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- Updated Jul 5 2018 at 3:38 PM
Experts question Turnbull government's $1b contract with IBM after census fail
Information technology analysts have questioned the decision by the Turnbull government to award IBM a $1 billion contract after the 2016 census debacle.
The deal, which covers the whole public service, raised concerns the deal could lock out rival vendors and fail to deliver value for money.
The government has touted the five-year deal for delivering $100 million in savings and benefits for taxpayers taking advantage of the Commonwealth's buying power to lock in discounts on hardware, software and cloud computing for all departments and agencies irrespective of their size.
But Dr Wissam Raffoul, an adviser with ICT consultancy IBRS, said the government should have opted for a smaller deal and made IBM earn back trust.
Prime Minister Malcolm Turnbull blamed the company for failing to meet its contractual obligations and it paid $30 million in compensation.
"If you engineer a bad experience like the census, why do you expect IBM can do a better service," Dr Raffoul told The Australian Financial Review.
"If the government still trusts them, they should give it [the contract] in phases and not such a big deal."
Dr Raffoul said he was concerned the government had been repeating the mistake of ICT procurements in the 1990s, when big contracts were signed with a single vendor.
Changes were introduced from about 2000 after a review found these types of deals were not delivering value for money.
"It's the same bad practice that went wrong before but we're doing it again now under the name of new technology or digital transformation," he said.
Dean Lacheca, research director for public sector and government at advisory firm Gartner, said the scale of the deal was not a surprise but pointed out IBM had been struggling to win new business outside of government.
"There is still a significant legacy investment in IBM [in the federal government] and a big part of that deal underpins that legacy system and opens up opportunity for innovation," he said.
Mr Lacheca said the deal would give Canberra access to IBM products in a controlled way with standardised pricing but was concerned it could inhibit competition.
"Hopefully the agreement takes away pressure on procurement but we want to make sure that smaller system integrators are not locked out," he said.
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IBM deal exposes real cost of legacy
By Justin Hendry on Jul 5, 2018 12:00PM
The vendor government can't live without.
At the heart of the Commonwealth’s $1 billion government-wide deal with major vendor IBM is a push to find new ways to save, but also new ways to spend.
It is the latest in a series of deals with the federal government’s biggest IT dollar value vendors brokered by the Digital Transformation Agency to try and synchronise how essential IT needs are sourced.
Similar deals have already been inked with software giant SAP in recent months, although the only major contract to emerge from that is nowhere near as dear as the figure being touted with IBM.
The DTA has spent the last six months negotiating the five-year deal with Big Blue to give agencies, big or small, the “bulk-buying power” to ensure universal pricing structures across government.
Part of that is a straight through volumetric discount and commodity price standardisation exercise to control gouging and margin padding.
However the real driving factor behind the mega-deal this is the promise of additional savings for taxpayers from a vendor which continues to support the backbone of the APS, while its digital transformation efforts are ongoing.
It can be hard for governments to live with IBM, but even harder to live without.
All agencies will have their existing contract moved under the new arrangement to benefit from the arrangement, accounting for the “more than $300 million” that makes up the new deal.
It is not clear whether the new deal includes the last significant deal snagged by IBM back in 2016, which pushed its mainframe support arrangement with the Department of Human services passed the $1 billion mark.
The government is said to have saved in excess of $1.2 billion since 2008 through the introduction of mandatory whole-of-government arrangements such as Microsoft licensing arrangement that has just been replaced.
This is only expected to become even more pronounced with the buying reforms heralded by last year’s ICT procurement taskforce.
The government hopes to reduce the total annual ICT spend by 10 percent over the next four years using a number of mechanisms, most notably capping IT contracts at $100 million.
It will also free up a further $650 million for Australian small to medium enterprises each year, possibly be redirecting the savings from the major vendors.
But at a time when government IT spend is said to be nearing $10 billion a year, the annual $100 million figure the government hopes will come through coordinated procurement looks more like a drop in the ocean than a glass half full.
IBM is, after all, responsible for a significant portion of the government’s IT spend each, chewing through more than $4.2 billion across 2175 contracts over the last ten years, according to iTnews analysis of AusTender contracts.
While there is scant detail on just which projects IBM will support, Medicare's 30-year-old payments system seems an obvious beneficiary.
That system is increasing nearing end of life, and has been given emergency funding for remediation while the Department of Health continues to search for a replacement.
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I have to say it will be interesting to see how this plays out in the next few years as it is almost inevitable there will be a messy project of two emerge and after the ‘Census Fail’ you can be certain they will be on high alert to catch the failing project early….
I am not sure such huge contracts are such a great idea but we will all see.
David.
Doesn't seem to fall under much of MHR given its an Accenture and Oracle system. Replatforming MHR in a couple of years though...
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