HP to retain ATO's enterprise computing

The Australian Taxation Office (ATO) has announced that incumbent supplier HP Enterprise Services has been selected as preferred tender to continue to manage its centralised computing for at least five years, with options to extend the agreement to 11 years.

The announcement means that HP Enterprise Services is more than likely to continue managing the Tax Office's mainframe, midrange, data warehouse, storage and secure gateway requirements until at least 2017, if not until 2023.

The tender also covered the provision of data centres, data centre networks and facilities management.

The ATO said it chose HP over rival IBM as HP's deal "represents the best value for money outcome for the ATO."

No financial terms have been agreed upon to date.

The Tax Office has reserved the right to change its mind and use IBM Global Services "if a value for money proposition cannot be achieved with the preferred tenderer [HP]."

Mega-millions at stake

The centralised computing tender represents the third slice of IT outsourcing deals put to the market by the ATO after breaking up its monolithic billion-dollar outsourcing agreement with EDS, which HP Enterprise Services acquired in 2008.

The ATO had previously awarded its desktop services work to Lockheed Martin under a $60 million a year deal and managed network services to Optus under a $46 million per year deal.

But the biggest slice of the pie - enterprise computing - could be worth far more to HP.

According to briefing documents released by the Tax Office in mid-2008, enterprise computing requirements made up some $160 million of the ATO's IT spend every year.

Winners and losers

Two years in the making, the Tax Office deal has been among the most anticipated chunks of government work in Australia's IT industry.

Competitors have progressively dropped out of the race as the ATO's negotiators set tougher expectations.

Of the four main suppliers in the running, CSC and Lockheed Martin pulled out of the race in December 2009 after studying a formal request for tender (RFT) document in October of that year.

HP Enterprise Services and the ATO took the stage together at this week's Gartner Symposium event in Sydney to talk up advances the partnership had made in virtualisation projects - which led to speculation that HP may have bumped IBM Global Services out of the race.

The ATO said it hoped to finalise contracts with HP in December 2010.