Thursday, 16 October 2008 15:43

Government must slash ICT spend, cut contractors, build up permanents: report

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The anticipated independent review of the Australian Government's use of ICT by Sir Peter Gershon has been released and it spells bad news for vendors, recruiters and technology contractors but good news for permanent ICT staff. The report recommends $540 million in ICT spending cuts and slashing the number of ICT contractors by 50% in the first two years alone, while implementing a framework and skills training for more permanents.

Sir Peter Gershon, a former Chief Executive of the UK Treasury’s Office of Government Commerce, was appointed to conduct a review of Australian Government's management of ICT in April this year. Mr Gershon had previously undertaken strategic reviews for the UK Government on procurement including ICT and public sector efficiency, resulting in a claimed £23 billion in budget savings.

Six months after commencement of the review, the subsequent Gershon report has painted a dismal picture of the management of ICT spending within Australian Government agencies.

The report also slams the performance of government agencies in the area of sustainability with regard to their use of ICT, specifically identifying energy costs and carbon footprint.

Among the key findings of the review:

1. There is weak governance of pan-government issues related to ICT.
 

2. Agency governance mechanisms are weak in respect of their focus on ICT efficiency and an understanding of organisational capability to commission, manage and realise benefits from ICT-enabled projects.


3. The business as usual (BAU) ICT funding in agencies is not subject to sufficient challenge and scrutiny.


4. There is a disconnect between the stated importance of ICT and actions in relation to ICT skills.


5. There is no whole-of-government strategic plan for data centres. In the absence of such a plan, the Government will be forced into a series of ad hoc investments which will, in total, cost in the order of $1 billion more than a coordinated approach over a 15-year period.


6. The government ICT marketplace is neither efficient nor effective.


7. There is a significant disconnect between the Government’s overall sustainability agenda and its ability to understand and manage energy costs and the carbon footprint of its ICT estate.

CONTINUED Page Two


The resulting list of recommendations by Gershon pulls no punches and suggests wide ranging changes with respect to Governance, Capability, ICT spend, Skills, Data Centres and Sustainable ICT.

With respect to spending, agencies with annual ICT budgets of more than $20 million have been recommended to slash spending by 15%, with a phased introduction over two years. Agencies with spends of $2 to $20 million would have to cut spending by 7.5%.

Another big impact on the ICT industry if the recommendations of the report are implemented will be in the area of recruiting. Gershon recommends that the number of contractors be cut by 50% over two years, while increasing the number of permanent ICT staff with an associated public service career structure.

The impact of the recommendations related to skills will be felt most by Australia's largest ICT recruiters, whose business models are heavily slanted toward the supply of contractors.

As the Federal Government is easily the biggest customer of ICT products, services and people in Australia, the Gershon report with its recommendations of huge budgetary cuts will not sit easily with industry suppliers.

A list of the key recommendations are below:

Governance

* Establish a Ministerial Committee on ICT to be responsible for the key whole-of-government ICT policies and the overall strategic vision for how ICT should support the achievement of the Government’s outcomes and wider policy agenda.

* Create a Secretaries' ICT Governance Board (SIGB) with a strong mandate from the Government to drive the agreed recommendations arising from the review and focus on addressing the key business issues to improve the efficiency and effectiveness of the Government’s use of ICT.

* Allow agencies to obtain opt-outs, based on genuine business need, from agreed whole-of-government activities. Opt-outs to be approved by the Ministerial Committee, informed by the SIGB.

Capability

* Improve agency capability to commission, manage and realise the benefits from ICT-enabled projects through the implementation of a common methodology for assessing agency capability based on self-assessment and periodic independent audit. Each agency Chief Executive to propose a target level of capability based on their agency’s and the Government’s strategic priorities, and for this to be independently validated. Agencies to develop a capability improvement plan with commitment, and agreed actions, to address identified gaps.

ICT spend

* Target to move total FMA Act agency ICT spend from an average 77:23% split between ICT BAU activities and creation of new capability in 2007–08 to an average 70:30% in 2011–12.

* As initial steps towards this goal, reduce the ICT BAU budgets of the largest 28 FMA Act agencies (Defence excluded) with ICT spends in excess of $20 million per annum by 15% from 2007–08 actuals (for a list of agencies refer to Appendix F), with a phased introduction over two years.

* Create ICT Review Teams to help these agencies achieve or exceed the target reductions without impairing service delivery to citizens and business.

* Targeting agencies with total annual ICT spends between $2 million and $20 million to achieve a 7.5% reduction on average of their BAU from 2007–08 actuals (for a list of agencies refer to Appendix G) , with a phased introduction over two years.

* The 15% and 7.5% reductions in total should save the Government around $140 million in the first year and in excess of $400 million in the second and subsequent years. 50% of the savings generated by these recommendations be transferred to a central fund for reinvestment in projects to improve efficiency and effectiveness of ICT BAU activities, such as replacement of legacy software and hardware with high support and maintenance costs.

Skills

* Create a whole-of-government Australian Public Service (APS) ICT career structure, including training and development programs for ICT professionals in key skills areas.

* Develop and maintain a whole-of-government strategic ICT workforce plan.

* Reduce the total number of ICT contractors in use across FMA Act agencies by 50% over a 2-year period and increase the number of APS ICT staff. This should save the Government an estimated $100 million (across both BAU and project-related work).

Data centres

* Develop a whole-of-government approach for future data centre requirements over the next 10–15 years.

Sustainable ICT

* Develop a whole-of-government ICT sustainability plan (in conjunction with the Department of the Environment, Water, Heritage and the Arts) to manage the energy costs and carbon footprint of the Government’s ICT activities.

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Stan Beer

Stan Beer assists with Digital Advertising installation and monitoring of advert performance. With 35 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications. Any previous news story submissions should be director to editor@itwire.com and advertising enquires to andrew.matler@itwire.com

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