The West Australian Government’s decision to decommission its Shared Services business will cost a projected net $95 million this financial year, and around $370 million overall, according to budget forecasts.
The WA Government released its 2013-14 budget on Friday. It revealed it had spent $258 million since it made the decision to scrap Shared Services in 2011, and estimated a further $95 million would be spent this financial year, with an additional approximate $5.9 million each year until 2017.
The total WA expects to spend decommissioning the body is around $370 million, according to its forward estimates.
The state government decided to ditch its shared corporate services office two years ago, after it was found to be costing WA tens of millions of dollars despite being initially implemented to save the state up to $56 million a year.
The Office of Shared Services was created in 2005 to provide IT services to 58 state departments and agencies, including for finance, procurement, support and online services, as well as human resources services based on Oracle’s eBusiness ERP platform.
The 2011 report found only 37 percent of agencies had rolled in to the Oracle solution, with the remainder using only finance and/or procurement services. “Extensive customisations” - specifically 1165 - of the Oracle solution had contributed to stability and cost issues, the report found.
Additionally, most of the medium to large agencies still left to roll into the shared services arrangements in 2011 and 2012 thought their legacy systems were better than the Oracle system, and predicted a negative impact as a result of an Oracle ERP rollout - a perception backed by agencies which had already rolled out and reported a bad experience.
The State's Department of Finance was assigned the task of decommissioning Shared Services. The process was initially set to be completed by December this year, but was later extended to March 2014.
Mini procurement boom
The dissolution of the shared ERP platform has resulted in a burst of ERP procurement activity in the state, as agencies face the prospect of having to re-establish their own internal capability.
This work will continue in earnest this financial year as the March 2014 deadline for completion of the decommissioning process looms.
On top of the project management budget assigned to the Department of Finance, several agencies have received new or ongoing funding to assist in their transitions.
The WA Gold Corporation pocketed $7 million worth of new funding in last week’s budget for its ERP software replacement. The Department of Planning also received a $5.3 million boost to its budget for the shared services transition, which it plans to spend before June 2014.
Ongoing allocations are listed against several other agencies, many of which are close to being exhausted.
The Department of Finance has estimated that a total of $68 million worth of business will go through its whole-of-government panel for ERP solutions before it reaches its initial expiry in June 2014.
Last month panellist Technology One announced it had secured 21 contracts with departments and agencies transitioning off the shared services platform, including the Department of Aboriginal Affairs, the Department of Local Government and the Department of Water.
WA Finance had not responded to enquiries lodged by iTnews at the time of publishing.
Read on to find out how other states are making similar moves
Australia's state governments move away from shared services
The final stages of the dissolution of WA’s shared services body come as a number of other states across the country begin to move away from internally provided shared corporate services.
NSW is reportedly planning to ditch its shared services body BusinessLink, with a transition plan to be implemented following a review. The Minister for Family and Community Services, Pru Goward, has declined to confirm an intention to dissolve the unit and has deferred any comment until the review is complete.
The Victorian Government is set to make its shared services agency CenITex a broker of IT rather than a provider.
Following an internal review last year which found the state did not have the funds to upgrade 75 percent of its legacy desktop, hosting and storage environments, CenITex CEO Michael Vanderheide announced to staff the preferred option was to take all core services to the market.
CenITex has been issuing requests for proposals since June and will continue doing so until March next year. It plans to transition to a new operating model after suppliers are locked down in July 2014.
Additionally, late last month the Queensland government announced Queensland Shared Services would be overhauled before it faces competition from the open market.
The Queensland Government adopted a recommendation of the state Commission of Audit report to remove the mandate for compulsory involvement with QSS, and has begun the process to develop a revised model which would see it compete with the market for shared services.
QSS runs finance, procurement, human resources, facilities and mail support services for 20 Queensland state agencies.
Queensland is also preparing to divest the State’s main technology services provider CITEC as a result of the Commission of Audit.