skills management overheads, as well as knowledge management risk. This figure was reduced to 29% in 2006–07, according to its baseline reporting.

2.1.5 Infrastructure

Some submissions (8) also felt that there are opportunities to rationalise, consolidate and share ICT infrastructure (such as call centres), particularly for smaller agencies, noting that some pooling and consolidation of requirements would be required.

One company surmised that the Government could save up to $100 million by optimising its infrastructure alone.

2.2 Shared services

Many submissions (29) considered that rationalising, standardising and aggregating business systems and applications also enables a move to shared services across agencies. By way of comparison, 11 submissions indicated that other governments (both state and international) have progressed further in this area. They mentioned the activities of the Victorian and Queensland Governments, and the US and UK Governments, and suggested that the Government explore and learn from their experiences.

The top candidates suggested by industry for shared services included:

While industry was generally optimistic about the potential of shared services, they also noted that shared services and systems inevitably involve a degree of compromise that can expose the different business expectations of customers. This sentiment was echoed in the meetings I held with state government CIOs. While they acknowledged the potential benefits of shared services, they commented on the significant challenges and risks associated with implementation, and counselled considerable caution in this area.

2.3 Standardised/coordinated approach to procurement

Many submissions (32) mentioned that the Government could obtain significant efficiencies by adopting a standardised or coordinated approach to procurement. There are currently multiple tenders for the same product or service (which is costly for both the Government and industry) and agencies are buying these products or services at different prices. Some submissions (17) went on to say that the Government is not making the best use of its collective purchasing power (particularly in purchasing commodity products). At the same time, it is incurring high administrative costs by having multiple procurement activities across agencies. This includes expenditure on external consultants, probity advisers, legal advisers and internal resources.

However, 11 submissions commented on the need to be mindful of the impact of any such standardised or coordinated procurement activities or initiatives on competition, especially on smaller players. One commented that small and medium enterprises (SMEs) in particular, tend to be squeezed out in consolidation programs, robbing the Government of the innovations offered by smaller suppliers. Another referred to research indicating that SMEs gained around 22.5% of work by contract value in 2004–05, while 60.3% went to multinationals.21 Nine also commented on the need to consider past attempts at aggregation (for example, clustering) and to carefully analyse the costs and benefits before proceeding.

2.4 Use of Commercial Off-the-shelf Solutions

Many submissions (24) indicated that there are no specific inhibitors to using commercial off-the-shelf solutions without customisation, with 10 mentioning that there is often unnecessary excessive customisation by agencies. This erodes the inherent benefits offered by commercial off-the-shelf products, and increases costs.

Some submissions (13) believed that more robust definition and consideration of requirements, and adopting service oriented architecture (SOA) and open standards, would increase the appeal of commercial off-the-shelf solutions.

2.5 Need for standardisation

Fourteen submissions indicated the need to have standard architectures by adopting SOA and the Australian Government Architecture. They believed that if agency applications were developed on the basis of building services (and components of services) that were as generic as possible, opportunities for re-use by multiple agencies would increase significantly. Re-using applications would decrease the investment needed to develop new applications, and thus reduce the time taken to deliver improved services to the community.

Ten submissions indicated that much can be gained from standardising business processes across agencies wherever possible, with eight suggesting that agencies should adopt the Australian Government Business Process Interoperability Framework. They believed that the framework, if implemented across all agencies, would result in standardisation and reduced costs for agencies, as well as reduced tendering costs for suppliers.

Seventeen submissions highlighted the need for whole-of-government common and open data standards to facilitate sharing and collaboration among agencies, and to improve service delivery innovation by removing technology and vendor dependency.

2.6 Whole-of-government governance

Nineteen submissions indicated that there is a role for a central body to:

Fourteen submissions indicated that the Government does not measure benefits well, particularly at the whole-of-government level. They believed that there is no consistent and rigorous approach to establishing, measuring and reviewing benefits, which makes it difficult to support general statements on the benefits of ICT to government operations. To improve this, 12 submissions suggested that the Government would benefit from centrally coordinating ICT investments through portfolio management methodologies, coupled with strong performance measurement and tracking of benefits. This included exploring potential governance structures for multi-agency developments, as well as collecting and monitoring data on ICT investments. Cross-agency portfolio management could identify projects with a high potential to transform government services, improve alignment and integration across government, and reduce duplication. One submission referred to research which showed that good ICT governance is associated with a 20% higher return on assets.22

Some submissions (4) also commented on the observation that there are a number of private sector organisations that are leaping ahead in managing ICT at an enterprise level to improve competitiveness. They said that within the government context, the centre has a limited ability to influence or guide a program once funding has been approved unless an agency requests extra funds. In contrast, private sector organisations tend to use more ‘activist centre’ approaches.

While nine submissions commented positively on Gateway Reviews, they believed there is still room for improvement. For example, the Gateway process could be implemented more rigorously (for example, by making Gate 0 compulsory) and lessons learnt from ICT successes and failures could be shared more effectively.

Fifteen submissions also mentioned the need to focus on improving project management disciplines (particularly benefits realisation), governance and funding mechanisms of large ICT investments. Some went on to say that project management should be a formally recognised discipline in government and that there should be better executive-level commitment to, and improved recognition of, formal project management training and accreditation.

However, 12 submissions commented on the need to concurrently review and revise structures, mechanisms and incentives to improve collaboration between agencies. They believed that the current Chief Executive Officer (CEO) accountabilities and interpretations of the Financial Management and Accountability Act 1997 (FMA Act) do not encourage cross-agency initiatives. Also, because agency CIOs are accountable to their CEO, the Government generally does not have the authority to intervene in agency ICT decisions. In support of this observation, eight submissions commented that other governments (both state and international) were more advanced in terms of inter-agency collaboration. As a starting point, six suggested creating a centralised database of agencies’ ICT systems, hardware, software, capacity and capabilities. This would allow agencies to understand and look for similarities and duplication and determine opportunities for sharing or re-use, and consolidation.

2.7 High costs of tendering

There was a general view that industry finds the private sector easier to do business with. Sixteen submissions indicated that costs of tendering to the Government are too high, and 10 indicated that decision making in terms of defining business needs, evaluating technology solutions, procuring a technology and finalising contracts is too slow.

Fourteen submissions indicated that contractual terms and conditions are often overly onerous or uncommercial, and sought standard contracts with reasonable terms and conditions. While the Government has, in principle, adopted fair and acceptable policies on liability, insurance and intellectual property (IP), implementation has been inconsistent. Many tenders contain onerous clauses, resulting in no-bids and restricting the solutions available to the Government. For example, unlimited liability, or caps on liability are set so high as to be essentially the same as unlimited liability. Industry also noted insurance clauses that have very high insured amounts (especially professional indemnity insurance). The limits often exceed the likely losses that could be incurred and, in many cases, are just not available in the Australian insurance marketplace. They also said that agencies often require ownership of IP as the default position when they purchase ICT goods and services. Since many do not exploit the IP, the future value it might have generated for the Australian ICT sector and wider economy is lost.

Twelve submissions thought that agencies are often too focused on specifications or inputs rather than outcomes. Whereas the private sector focuses more on the outcomes to be achieved rather than the processes to be followed, the Government focuses overly on process, adding significantly to project costs, at the expense of ensuring project outcomes. Agencies are also often too prescriptive in their specifications. Only one submission provided limited quantitative comparative data which indicated that the Government is similar to the US and UK Governments in terms of bid costs as a percentage of total contract value for large tenders. The private sector tends to provide greater flexibility in designing solutions that encourage greater innovation from vendors. Furthermore, the Government often selects the tender with the cheapest minimum compliance offer, thus not achieving true value for money.

Supplementary evidence sought from the AIIA supported these views. Based on a survey it conducted with 66 member companies (around 79% of which had annual Australian revenue of less than $15 million), about 40% indicated that they have decided not to participate in the Government market. In addition, most of those who do participate regularly decline to bid for individual tenders. The main reasons given for non-response were:

These points were confirmed in a subsequent round table meeting the review held with nine SMEs. This meeting also identified some difficulties SMEs had experienced with large prime contractors.

Eleven submissions wanted earlier and more ongoing consultation with industry throughout the procurement process. They believed that many agencies are reluctant to enter into meaningful discussion with potential tenderers before releasing requests for tender, citing probity issues. This affects the quality of the decision made and favours the incumbent. They also believed that the concept of partnering is better understood and practised in the private sector, avoiding the ‘us and them’ attitudes that commonly arise with government contracts.

2.8 The Australian Government compared to other governments

While industry was asked to comment on how the Australian Government compared to their other government clients in general, apart from procurement, no recurring themes were identified.

2.9 Skills shortage

Fourteen submissions believed that the current skills and resources shortages will continue to be a challenge for all organisations, not only the Government, as baby boomers retire and the number of ICT graduates declines. This emphasises the need for the Government to plan for future skills requirements and potential skills gaps. They believed that there is a strong case for the Government to improve its human resources planning and coordination of its ICT workforce, both from a capability and capacity perspective. For example, it could make more effective use and sharing of staff with high-demand skills. In support of this observation, nine submissions mentioned that the decentralised agency-by-agency management of ICT projects means that agencies are competing for staff, which inflates contractor rates.

A few submissions commented that the stress on the labour pool has led the Government to rely heavily on contractors for their ICT skills, particularly in Canberra. Another commented that many agencies are using contractors to ‘top-up’ permanent staff to address workloads, with the contractors effectively becoming permanent staff. Further, industry asserted that approximately 20% of staff in many agencies have been converted from full-time permanents to more highly paid contractors. The result is that when contractors move on, so too does their knowledge and skill base. Other difficulties include probity concerns, lack of succession planning, variable quality, and workers operating outside the performance management system.

To address these issues, 14 submissions suggested that ICT professionals need to be valued more. This can be achieved by implementing a whole-of-government professional development program encompassing career development, pathways to professional accreditation, retraining, recruitment and retention strategies.

2.10 Green ICT23

Some submissions (8) believed that the Government should lead by example and more actively consider environmental factors as part of their ICT purchasing. This not only achieves cost savings (for example, through reduced power and cooling costs of more energy-efficient products) but supports the green agenda. In 2008 the US Government implemented a blanket requirement to procure only Electronic Product Environmental Assessment Tool (EPEAT™)24 registered desktop computers, laptops and monitors. The US Environmental Protection Agency, using conservative assumptions, estimates that the government’s purchase of EPEAT™ registered computers over a 4-year time frame will:

These submissions recommended that a set of environmental criteria be established for Australian Government ICT purchases, and that it be made mandatory for government purchasing officers to use the criteria when evaluating tenders.

Other green initiatives that industry considered the Government could adopt include:

2.11 Security Clearances

Five submissions commented that there is no consistent and standardised whole-of-government approach to the implementation of policies, procedures and processes in managing security clearances. This has resulted in each agency establishing its own approach under the broad Australian Government guidelines. Often, security clearances issued by one agency are not accepted by another and clearances cannot be transferred. They believed that the implications are very significant for companies supporting different government agencies, including cost, staff waiting time in re-clearing for new agencies, and reduced productivity. They also considered that the ability to uniformly manage security and identity management across government agencies would simplify and provide significant savings in administration.

2.12 Best practices

2.12.1 Coordinated management and procurement

A few submissions felt that the Government could benefit from using best practices adopted by the UK Office of Government Commerce (OGC). As part of an initiative to improve standards and procurement capability across the central government, OGC divides purchasing specialists by product line. It has also set up a separate website (http://www.ogcbuyingsolutions.gov.uk/) which provides government with a central catalogue of nationally approved products and services that meet government procurement guidelines. By purchasing hardware products with a common set of specifications across government (as opposed to across agency), the UK Government has been able to save up to 47% on PCs, laptops and monitors.27

A few submissions also felt that the Government could benefit by adopting acquisition reforms that have been implemented in the US. These have resulted in substantial savings where software licences are being used more efficiently across large federal departments through ‘acquisition maturity models’ that benchmark acquisition capabilities against established standards. (The UK Ministry of Defence has used this approach for acquiring weapons systems.)

2.12.2 Shared services

As discussed in 2.2, another practice that industry felt the Government could adopt is shared services. This practice has been adopted by businesses and attempted by several governments (both state and international), with varying degrees of success.

2.12.3 More innovative procurement and contracting

A few submissions felt that the Government could benefit from having more innovative approaches to procurement. They noted that there has been a shift from requests based on technology or specifications to requests based on business outcomes, particularly in the private sector. This enables vendors to be more creative and flexible, and increases engagement.

A few also pointed out the substantial savings that e-auctions can achieve. For example, the UK National Health Service Purchasing and Supply Agency renewed its £40 million budgeted requirement for ICT hardware through an e-auction; the successful supplier was able to offer a £12.7 million (31%) saving over the previous contract.

2.12.4 Improved vendor engagement

A few submissions also identified early and ongoing engagement of vendors as another area where the Government could obtain benefits. For example, the AIIA’s UK counterpart, Intellect, offers a number of services to facilitate early interaction and close consultation between agencies and industry to achieve better outcomes. Intellect’s Concept Viability service allows agencies to get industry feedback at the concept stage to allow early analysis of costs, risks and implementation options. Intellect also actively supports joint government–industry work on cost reduction, delivery and procurement effectiveness. The Queensland State Government has established a single voice for the ICT industry to engage with government through the ICT Industry Workgroup. This group comprises representatives from the Australian Computer Society, the AIIA and Software Queensland, who jointly represent 12 ICT bodies.

2.12.5 Standardised approaches

Some submissions felt that private sector organisations and, to a lesser extent, other governments are more advanced in leveraging standard architectures and business processes. A few felt that the approach taken by the US Government to optimise its ICT infrastructure, including desktop, communications and data centres, could provide a good framework for the Government. One company mentioned that all government agencies in Singapore will have a standard ICT operating environment by 2010, which will provide significant cost savings while enhancing operating efficiency and corporate identity.

Six submissions mentioned that the Government would benefit from adopting standard service management such as ITIL®. One industry submission commented that the Victorian State Revenue Office has reduced its ICT budget by 16.5% since achieving ITIL® compliance in 2005.

A few submissions also talked about other governments adopting common standards. For example, governments around the world, most notably the US, Japan, the UK and The Netherlands, have collaborated on and adopted the Extensible Business Reporting Language (XBRL®) data standard.

2.12.6 Single government entry points

Some submissions identified the work of other governments in creating single points of entry for citizens and suggested that the Government consider similar models. For example, they pointed to New York City’s single entry point for citizens, and Service Canada’s one-stop, ‘single-window, multi-channelled’ service network to improve after hours access to government services.

2.12.7 Embracing open source solutions

One company pointed to the Government of Brazil as an administration that is determined to effectively use the latest ICT technologies to overcome distance and socioeconomic challenges and provide best outcomes for its citizens. It is making some of the world’s largest investments in open source software, investing in infrastructure and delivering services across multimedia. Another company pointed to the US Department of Defense, which advocates open source software as an integral component of its collective ICT enterprise environment.

2.12.8 Focus on sustainability

Some submissions also pointed to the fact that many companies are focused on sustainability practices to lower costs, increase shareholder value and gain competitive advantage. Practices include:

2.12.9 Consideration of other capability sourcing options

Some submissions suggested that the Government could be more flexible and strategic with sourcing options, for example, by actively supporting near-shoring and offshoring.

Next section: Chapter 3: Summary of survey findings

Footnotes:

  1. Gartner (August 2006), ‘A message from data centre managers to CIOs: Floor space, power, and cooling will limit our growth’.
  2. Ibid.
  3. Gartner (September 2007), ‘U.S. data centers: The calm before the storm’.
  4. Adrian Johnson (June 2007), ‘Capacity utilisation - Asking the questions’, MeasureIT Issue 5.06, http://www.cmg.org/measureit/issues/mit42/m_42_5.html.
  5. Technically, it is possible to consolidate storage without actually consolidating data.
  6. Intermedium (2005), ‘SME participation in Australian Government ICT procurement 2003–04 & 2004–05’, Report for the Department of Communications, Information Technology and the Arts, http://archive.dcita.gov.au/__data/assets/pdf_file/0005/56930/Intermedium_Final_Report_03-05.pdf
  7. Weill P & Ross JW (2004), IT governance, Harvard Business School Press, Boston, p. 269.
  8. Note that industry tended to use the terms ‘green’ and ‘sustainable’ interchangeably, however, the prevailing terminology in the industry is ‘green ICT’.
  9. EPEAT™ is a system to help purchasers in the public and private sectors evaluate, compare and select desktop computers, notebooks and monitors based on their environmental attributes. EPEAT™ also provides a clear and consistent set of performance criteria for the design of products, and provides an opportunity for manufacturers to secure market recognition for efforts to reduce the environmental impact of their products.
  10. See http://www.epeat.net/Docs/White%20House%20Thanks%20EPEAT%20Mfgrs%20(3-21-07).pdf
  11. ENERGY STAR® is an international standard for energy-efficient electronic equipment. It was created by the US Environmental Protection Agency in 1992 and has now been adopted by several countries around the world, including Australia.
  12. Office of Government Commerce (2006), ‘How can we help you? Saving money on IT hardware’, http://www.ogc.gov.uk/documents/CP0146ITHardware.pdf

Contact for information on this page: ICTReview@finance.gov.au

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Last Modified: 11 February, 2009