South Australian companies miss out on outsourcing contracts

Adding to the disenchantment are strongly supported rumours that no companies from the state feature in the next round of the long-awaited AU$1 billion in IT outsourcing contracts.

In 1995 Texan IT services giant EDS won a much-vaunted nine-year whole-of-government contract to provide services to about 80 state agencies.

The outsourcing deal was originally valued at AU$565 million and included local industry development criteria which have largely been considered unsuccessful.

The decision to carve up the contract was announced in October 2003, raising hopes that South Australian companies would gain business from the fallout, and a new entity, FutureICT, was created to divvy up the work.

The selective outsourcing process has been described as -transparent as a brick wall", binding bidders to iron-clad non-disclosure agreements.

Local companies will be "devastated" by the outcomes of the FutureICT program, say several industry association representatives. The result is particularly galling while the Labor government, on the cusp of an election campaign to be announced next week, is spending a reported AU$200,000 on a Buy Local advertising campaign.

"We have [Premier] Mike Rann saying we should be buying local and supporting local companies but when it comes to his own government, they find every excuse as to why not,"said David Raffen, chair of the ICT Council for South Australia and managing director of computer services company Microarts.

"I'm being told to buy South Australian eggs and oranges but he won't buy South Australian computers."

Government CIO Grantly Mailes claims that free trade agreements are preventing him from getting behind the government's campaign.

"We [have] a number of multilateral agreements within the Australian government and international free trade agreements. As a small economy, SA can't afford be protectionist -- we rely on national and international export and we would be the losers in the long run in a protectionist environment."

Mailes claimed at a local industry meeting that only 13 percent of the State's IT spend is controlled by government, while the conventional wisdom is that the figure is closer to 50 percent.

Brenda Aynsley, chair of the state branch of the Australian Computer Society, is currently running a pre-election survey on the parties' positions about IT and its role in the economy.

"I understand that the government CIO is risk averse, but we will never have a homegrown Tier 1 company in South Australia without the support of government business," she said.

The government has held a series of information seminars for small businesses over the past few weeks, including an SME e-procurement forum and Small Innovators forum.

"Initiatives are fine, but where are the results?" said Raffen, whose company was part of an IBM-led consortium that included several local companies in its bid for FutureICT contracts.

"Companies currently providing services will be absolutely devastated by these outcomes and will have to totally reinvent themselves if they are to succeed. The only carrot the government is handing out is possible software development."

Vectra is one company that appeared well positioned to win security services but finally lost out.

"Vectra provides services all over Australia and Asia but they're not good enough for the South Australian government," Raffen said. "I think they [the selection panel] are not just risk averse, they are positively biased against SA companies."

Chris Smerdon, managing director of Vectra, preferred not to comment, saying that he wants to look forward not back.

"I just want to know what's in scope, what's out of scope and what is worth local companies pursuing," he said.

It is unlikely any awards will be publicly announced until after the state election on March 18, but the rumour mill says that the first winners of the FutureICT contracts are:

• Mainframe contract to remain with EDS until 2007
• PCs to Hewlett Packard (HP), Dell and IPEX
• Laptops to Dell and Acer
• File servers to HP
• Managed network services for both core services and agencies to Dimension Data
• PABX maintenance support to NEC
• Messaging to Telstra
• Distributed computing support services to Volante

Winners of contracts for Internet services, hosting and security are not yet known.