Queensland shakes up IT shared services

 

Central procurement office proposed.

The Queensland Government plans to establish a new central procurement office for state departments and agencies in an attempt to rectify previous challenges with shared services arrangements.

According to Queensland Government chief information officer Peter Grant, previous shared services systems had failed to achieve stated outcomes including saving money, reducing operational redundancy and allowing agencies to focus on their core responsibilities.

“There have not been a range of killer success stories in offering IT services through shared services schemes,” Grant said at the Technology in Government & Public Sector Summit this week.

“In Queensland, we spent $1 billion over 10 years and saved zero.”

The State Government's shared services attempts have faced heavy criticism of late, with issues at Queensland Health and the core shared services agency CITEC leading to ongoing issues.

A $5.2 million audit conducted by Grant, who joined as whole-of-government CIO for the second time earlier this year, had settled on a bill of more than $5 billion to fix the state's 50 most vulnerable systems.

Queensland's makeover

Grant proposed to establish a well-funded central group, dubbed the 'Services Executive', which would be tasked with identifying the best sourcing options for a range of back-office and commodity-based services for Government.

Those services would be provided either through an external industry or internal provider in order, Grant said, to avoid the invalid assumption that an in-house provider must be good at delivering the best services for Government departments.

The executive would be held accountable for ensuring service outcomes are met by identifying the best internal and external providers, each of which would themselves be held accountable by key performance indicators on price and performance.

Unlike other KPI criteria though, those indicators placed on chosen providers would go beyond savings in order to avoid the pitfalls of previous shared services arrangements.

Internal providers would also be held accountable to the same performance indicators, while agencies would be required to use the services, as well as agree to policy directives concerning those services.

Judicious funding and attention to KPIs through this division of responsibilities should drive the appropriate behaviour, Grant said.

Instead of committees, a referee was needed to adjudicate on various issues, such as which services are ripe for shared services and which are best left to agencies.

Grant proposed his office become that referee.

The Services Executive would not require agencies to participate if they were not happy to do so.

“That happens over and over in shared services initiatives," Grant explained.

"Agility and support issues are eliminated because when providers participate because they want to, they can actually chose whom their clients will be."

The advantages of the makeover, Grant argued, was that it would overcome the problem of due diligence, provided the Service Executive was properly funded and did not use cost recovery models. 

Righting the wrongs

Understanding why other shared services arrangements failed was the key to developing a better model, he said.

Lack of responsibility for outcomes had become an instant point of failure for many shared services initiatives, he said.

“It’s really hard to find an organisation where there is a person that will get the sack if it doesn’t work.”

Instead, accountability and risk were often shared through committees with diffuse and opaque responsibilities.

He recounted his experience in taking up his current position to learn there were no few than 16 such committees operating in State Government, attended by agency CIOs. No one could explain what they were meant to achieve or how they related to each other.

Grant disbanded those committees.

The funding model, too, was often counter-productive. Cost recovery schemes did not work because it gave agencies a license to avoid the scheme if the prices were raised to high.

The notion of saving costs through economies of scale was a myth, Grant argued, because the needs of agencies often varied.

Some wished to be agile and have the latest tech, while others want just the basics and not interested in a full set of ERP or HR options.

Many agencies ended up having have to pony up for a product they did not need or be disappointed by a dumbed down version of an app they really needed.

The support requirements varied as well. He said supporting a police agency, a health agency and a policy agency involved very different service levels.

The big fat internal provider

Related to this was a phenomenon that Grant described as “the big fat internal provider”.

"They get to a point — particularly where your funding model is wrong — where they don’t have to perform at all,” Grant said. If the service costs more, they simply added it to the agency bills.

Costs were not transparent under such schemes as agencies had to buy at the costs charged by internal providers.

Queensland's CITEC, the state's previous shared services provider, had a lot of overheads, which they subsequently passed on to agencies as additional costs.

He said CITEC had no motivation to cut costs.

“They are costed at a level that were far higher than agencies would have paid," he said.

"It allows providers to grow fat.”

Only marginal savings were possible if the provider was outsourced, as it did not resolve other inherent faults.

Another symptom of a failing shared system was that the organisation that provided shared services were rarely asked whether they want the job, whether they were suited for the position and whether or not there may be alternatives outside the State Government sphere.

“If you ask the provider did you want to do this? The answer is often, no," he said.

"They were made me to do it, because the organisation could not find anyone else to do it. So they found someone that had to do it."

Costs of repurposing inhouse software

Grant also criticised attempts within Government to re-purpose in-house software built for one department, to other agencies that did not require the same features or had the same requirements.

Though expectations often settled on a 10 percent premium to repurpose software, the real costs of doing so were more like 200 percent, he argued.

“Why? The data model of a single application won’t have a table in it for who is the company,” he said.

“If you add that table to the data model, you’ll probably find that becomes the parent key for every other table in the whole system. That means you are going to have to change every table in the whole system.

"That means changing the file structure in the whole system. That means every program in the whole system. So taking something that you use once and make it multi-company is really hard.

One response to this development dilemma is to make a separate instance for each organisation.

“That’s good but how does that give you economies of scale? You have a whole lot of separate instances that you have to maintain. So that is a real trap for shared services organisations.”

Copyright © iTnews.com.au . All rights reserved.


Queensland shakes up IT shared services
 
 
 
Top Stories
Frugality as a service: the Amazon story
Behind the scenes, Amazon Web Services is one lean machine.
 
Negotiating with the cloud email megavendors
[Blog post] Lessons from Woolworths’ mammoth migration.
 
Qld govt to move up to 149k staff onto Office 365
Australia's largest deployment, outside of the universities.
 
 
Sign up to receive iTnews email bulletins
   FOLLOW US...

Latest VideosSee all videos »

The great data centre opportunity on Australia's doorstep
The great data centre opportunity on Australia's doorstep
Scott Noteboom, CEO of LitBit speaking at The Australian Data Centre Strategy Summit 2014 in the Gold Coast, Queensland, Australia. http://bit.ly/1qpxVfV Scott Noteboom is a data centre engineer who led builds for Apple and Yahoo in the earliest days of the cloud, and who now eyes Asia as the next big opportunity. Read more: http://www.itnews.com.au/News/372482,how-do-we-serve-three-billion-new-internet-users.aspx#ixzz2yNLmMG5C
Interview: Karl Maftoum, CIO, ACMA
Interview: Karl Maftoum, CIO, ACMA
To COTS or not to COTS? iTnews asks Karl Maftoum, CIO of the ACMA, at the CIO Strategy Summit.
Susan Sly: What is the Role of the CIO?
Susan Sly: What is the Role of the CIO?
AEMO chief information officer Susan Sly calls for more collaboration among Australia's technology leaders at the CIO Strategy Summit.
Meet the 2014 Finance CIO of the Year
Meet the 2014 Finance CIO of the Year
Credit Union Australia's David Gee awarded Finance CIO of the Year at the iTnews Benchmark Awards.
Meet the 2014 Retail CIO of the Year
Meet the 2014 Retail CIO of the Year
Damon Rees named Retail CIO of the Year at the iTnews Benchmark Awards for his work at Woolworths.
Robyn Elliott named the 2014 Utilities CIO of the Year
Robyn Elliott named the 2014 Utilities CIO of the Year
Acting Foxtel CIO David Marks accepts an iTnews Benchmark Award on behalf of Robyn Elliott.
Meet the 2014 Industrial CIO of the Year
Meet the 2014 Industrial CIO of the Year
Sanjay Mehta named Industrial CIO of the Year at the iTnews Benchmark Awards for his work at ConocoPhillips.
Meet the 2014 Healthcare CIO of the Year
Meet the 2014 Healthcare CIO of the Year
Greg Wells named Healthcare CIO of the Year at the iTnews Benchmark Awards for his work at NSW Health.
Meet the 2014 Education CIO of the Year
Meet the 2014 Education CIO of the Year
William Confalonieri named Healthcare CIO of the Year at the iTnews Benchmark Awards for his work at Deakin University.
Meet the 2014 Government CIO of the Year
Meet the 2014 Government CIO of the Year
David Johnson named Government CIO of the Year at the iTnews Benchmark Awards for his work at the Queensland Police Service.
Q and A: Coalition Broadband Policy
Q and A: Coalition Broadband Policy
Malcolm Turnbull and Tony Abbott discuss the Coalition's broadband policy with the press.
AFP scalps hacker 'leader' inside Australia's IT ranks.
AFP scalps hacker 'leader' inside Australia's IT ranks.
The Australian Federal Police have arrested a Sydney-based IT security professional for hacking a government website.
NBN Petition Delivered To Turnbull's Office
NBN Petition Delivered To Turnbull's Office
UTS CIO: IT teams of the future
UTS CIO: IT teams of the future
UTS CIO Chrissy Burns talks data.
New UTS Building: the IT within
New UTS Building: the IT within
The IT behind tomorrow's universities.
iTnews' NBN Panel
iTnews' NBN Panel
Is your enterprise NBN-ready?
Introducing iTnews Labs
Introducing iTnews Labs
See a timelapse of the iTnews labs being unboxed, set up and switched on! iTnews will produce independent testing of the latest enterprise software to hit the market after installing a purpose-built test lab in Sydney. Watch the installation of two DL380p servers, two HP StoreVirtual 4330 storage arrays and two HP ProCurve 2920 switches.
The True Cost of BYOD
The True Cost of BYOD
iTnews' Brett Winterford gives attendees of the first 'Touch Tomorrow' event in Brisbane a brief look at his research into enterprise mobility. What are the use cases and how can they be quantified? What price should you expect to pay for securing mobile access to corporate applications? What's coming around the corner?
Ghost clouds
Ghost clouds
ACMA chair Chris Chapman says there is uncertainty over whether certain classes of cloud service providers are caught by regulations.
Was the Snowden leak inevitable?
Was the Snowden leak inevitable?
Privacy experts David Vaile (UNSW Cyberspace Law and Policy Centre) and Craig Scroggie (CEO, NextDC) claim they were not surprised by the Snowden leaks about the NSA's PRISM program.
Latest Comments
Polls
Which bank is most likely to suffer an RBS-style meltdown?





   |   View results
ANZ
  21%
 
Bankwest
  9%
 
CommBank
  11%
 
National Australia Bank
  17%
 
Suncorp
  24%
 
Westpac
  19%
TOTAL VOTES: 1455

Vote