Federal Government IT spending drops

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Federal Government IT spending drops

Returns to routine levels.

Federal Government technology spending dropped by $600 million over the past financial year, a legacy of the multi-year, multi-million dollar IT services and telco contracts signed the previous year.

Federal Government technology spending was $4.4 billion in the year ending June 30, 2010, according to figures produced by analyst firm Intermedium.

IT services spending was $2.45 billion in the 2010 financial year, 12 percent less than the amount spent in the corresponding period the previous year.

There was also a billion-dollar-drop in the amount spent on outsourcing services by the Federal Government, which totalled $500 million for the FY2010 period.

The spend on telco services was $572 million in FY2010, less than half the amount spent the previous year.

The reductions were largely due to the cyclical nature of government deals, according to Intermedium head Judy Hurditch.

"The cyclical nature of the outsourcing deals [mean that] most of them have a minimum of three years and some extensions," she said. 

"We did see a big raft of deals signed in the 2008/2009 financial year. That reflected where they all started a decade prior to that, travelling together as a pack, and they will continue to do so. The next big year will be around mid-2014."

However, this trend was compounded by the conclusion of a number of multi-year systems integration projects, which were not replaced, she said.

"Broadly, there has been reduced opportunity to secure new business," Hurditch said.

There was some increase in spending on hardware and software, the spend on the latter growing to $750 million.

Hurditch named the advent of a shared services model as the next big trend in Federal Government procurement.

"It is very commonplace in State jurisdictions, but hasn't been favoured as a model in Canberra until recent times [until] the Department of Human Services model, which is under the responsibility of John Wadeson."

She said the shared services body may procure a large amount of IT hardware on the behalf of all agencies, or it could outsource this responsibility to a third-party.

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