Rescued CITEC digs up $12m in savings

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Rescued CITEC digs up $12m in savings

Will it be enough to get earnings back on track?

Embattled Queensland government IT infrastructure provider CITEC claims to have found a way to squeeze $12 million out of its cost base over the next three years, by re-negotiating extra discounts out of its suppliers.

CITEC won a last-minute reprieve from the incoming Labor government earlier this year after preparing itself for a sell-off as part of a directive of the previous LNP administration.

However, the organisation, which runs two data centres and secure network infrastructure for use by Queensland agencies, is still struggling with the fallout from the divestment plans.

Last month, state Technology Minister Leeanne Enoch told budget estimates that “not only was [the divestment policy] deeply unsettling for the staff; the uncertainty contributed to a number of CITEC customers either in-sourcing activity or moving to alternative outsourced arrangements".

“As a result, over the last two financial years CITEC ICT’s revenues have reduced by $16.96 million,” she said at the time.

The infrastructure organisation - which was split from its information brokerage operation last year in anticipation of its privatisation - is expecting a $6.2 million EBITDA loss for 2015-16.

The agency’s latest annual report (pdf) suggests it has turned to its supplier base to carry a lot of this burden.

CITEC said it had renegotiated a number of deals that will deliver it $12 million in savings over the next three years, which it plans to pass on as reduced fees to its agency clients.

Over the past financial year it upgraded its IBM mainframe, EMC storage, SAP payroll system and T5 UNIX solution to support its client agencies.

The annual report identifies 2015-16 as the year CITEC and its parent agency, the Department Science, IT and Innovation, will consult with industry and stakeholders to nut out the “most appropriate business model for CITEC” going forward.

The minister has already ruled out any staff cuts from the 310 FTE- strong agency.

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