Inside CenITex's years of tumult

The story of Victoria’s shared services provider CenITex is one filled with scandal, nepotism, cost overruns, outages, a proposed sell-off to the private sector and an eleventh-hour reprieve.

CenITex chief Michael Vanderheide accepts unreservedly that his organisation has an image problem.

“People have long memories and that is part of the story of CenITex that people haven’t quite let go of yet,” he told iTnews.

A 2012 Ombudsman’s report exposed a culture of jobs for mates, an uncontrolled, unvetted process for hiring contractors and workarounds to avoid having to take contracts to open tender.

The organisation employed a staggering 251 contractors in 2011 - many reportedly in uncompetitive rates - and ended up with a $37.5 million deficit in 2011-12.

“The organisation had grown a lot faster than the control environment, and unfortunately there were some unscrupulous people who took advantage of that,” Vanderheide acknowledges.

“It took a long time for the organisation to get itself right.”

None of this could have been far from the minds of the Liberal law makers who decided after coming to government in late 2010 that the best decision was to pull the plug on the entity and ship its services out to a private provider.

Vanderheide accepts that at the time, it looked like the IT market was outpacing the government organisation in terms of performance.

“The initial analysis made it look like industry could do it for less than we could,” he said. “But we still had to test that.”

What followed was a rollercoaster ride for the IT chief, who once led IT for the Victoria Police, and his staff.

But he says he was just as surprised as anyone at the way the embattled workforce responded.

“When we kicked [the outsourcing] off back in 2013 the key risk was always going to be staff attrition, that we were going to lose really good people.”

But in reality, CenITex’s attrition rate dropped to just over five percent during the outsourcing period, down from a historical average of 15 percent (it has now stabilised at around nine percent).

“The people here have demonstrated really remarkable resilience and focus,” Vanderheide said.

“I think they will look back and say, yes it was an uncertain couple of years, but it was also a really good couple of years.

“The key thing for staff is uncertainty … so we did everything we possibly could to treat them like the adults they are. Whether there was good news or bad news they got the news.

“So I think people felt well informed as the process went on, and equipped to make the best possible decision for their own personal circumstances - and the vast majority decided to stick around and see it through."

Can CenITex maintain its commercial viability?

With its fate safe - for now at least - after the new Labor government last month decided to keep the agency on, Vanderheide and his team must continue a campaign to maintain the commercial viability of the public entity to justify its ongoing existence.

Vanderheide makes an equally impassioned defence of the business itself and its recent turnaround in fortunes.

Amidst all the upheaval, in 2014, the agency announced it had hauled itself back into a profitable condition for the 2013-14 financial year - all the way from the $37.5 million brink it found itself at only two years before.

This year, he is quietly confident CenITex will be able to report the biggest surplus yet.

“Our balance sheet is stronger than it has ever been in the entire history of the organisation. Our service levels have been met for the last couple of years. We have seen a significant reduction - close to 40 percent - in outages and significant incidents,” he insists.

While the headlines tell the story of tumult, the chief executive describes quiet tinkering behind the scenes to makeover the organisation.

He credits a lot of the recovery to a big investment the state made into a uniform ‘government shared platform’ four or five years ago that is now starting pay dividends.

“It may have taken a year or two longer than what was envisioned but we are well and truly reaping the benefits of that now,” he said.

The GSP includes a common NetApp storage platform, a common server environment, standard network infrastructure, and a Windows 7 desktop fleet.

As well as radically cutting power bills in CenITex’s two data centres, the GSP allows support staff to work more efficiently “because they are not having to deal with a different thing every time they come into work”.

The organisation has also trimmed its workforce, in particular reducing the numbers of contractors on staff to just 20 or 30.

But is it enough?

The new Labor state government in March announced the CenITex outsourcing approach to market would be called off pending a review.

Last month, with the results of a fast and furious assessment in hand, Victoria decided it was going to keep CenITex as is - but that it would abolish the policy mandate forcing Victorian agencies to buy from it.

In the black, but only by the slimmest of margins in 2013-14, the loss of a major agency customer could quickly reverse Vanderheide’s rosy demeanour and return CenITex to the status of cost centre rather than centre of IT excellence.

Asked whether such a threat is real, he insists he is “really not losing sleep over that”.

“We are working really closely with our current customer group,” he said.

“What I want for Victoria is the best possible IT they can get, so if a customer decides the best possible IT is going to come from someone other than CenITex we will work with them to make that possible.”

So is a long term operating surplus at CenITex a plausible reality?

“We are budgeting [that] for the coming year and I have no reason to believe we are not going to achieve that,” he said.

Without the procurement mandate, it is now up to CenITex to win the hearts and minds of the Victorian public servants it is signed up to serve. With one surplus under its belt, CenITex has been able to cap this years’ prices at last years’ level, and is offering discounts for early payment.

“I guess the message that I have been sending the organisation is that being the service provider of the Victorian government is not a birthright," Vanderheide says.

“We’re being driven by an agenda that is being set by our customers and we will succeed on the basis that we are doing a really really good job, and we will fail if we don’t.”