Western Australian Premier Colin Barnett has today said that the government will drop its pursuit of shared IT services after yet another report stated the project is overdue, over budget and unlikely ever to deliver on promised savings.
The original strategy aired in 2003 had planned to supply 90 Western Australian government agencies with shared services via shared services centres including the Department of Treasury and Finance Shared Services Centre, the Health Corporate Network and the Education Training Shared Services Centre.
A cost-benefit analysis into the troubled and long-overdue shared services project by the Economic Regulation Authority (ERA) tabled in WA parliament today revealed that the 2003 business case for shared services plan was too ambitious in its original costings.
"The proposed benefits were overly optimistic, the true cost of the project was underestimated and the proposed roll-in schedule was not realistic. This, together with decisions made regarding customisation of the IT system during the initial stages of the project, has caused problems that are still influencing the service delivery of the [Department of Treasury and Finance Shared Services Centre] today," the ERA's report said.
The ERA report provided a damning insight into the ongoing and unforeseen costs agencies are experiencing after moving onto shared services. Particularly those provided by the Department of Treasury and Finance Shared Services Centre (DTFSSC), including the cost of running parallel work processes to ensure correct data was being received from the department and an unwillingness from agencies to trust the DTFSSC.
Key implementation partner Oracle also received a beating from the ERA report, which said that rolled-in agencies had been experiencing considerable technical issues using the Oracle system, including the need for extensive customisation to make the software even usable.
"If DTFSSC was to continue in some form, the authority is of the view that the Oracle eBusiness system would need to be upgraded to the latest version. It is believed that this latest version is more shared services-centric and may eliminate the need for excessive customisation of the system in the future," the report said, adding that the projected cost of upgrading the system would see an extra $35 million thrown at the project.
The ERA gave the government a financial ultimatum when considering the future of the project: either stop agency roll-ins to fix the project issues and spend more to upgrade the Oracle software or can the shared services project. The ERA report acted as the straw that broke the government's back, however, with Barnett today recommending that government agencies go back to procuring their own separate IT services.
"The ERA's analysis indicates that decommissioning the OSS represents the least cost and most certain option for delivering corporate services," the premier said today.
However, the decommissioning process won't be painless, the premier said, appointing Finance Minister Simon O'Brien and director-general of finance Anne Nolan to head up the dismantling committee to be made up of agency directors-general, CEOs and an independent operative.
"There remains considerable work to progressively decommission the OSS, including how to best leverage off existing systems and continuing procurement services. The impact on the budget will also need to be fully considered," the premier said.
When outed in 2003, the project has been due for completion within three years, coming in at a cost of $91 million to the state government, offset by $50 million a year in savings from the government's back office purse.
By 2008, the government had thrown a massive $435 million at the project with nothing to show for it. The then-treasurer Troy Buswell said that the project had a long and sorry history and projected that it wouldn't be completed until 2013.
The ERA's negative assessment on the shared services project joins the chorus of dissenters including the WA's auditor-general last year, who said that the project was unlikely to deliver projected cost savings.
Western Australia joins the ranks of the governments which have tried and failed to implement a shared services nirvana, the ERA report added.
Queensland, for example, last year canned its exclusive shared services strategy following the Queensland Health payroll debacle, which saw nurses missing their pay cheques and deceased members of staff automatically rostered to work.