NSW Govt SAP roll-out to be cloud test case: Ovum

The NSW Department of Trade and Investment roll-out of SAP's cloud product SAP ByDesign will be a test case that other government agencies will watch closely, according to Ovum.

Yesterday SAP announced that the NSW Government Department of Trade and Investment was rolling out SAP Business ByDesign, SAP Payroll and cloud consulting services in a AU$14.5 million deal.

The implementation is expected to save the department over AU$12.5 million, as the department consolidates 16 agencies (which have a total of 8500 employees) from a number of legacy ERP systems to the SAP cloud platform.

"This innovative investment in government efficiency will enable our state's economic development agency to improve both internal and client services," Deputy Premier and Minister for Trade and Investment Andrew Stoner said.

"By consolidating the department's ERP systems onto a single cloud-based platform, we can now focus more of our energies on building investment and jobs, and generating a positive business environment for ... NSW."

SAP said that the agreement was its largest Business ByDesign win.

Ovum Asia Pacific research director for IT, Steve Hodgkinson, said that government departments around the country would be watching the deal to see if cloud services will be a better way of providing shared services.

"It is charting new territory in government use of cloud services in Australia," he said.

"The hope is that the multi-tenant architecture and configurability of the [Software as a Service] SaaS solution will enable the many agencies within the Trade and Investment portfolio, to use it as an efficient and flexible shared service. If this hope is realised, it will be an important proof point for the efficacy of the cloud services model as an alternative to more traditional in-house shared ICT services arrangements."

Because SAP is touting the project as its biggest win globally, and it's the first cloud win in the Australian government, many eyes will be on the project, he said.

"Cloud sceptics will be eager to see it fail. Cloud proponents, on the other hand, will be keen to see both SAP and the agency succeed in taking a major step into the future of public sector ICT-enabled innovation."

The project came at the right time, he said, because cloud risks are now better understood and cloud maturity was improving, especially in the area of data sovereignty.

NSW Trade and Investment chief information officer David Kennedy has reportedly worked out data sovereignty issues, saying that the ERP system, which will be run out of SAP datacentres offshore, didn't have any protected data. The HR and Payroll data would be held in Australia.

The project also came at a good time, according to Hodgkinson, because government budget cuts continued to bite, and confidence in shared services was at an all time low.

"Recent budget cuts mean that it is now difficult for agency executives to pretend that either the ICT status quo or traditional under-invested in-house approaches to application consolidation and sharing are sustainable."

"The promise that cloud services might actually be better, faster, less expensive and less risky than previous ICT projects … is an attractive and timely proposition," he continued.

"The eyes of agency executives in all jurisdictions, as well as throughout the ICT industry, will be on this project."