ATO takes axe to EDS AU$1bn outsourcing deal

The Australian Tax Office says it will open its IT outsourcing contracts worth over AU$1 billion to multiple suppliers, ending its 10 year single-supplier arrangement with EDS.
Written by Liam Tung, Contributing Writer

The Australian Tax Office (ATO) says it will open IT outsourcing contracts worth over AU$1 billion to multiple suppliers, potentially ending its longstanding single-supplier arrangement with EDS -- and has promised no datacentres will be offshored as a result.

For the past 10 years, EDS has held the ATO contract wholly. However, following internal reviews and advice from Boston Consulting Group, the ATO has decided to split its IT outsourcing arrangements into three separate streams.

"Even if one vendor wins all three, it would be three separate contracts," the ATO's second commissioner Greg Farr told ZDNet Australia. "It will be all done separately but I wouldn't preclude one vendor from getting all three."

The decision to break up the contract was taken to foster greater competition in tenders for the ATO's outsourcing work, said Farr. It equally needed to aggregate components of each contract to avoid complicating the integration process by involving too many vendors, he added.

"We needed to have sufficient scale to make it worthwhile and standardise the benefits. We also wanted to combine the service elements relating to planning and asset refreshes and keep the refresh bundles in the same cycles," said Farr.

There are only about six vendors that, in Farr's view, will be capable of fulfilling the tender requirements. While that number includes offshore vendors, all datacentre contracts must stay within Australia.

"We haven't and can't preclude offshore work as part of the evaluation -- but there will be no offshore datacentres. Anything that requires storage of Australia tax data will be in secure premises in Australia. This does limit us a lot, but I don't think it would be acceptable to the Australian public," he said.

The ATO will extend its current contract with EDS until 2010 to cover the transition period, although Farr said parts of the contract may end earlier when new arrangements are put in place.

The first tender to be awarded will be for the ATO's "managed network services", covering voice, mobile and data carriage, PABX, desktop handsets and LAN and WAN switches.

"We would hope to have an expression of interest for this in the marketplace by early next year," said Farr.

The second tender will be for "end-user computing", including mobile device management, service desk, service management and printer management, while the third tender will be for "centralised computing" such as the ATO's mainframe computing needs, mid-range storage and its data warehouse.

The second and third tenders will be announced simultaneously during the middle of next year. Each tender will be followed by extensive testing periods, which, should EDS no longer be in contention for the tender, will be isolated from the incumbent contractor to ensure non-interference throughout the period, said Farr.

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