NSW govt IT spending tops $3bn

The NSW government’s IT spending has grown by more than 40 percent over the last five years, exceeding the $3 billion mark for the first time.

The new spend figure comes after the Department of Finance, Services and Innovation quietly released its fifth annual round of IT benchmarking, providing the latest rundown of agency IT outlays across verticals.

The later than expected report reveals that overall government technology spending reached $3.08 billion – or 4.3 percent of total agency expenditure – in the 2016-17 financial year.

It is part of a wider jump in IT spending over the past five years, which the government puts down to its aggressive digital transformation efforts.

“Over the last five years, the NSW ICT spend has increased by 41 per cent,” the 2016-17 ICT Metrics Report [pdf] states.

“This reflects the Government’s determination to provide customer centric services to the people of NSW.”

The increase was most pronounced in the 2016-17 financial year, which saw spending climb by $0.43 billion or 16.25 percent on 2015-16 figures – the largest year-on-year spending increase in five years.

While this is still consistent with overall industry benchmarks from Gartner, it is above the state and local government benchmark for the first time in five years.

“The proportion of spend on ICT versus total agency expenditure was 4.3 per cent in 2016–17, which is consistent with the Gartner benchmarks of 4.1 per cent (state and local government) and 4.6 per cent (cross industry),” the report states.

“This is a reflection of the Government’s determination to ‘catch-up’ on ICT and to undertake ICT transformation.”

Big spenders identified

Three NSW government clusters were found to be responsible for the majority of the state's IT expenditure, with around $2.09 billion spent between Transport ($0.74 billion), Health ($0.69 billion) and Justice ($0.66 billion) during 2016-17.

Finance – the cluster driving many of the customer centric service reforms cited as the reason for the massive jump in spending – sits further down the list, having spent $0.23 billion in 2016-17.

Much of the spending at both Transport and Health fell to applications, which account for 52 percent and 55 percent of total agency IT spend respectively.

Spending on applications across the government remains the most expensive service toward at $1.3 billion or 45 percent of total ICT spend, an increase of 17 percent on the year before.

However it was not the service tower that saw the biggest increase; that fell to spending on Servers, which grew by 76 percent.

Opex transformation lagging

The report also highlights that despite attempts to reduce capital expenditure, the state government’s operation expenditure funded transformation is “lagging behind”.

IT capital expenditure still sits above 30 percent, which is is “considerably higher” than the Gartner benchmark of 19 percent in 2016-17.

But the government is confident that capex will continue to fall as “major transformations are delivered”.

The bulk of the IT capital expenditure falls under what the government calls the ‘grow’ and ‘transform’ aspects of the business rather than the ‘run’ or operational aspects of the business.