Recently, changing federal government policy was a factor in the Australian Taxation Office's decision to extend its end user and centralised computing contracts with incumbent supplier EDS, the agency's CIO Bill Gibson has revealed.
Recently, changing federal government policy was a factor in the Australian Taxation Office's decision to extend its end user and centralised computing contracts with incumbent supplier EDS, the agency's CIO Bill Gibson has revealed.
ATO CIO Bill Gibson (Credit: ATO)
Last week the Australian Taxation Office
unexpectedly flagged a $604 million extension with supplier EDS so that it would have enough time to
transition its desktop and datacentre services to a new provider.
The
original plan had been to break up the $1 billion EDS
outsourcing contract into three pieces which would be tendered and
transitioned by June 2010.
In the middle of last year, the agency was ready to refresh
its desktops under the EDS contract, ATO CIO Bill Gibson told ZDNet.com.au
yesterday. In some cases its computers were six years old. The
agency was making do with scavenged spare parts, but the failure
rates were picking up.
Yet that refresh had to be put on the back burner because of
"circumstances", according to Gibson. "There are some government
policies which have emerged over the last few months," he said.
"There was a range of other initiatives that we needed to take into
our planning."
The fact that the office hadn't refreshed last year put renewing
desktops high on the priority list now. EDS will be carrying out
that refresh during the extension time, to be finished by June
2011.
Gibson wouldn't mention which government policies and
initiatives had caused the delay of the desktop refresh. However,
analysts speaking last week about the EDS extension mentioned that
the Gershon review likely had a hand in the agency setting its
plans back. The ATO also had to brace itself for
extra work with the government's stimulus payments.
There was a range of other initiatives that we needed to take into
our planning.
Bill Gibson
"I'd imagine the Gershon report has raised a few questions they
probably have to sort out," Jim Longwood, research VP in Gartner's
IT outsourcing team, told ZDNet.com.au.
Longhaus research director Sam Higgins agreed. "From a risk mitigation
perspective, putting something to market that he's going to need to
unwind in the post-Gershon world is probably the reason," he said.
Higgins also pointed out the impact of changing governments in
general on agencies: "There has to have been some impact for Bill
and others."
Three months ago, the ATO called in Boston Consulting Group to review
its sourcing plan. "They reviewed the current strategy in light of business
pressures," Gibson said. The result was the extension. "We will be signing on contractors
a little later than we had originally planned," the CIO said.
The original idea was to have started the transition for the
desktop part of the contract by April next year. Now it was
expected to be initiated by the start of July, to be completed by
the same time next year, he said.
Even if the incumbent
were to win we have high expectations that whoever wins will be
moving our systems into the most up-to-date technology available.
Bill Gibson
Gibson had decided earlier that the centralised computing
contract would come after the end user computing contract instead
of the original plan to transition the contracts in parallel. "Once
we started into the program we realised that wasn't sensible," he
said.
Gibson now expected to release a draft tender on 31 July for the
centralised computing portion, followed by an updated final tender on 1
October. He said the vendors would have a generous amount of time to
respond before the contract was signed, likely to be sometime late 2010.
He had received feedback from the vendors that it would take six
months to plan the datacentre support transition and 18 months to
implement it, longer than he'd originally thought. He hoped to have
the planning time integrated in the negotiation time before the
contract was signed, which puts the transition finishing around a
year and a half after the contract is signed late next year.
Despite saying the transition would take longer than planned for
centralised computing, Gibson denied that the agency would be
spending more on paying two vendors during the transition than
it had originally budgeted. "We won't have two firms on the books
for longer," he said. "It's not going to impact the costs significantly."
Gartner's Longwood said that Gibson's assessment of the
transition time was fair, adding that from his experience talking
to outsourcers, 18 to 24 months was considered to be the minimum
lead time. Without the extension, the ATO would have been
borderline whether it would have got that through, he said.
Ovum analyst Jens Butler said that Gibson's experience showed
just how deeply embedded first generation outsourcers were. "It
actually makes them quite difficult to extract them out of those
contracts," he said.
If we contemplated extending this,
what's in it for us?
Bill Gibson
Yet Gibson believed that the non-incumbent vendors would have
equal opportunity to win the new contracts despite costs incurred to
transition. "Even if the incumbent
were to win we have high expectations that whoever wins will be
moving our systems into the most up-to-date technology available,"
he said.
The ATO had got a good deal out of EDS on the
extension, according to Gibson. Apart from negotiating a refresh, which would deliver
running cost savings to the office, the agency had also
bargained for more extensive use of virtualisation — all at a lower cost.
"We've got more for less," Gibson said. "As to who pushed who
down, it was a negotiation. If we contemplated extending this,
what's in it for us?"
Gartner's Longwood said that has been a typical result of CIO
bargaining recently. "We typically see 5 to 8 per cent reduction in
deal costs in these tough times," he said. "Most CIOs at the moment
are focusing on short-term savings and not rocking the boat."
