The Western Australian Government has announced it will decommission its shared corporate services office after a report found it was costing the state tens of millions of dollars.
The initiative, which was meant to save the state up to $56 million a year, had been providing IT services to 58 state departments and agencies.
The office offered agencies financial, procurement, human resources services on an Oracle ERP platform, as well as shared support and online services including video-conferencing and internet access.
The scheme has been halted prior to the planned roll-in of a "number of large and complex agencies" over the next two years.
"Rolling agencies into an ineffective shared services arrangement would be costly and jeopardise agencies' operational efficiency," a report by the West Australian Economic Regulation Authority [pdf] found.
State Premier Colin Barnett today backed the key findings of the report, which ultimately recommended that agencies re-take control of corporate services.
The centralised Office of Shared Services would be "progressively decommissioned", Barnett announced today, a process to be spearheaded by an implementation committee that included at least one independent representative.
Barnett said that the Government needed to consider "how to best leverage off existing systems and continuing procurement services.
"The impact on the budget will also need to be fully considered," he said.
Finance Minister Simon O'Brien said that staff who worked in the shared services office would either "continue to work on the procurement process" while "others will be redeployed to recommence corporate services in Government departments."
The ERA said that as of the end of last month, the office of shared services had cost the Government $189 million in capital costs and $254 million in operating costs, bringing in only $43 million in revenue.
The Authority said only 37 percent of agencies had "rolled-in to the full ERP solution, with the remainder using finance and/or procurement services only".
The ERA's analysis concluded that the shared services project would not have proceeded had the Government had access to the same cost figures made available today.
The report also said – partially with the benefit of hindsight - that an audit of the shared services office in 2007 should have resulted in it being decommissioned then, which would have saved further cost blowouts.
The state had two other shared services centres not caught up in this review: one for education and training, the other for health. All three were set up in 2005.
Oracle's technical review
An independent technical review of the Oracle ERP system found that extensive customisation of the system had contributed to stability and cost issues.
"Decisions made regarding customisation of the IT system during the initial stages of the project... caused problems that are still influencing the service delivery of the [office] today," the ERA said.
There were 1165 customisations in the Oracle system, of which about half related to payroll and HR services alone, according to the technical analysis by Stantons.
The level of customisation would hamper a necessary upgrade of the Oracle system from version 11.5.10 to 12 (necessitated by expiry of support arrangements in November 2013), it said.
Stantons said that the upgrade process "could take up to 27 months" and recommended that as much customisation as possible "be removed from the system" to prevent a recurrence of the current situation.
One contributor to that timeframe was a list of 615 outstanding "defects and enhancements" that Stantons recommended be reviewed before embarking on an upgrade project.
Version 12 of the Oracle software was thought to require less customisation because it was more supportive of a shared services architecture.
The Office of Shared Services had sought $35 million for the upgrade, plus more funding for maintenance and other works. The decommissioning meant these funds would no longer be required.
Legacy systems better
Another obstacle standing in Oracle's way was the perception of medium-to-large agencies that were scheduled to be rolled into the shared services arrangements in 2011 and 2012.
About 80 percent of these agencies "believed that their current in-house systems [were] superior to the Oracle system, so that rolling-in would have a negative impact upon their business."
The perception was backed in part by negative feedback from predominately smaller agencies that had rolled into the shared services scheme.
The ERA examined submissions from 23 such agencies, 82 percent of which said shared services on Oracle were less efficient than the legacy systems the agencies had dumped.
Users of shared services also reported big problems with Oracle eBusiness – such that 65 percent of the sample had developed their own "workarounds".
The agencies estimated that creating those workarounds would cost them almost $4.2m in 2010-11.