News that Defence has opted to delay the market testing of its long-awaited distributed computing contract will undoubtedly be met with disappointment by suppliers eager to bid for one of the country’s largest IT buyers.
The delay is a symptom of a larger issue in government IT circles. Agencies are being pushed into outsourcing deals - in the name of cost savings - without first being given the necessary resources to clean up their shop.
From an IT perspective, Defence arguably bit off more than it could chew under the Strategic Reform Program.
Defence CIO Group - the IT management function serving the needs of close to 100,000 personnel - is simultaneously transitioning all of its telecommunications needs to Telstra under a deal worth in excess of $1 billion, evaluating tender submissions from IBM and Lockheed Martin for the outsourcing of data centre services under the centralised processing program, is trialling technology options for a rollout of next generation desktops, and was expected (until yesterday’s announcement) to go to market for a desktop outsourcing contract worth in excess of $500 million.
None of these projects can be approached lightly. And yet the Defence CIO Group has been tasked with such a volume and complexity of work at the same time as it has been cut down at the knees in terms of its delivery capability.
A long pattern of staff cuts has led to the Defence CIO Group employing somewhere between 200 and 300 fewer staff today than when the Strategic Reform Program was announced.
Some of that reduction is attributable to the Efficiency Dividend - the long running campaign by successive Australian Governments to reduce business-as-usual spending within the public service.
In addition to these cuts the Strategic Reform Program anticipated considerable cost savings by relying on outsourcing in an effort to reduce the number full-time staff.
Defence has followed the reform timetable to the letter in terms of staff cuts, but isn't hitting its project milestones.
In other words, staff in the Defence CIO Group were almost certainly cut in anticipation of savings that haven’t yet been realised. There are tasks still pending that require the CIO Group to keep some valuable skills in-house.
Even if IBM or Lockheed Martin were announced as preferred tenderer for the data centre deal tomorrow, negotiations are unlikely to be complete before mid-year and savings (assuming there are savings from outsourcing) won’t be banked for 12 or 18 months further down the track.
The delay in desktop outsourcing will only compound this pressure. Two years from now, when this deal is revisited, there are likely to be fewer staff inside Defence with the requisite expertise to negotiate such large and complex deals.
(Meanwhile, the Department of Finance will be undoubtedly be using the trigger of a new government determined to tighten the purse strings to call for an expanded role in the coordination of IT spend on behalf of agencies.)
Numerous failed IT outsourcing projects are testament to one universal truth: you can only genuinely save money from an outsourcing program if you first work to reduce the complexity of IT before it is handed over to an external supplier. You only derive cost benefits from outsourcing when you are outsourcing a commoditised service.
Defence has come a long way on this score - modernising its data centre and IT infrastructure and planning to do the same on the desktop. But arguably the job of removing the complexity of IT isn’t complete just yet - and on that basis, some outsourcing deals might sensibly have to wait.