​Government-wide SAP deal expected to save IT coin

The enterprise technology firm will continue to provide the Australian government with products and services where appropriate, but under a new whole-of-government agreement expected to save IT procurement costs.
Written by Asha Barbaschow, Contributor

The federal government has announced a new government-wide agreement with ERP giant SAP, expected to save IT costs and simplify the procurement process.

Effective immediately for new and existing SAP contracts, Assistant Minister for Digital Transformation Angus Taylor said the new agreement will maximise the value of the government's spend on commonly used IT by "leveraging demand across agencies to achieve price reductions".

"The SAP agreement will deliver savings through reduced duplication and administrative burden for departments," a statement from Taylor said. "Government is driving hard to reduce costs so that it can invest in innovative new solutions. We know that a coordinated approach to ICT procurement works."

Taylor said the agreement is not designed to mandate use of SAP above other vendors.

SAP Australia declined to comment on the terms of the new arrangement.

The announcement follows steps from Taylor to open IT contract access to smaller players in the market.

"We've done the work to consult across government and with a number of major IT vendors to make sure we have fair and transparent arrangements in place," Taylor noted on Friday.

The assistant minister told journalists back in March that the "big bureaucratic beast" known as the Australian government was going to change the way it procures products and services, and would start ridding its innovation-stifling service provider panels as one way of doing so.

The government in August then capped IT contracts at a maximum value of AU$100 million or for a length of three years in a bid to allow small and medium-sized enterprises (SMEs) the chance to bid for smaller parts of big projects.

The government forked out AU$6.5 billion on IT last financial year, with about 30 percent going to SMEs.

Taylor wants to increase that share to 40 percent over the next 12 months -- which would have amounted to an extra AU$650 million in FY17, for a new total that would have been worth AU$2.6 billion for smaller players in the last year.

SAP products and services are currently used to deliver internal business processes to government, including software licences, cloud subscription, and support for human resources and financial management systems.

Earlier this year, the Australian government's Department of Human Services (DHS) signed with SAP Australia to help it progress design work for the Welfare Payment Infrastructure Transformation (WPIT) Program that it is undertaking to transform Australia's 30-year-old payment system, currently responsible for processing over AU$100 billion in Centrelink payments annually.

The AU$3.4 million contract will see the software vendor work with DHS on the provision of preparatory planning and design work until May 19, 2017.

It is expected that SAP will play a large part in the WPIT project, after the company was announced as the department's software vendor of choice for overhauling the payments system when it went to tender in August last year.

At the time, DHS said it was yet to sign with SAP although contract negotiations were already underway. DHS then said in November it was already working very closely with SAP on what will be the co-design and building of a social protection suite.

For 2016, the local arm of SAP reported a net loss after tax of AU$22.5 million, down from its AU$18.4 million after-tax loss a year prior.

Cloud and software-related revenue attributed to SAP Australia totalled AU$557.7 million for the 12-month period, while services revenue was recorded as AU$343.6 million.


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