Qld's shared services move follows a trend

Qld's shared services move follows a trend

Summary: Analysts say that the Queensland Government abandoning its centralised IT shared services model follows an industry trend to move away from the approach, but they also point out that the move may be costly.

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Analysts say that the Queensland Government abandoning its centralised IT shared services model follows an industry trend to move away from the approach, but they also point out that the move may be costly.

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Following the tabling of an auditor-general's review into the problems surrounding the implementation of a SAP-based payroll system in Queensland Health, Queensland Premier Anna Bligh announced the government would be abandoning its one-size-fits-all approach to IT shared services for government departments and launch a three-month review into the future of CorpTech, the government entity responsible for providing services.

Longhaus managing director Peter Carr said that Bligh's decision to pull back from shared services and to review CorpTech is unsurprising. No government department wants to have the Queensland payroll debacle repeated on their turf, he said.

"I think any CIO, any director-general and any minister in a portfolio where they were [about to have] CorpTech deliver these upgrades and new services would be going 'You know what? Get away from me', and the premier is not going to overturn those decisions."

Carr said the government's action reflected industry moves away from consolidating certain IT services.

"We've even seen, over the last five years or so, the major vendors like IBM make a lot of noise about consolidating on a single instance like SAP but even the major vendors have moved away from that," he said. "[In Queensland] there's 13 mega portfolios or mega agencies all dealing with such a wide range of service delivery capabilities that this whole concept of a single instance of an ERP [enterprise resource planning] that can deliver what is required cannot be maintained."

This is a view shared by Ovum's public sector research director Kevin Noonan.

"We have seen over this time this swinging pendulum towards shared services and back again," he said.

Noonan hoped that the concept of shared services did not take the blame for the problems with CorpTech.

"It would be sad to see shared services taking a hit when really it is not the fault of shared services. It is the fault of governance of shared services because you can't just apply the way we used to work when we did everything in-house."

Gartner research director Steve Battinger concurs that good governance is vital in consolidation projects such as this.

"In addition to the technology approach, it is often helpful to have a tie-in with policy reform to simplify what were different approaches in different agencies," he said. "If they're going to use this one system to suit everybody, you must take the rules and policy along with it."

"You can't just sit back and let all the technical people do it all because the job is horrendously complex."

Following the three-month review, Carr said a mixed model approach would be the likely way forward for CorpTech.

"You'll still see SAP being used but it will be pushed right into the back office and the individual agencies will have this middle layer of departmental specific business processes which they will have to build on top and they will probably be front-ended with some nice cloud-based customer interaction services," he said.

A case-by-case approach would be the best way forward for the Queensland Government, according to Noonan.

"We shouldn't be looking at simply mandating that everything should be going into shared services, he said. "Shared commodities work best [and] even for large agencies some whole-of-government arrangements will stay."

Should the Queensland Government move to disband CorpTech entirely and move IT services back within each department, it must be prepared to boost IT funding to make up for previous budgetary neglect, according to Carr.

"Even only taking the 2006 to 2010 period, a 2.5 per cent increase falls well below the industry averages for budgetary increases in the same period," he said. "Allowing for the [global financial crisis], aggregate increases over the same period equated to somewhere in the vicinity of 15 to 20 per cent. So if in 2010 we calculate that average industry budget increases return to a modest 5 per cent then Treasury will immediately have a $20 million shortfall to find before considering transition costs."

Noonan said CorpTech will now become a test case for governments around Australia.

"All are moving towards shared services right now so this will be a test case that governments around Australia will want to keep an eye on."

Topics: Government, Government AU, SAP

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Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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  • This particular shared services model appears impoverished to the extreme.
    In 2002 and 2003 the Queensland and Western Australian Governments embraced this particular model of shared services, which is to operate in very large clusters of agencies.
    This was opposite to New South Wales which operated in hubs of smaller to medium portfolio agencies or large agencies standing alone.
    Despite having the experience of the failure of the Federal Governments cluster models to draw upon, both Queensland and Western Australia batted on. South Australia was subsequently seduced by the smooth talk and promises that ERP vendors offer.
    After 7 years, 2010 neither Western Australia nor Queensland has achieved any measure of success. Both have spent royal commission levels of taxpayer money and for a projected whole of Government net recurrent operating loss, this contributor estimates at $150 million.
    Standardisation of services or the 80/20, creates workarounds which in turn add hidden costs of about 20%. In a one billion dollar solution hidden costs can amount to $200 million annually.
    With the benefit of hindsight and an Auditor General prepared to provide independent advice, Queensland has made a courageous and correct call. Continuing would have always ended in tatters.
    Western Australia on the other hand does not have the same level of courage. Despite probably spending well over $600 million ($200 million to the ERP), the Government is intent on spending a billion dollars and for just $55 million of “savings”.
    What fuels this thinking is beyond comprehension. Perhaps a conflict of interest, perhaps important people are protecting their reputations. Perhaps Ms Bligh has courage and others not.
    Gunterb