Government ICT: The bean counters stifle innovation

Comparing CalculationsI’m going to get some sideways looks for some of these posts, however I think its time that someone started to challenge the way that ICT is delivered via Government and hold a light to some of the reasons as to why. One of the areas that most stifles an ICT organisation’s ability inside a government agency is the accountants and “contract managers”.

By way of a caveat, thanks to some of you who have responded, this is not the case with every agency. A lot of these blogs will be generalisation, however I can safely say that in the majority of cases, these will stand true.

The first mistake any company or government agency can mistake is treating ICT as a sunk cost, overhead, that delivers nothing but intangible benefits (can’t be measured monetarily according to the accountant’s weapon, the business case.)

In the past decade, regardless of the government that is in power, we’ve seen downward pressure on operating costs, which has translated directly into demands on the ICT organisation to reduce their costs. This, in my opinion, has driven the risk through the ceiling in a number of areas as CIO’s and ICT staff are forced to retreat to spending money on core, critical services, while foregoing other services such as security, disaster recovery, less essential upgrades, and privacy. The end result is, what you see in the paper.

This downward cost pressure has seen many restructures where staff have been lost, or outsourced, and HR departments have been vehement in their pressure by lowering the rates that skilled ICT staff can get, forbidding the use of skilled contract resource, cutting training, cutting bonuses, and trying to hire people on fixed-term employment contracts

Other bean counter driven decisions have been made. In the last decade we saw the rise and rise of outsourcing, purely seen as a cost cutting measure. Those of us who have long experience in that area know that your costs will increase, inevitably, as a result of outsourcing and that the happiness factor is very low, with somewhere around two-thirds of companies and agencies stating their lack of satisfaction with outsourced arrangements.

Worse, as part of the outsource model, we’ve seen the rise of “ICT contract managers”, who generally, don’t know about ICT, do know about contracts, and set about trying to squeeze as much cash as they can out of the partners and providers that an ICT organisation needs to deliver service.

Across government, this downward pressure on cost has resulted in agencies “sweating” ICT infrastructure and software, in other words, putting off the day where they have to be replaced. We see this with the desktop as an example. Worse, in the data centre, critical legacy systems are sitting on aged infrastructure that will cost billions to replace in the coming years.

The government is somewhat naively trying to pressure agencies into utilising All of Government services as an alternative, such as IaaS or One.Govt, however, the horse has well and truly bolted in this case with the market rising to defend themselves and providing competing (better) services for much less cost.

Having your CIO report to your CFO, or similar, needs to change. This constant focus on ICT as a cost hole with little understanding shown of the complexities of managing ICT services is going to leave agencies in technical backwaters where one day, surprise, a massive amount of money and catch up will need to be made. $1,500,000,000 for IRD, as an example

So how do we change it?

The first thing we do is we get the Chief Executives, the Deputy Secretaries, and the Executive Management Teams to understand ICT. Because they don’t. Generally. They think they do, but they really don’t. All of these senior exec’s could do with some one on one training, some degree papers or similar, in the fundamentals of ICT management.

ICT is not a cost centre, its the engine that drives your agency, and if you want to get after providing online services to citizens, you have to invest in it and stop telling it to spend less money. It needs to be treated the same as any other business unit in an organisation with the same rights, in other words, as a customer.

You need to invest in strategy. This is the difference between ICT reacting to your every whim as opposed to proactively providing services that you consume. You being the rest of the business. This downward cost pressure has caused ICT to become reactive only. That strategy needs to be outlined for the next twelve and twenty-four months. It needs to be prioritised and discussed carefully with the ICT organisation.

Shadow ICT needs to stop. This is where the wider business units in an agency decide that the ICT organisation is too slow and go out and procure their own ICT services, either via a local ICT company, or increasingly, Cloud. Worse, having done that, they then charge the ICT organisation with the cost of those services and when it goes horribly wrong (Novopay), throw it over to the ICT organisation to sort it out. You need to treat the CIO and ICT Organisation as a broker for ALL your ICT services and enable them to do that role. Which means two more things.

First, you need to get the ICT organisation to tell you what it costs to deliver your ICT services, and let them charge you for that, rather than simply having a massive bucket of costs assigned to ICT. This will change your behaviour when it comes to consuming ICT and it will show where the actual cost is being driven from. Implementing chargeback is not that difficult once you’ve completed an initial total cost of ownership.

Next, you need to allow your ICT organisation to transform into one of ICT Service Delivery. This means investing in your entire ICT organisation with training, new staff, and the time to implement. The net result should be an ICT organisation that delivers ICT services based on service levels that have been agreed with business units with known costs. Here’s a tip as well, if you want your resource to hang around in a competitive market with skill shortages, pay them more, look after them, and stop treating them like a slave. This always helps.

Contract Managers should be relegated to what they were originally purposed to do; measuring contract performance against SLA’s as opposed to holding the purse strings and putting pressure on vendors, partners, and outsource providers. A pure contract and money focus will destroy a productive relationship faster than lightning.

Their should be a governance body established that has collective responsibility for ICT. This should include the Chief Executive and senior team. This allows the CIO and ICT organisation direct access to the agency decision makers and should be an open, frank, and regular board where every member takes accountability.

All of Government needs to do one of two things, in my opinion. Mandate the use of their services while reducing the costs to below market to make it easy to get into (or subsidise them) or get out of the way. They can’t expect an agency to be overjoyed about moving to an All of Government service that is older, inflexible, contractually complex, more expensive than what the private market can offer, has really high transition costs, can be more risky, and difficult to manage. If government wants to be in the business of providing services then they need to get those basics right.

Government should consider establishing an ICT Innovation Hub beyond the current methods they have to generate new ideas. There are thousands of ICT workers in government with great ideas that are lost in the hubbub of the few appointed experts. Better, that Hub should be mixed with New Zealand Innovation Hubs such as the Icehouse and others. Imagine if government ICT organisations had access to the kind of thinking behind companies like Xero? Why aren’t we asking them for ideas?

Downward cost pressure by accountants effectively running ICT organiastions in Government will stifle innovation and lead to a massive expenditure bubble in the next two years, if not sooner. You can’t expect ICT organisations to deliver better outcomes when they are treated as a sunk cost department that you don’t give innovative control to.

Government ICT needs to be changed from one of cost avoidance and management to one of ICT Service.


One comment

  1. Bang on the Nail Ian. Experience and knowledge is extremely valuable. A culture change is required to support excellence in ICT outcomes, in fact it’s well overdue. My analogy, “expecting your children to feed the family with their pocket money”.

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