news The Federal Department of Defence has revealed that it renewed a major IT hardware and software contract with IBM in late 2008 to the tune of $342 million, despite not having put the work out to public tender since 1999.

The contract appears to have been first reported by analyst house and technology media outlet Intermedium, which first published detailed of the deal in 9 December. Intermedium quoted a Defence spokesperson as stating that the five-year agreement, which will now be in force until September 2016, covers:

“Major Defence Systems including our Personnel, Finance and Military Logistics systems and Defence Information Communications Technology Reform Initiatives, including Service Oriented Architecture, Single Secure Desktop and Data Centre Migration and Consolidation.”

Brief details of the contracts are also available publicly on the AusTender website here and here.

Shortly after, time technology media outlet iTNews filed a Freedom of Information request with the Department of Defence to request details of why the department merely renewed the arrangement with IBM, instead of putting the contract out to public tender. We recommend you click through to read iTNews’ full coverage of the issue, as it is comprehensive. Several weeks ago, Defence has published its response to the Freedom of Information request publicly on its website (PDF). It has also published a letter explaining its rationale in responding to the FoI request (PDF), as is common with FoI requests.

The majority of that document has been censored, with eleven pages completely blacked out, with Defence defending the blackout as containing information which was “reasonably regarded as irrelevant to the scope of the [FoI] request. However, one section was not blacked out.

In that section, Defence stated that a decision had been made between the Defence’s Chief Information Officer Group, its Chief Financial Officer Group and the Department of Finance and Deregulation to allow the contract to proceed without going out to tender, with it being classified as a “sustainment activity”.

“A change of supplier would compel Defence to procure hardware and software that does not meet requirements of compatibility with existing equipment or services,” Defence noted in the document. “The requirement for IBM was determined as part of the Market Testing of the Defence Computing Bureau in 1999. Until such time as that decision is revisited, the requirement to sustain our existing IBM infrastructure will remain.”

“IBM is the only entity that can agree to changes to IBM’s terms and conditions of supply and use.”

Defence also noted that clauses of government regulations allowed direct sourcing where “additional deliveries” were taking place that were intended “either as replacement parts, extensions or continuing services for existing equipment, software, services or installations where a change of supplier would compel the agency to procure property or services that do not meet requirements of compatibility with existing equipment or services”.

The news is the second time over the past year or so which a major Federal Government agency has successfully worked around tendering guidelines to renew a decade-old arrangement with IBM.

Two days before Christmas in December 2010 and just 24 hours after publicly denying it had renewed its long-running comprehensive IT outsourcing arrangement with IBM, which has been in place since 1999, the Federal Department of Health and Ageing (DOHA) reversed its statement and confirmed the arrangement.

opinion/analysis
If you examine IBM’s lines of business closely, it is hard to make a case that Defence needed to renew its long-standing software and hardware outsourcing arrangement with IBM through 2016.

On the hardware side, IBM’s lines of business in server, storage and mainframe infrastructure all have direct rivals which provide similar solutions. In a number of cases, those solutions are regarded as being technically more capable than IBM’s (although IBM is also regarded as having the edge in a large number of areas).

For example, when it comes to servers, IBM has major competitors such as HP, Dell and even more integrated solutions from the likes of Oracle (especially through its acquisition of Sun Microsystems). In storage, it is common for major organisations to also look at solutions from EMC, NetApp and Hitachi Data Systems. In mainframe, companies like Fujitsu and CSC play a strong role.

When it comes to software, things are a lot more complicated, especially when you start discussing high-end concepts such as service oriented architecture, where few companies aside from IBM are really capable of providing enough pieces of the puzzle so that everything fits together. However, when major organisations such as the National Broadband Network Company are standardising many different systems on software from Oracle, and German giant SAP also has a comprehensive portfolio which is powering much of the Commonwealth Bank, it is hard to make an argument that the IBM work couldn’t be put out to market. When it comes to secure desktop, I’m sure VMware and Citrix would have a view about that.

And of course, all of these companies have major partner/system integrator ecosystems in Australia. Heck, IBM itself is one of those key partners for quite a few of those players.

Of course, there are two sides to every story. And as I have previously written, the Federal Government’s tendering regulations are onerous and often prevent quick and efficient outcomes from being reached in IT procurement. Defence chief information officer Greg Farr is one of the IT executives who I most respect in Australia’s technology sector — and I’m not the only one. Farr just won a Public Service Medal for his efforts at Defence and the Australian Taxation Office. I’m sure are there very good reasons for Defence to re-sign its contract with IBM.

However, Defence has not yet provided those reasons publicly. In fact, it very explicitly chose not to — releasing the bare minimum amount of information needed to satisfy iTNews’ Freedom of Information request.

Whatever the truth is about this situation, one fact remains. In our fast-changing IT environment, where major new technology products and solutions are released every year, no public sector organisation should sign a single supplier up for a 17-year contractual span without testing the market for that spend several times during that period. I, and I’m sure IBM’s competitors, would like to see some acknowledgement of that fact from Defence.

blog iTNews has published an excellent article today detailing how almost all of Westpac’s staff are still running Internet Explorer 6, and, presumably, Windows XP). The publication reports (we recommend you click here for the full article):

“Westpac staff have been left running outdated operating systems and browsers after the bank indefinitely postponed a $20 million technology refresh project aimed at delivering a consistent desktop experience across the group.”

We’d ask what gives, given that XP first came out in 2001, and even Microsoft itself has set a global countdown watch on the long-lived version 6 of its browser. But the sad truth is that many major financial services organisations and government departments in Australia are still running both. NAB only upgraded to Windows XP from NT (yes, I said NT) in 2008, while CommBank still runs Windows XP (on its MacBook Air fleet, no less) and the Department of Defence only recently upgraded to IE7. Disclosure: Delimiter runs predominantly on Chrome, with the odd Firefox flirtation.

news IBM XIV Storage System Gen3 will be a key infrastructure component for Bendigo and Adelaide Bank, forming an underlying foundation for the ongoing development and delivery of customer-focused business applications, according to an announcement by IBM yesterday.

Bendigo and Adelaide Bank, which owns and operates Bendigo Bank, Adelaide Bank, Sandhurst Trustees, Leveraged Equities, Bendigo Wealth, Rural Bank and Oxford Funding among others, is the first Australian organisation that will deploy the recently announced XIV Gen3 disk storage systems.

IBM claims that IBM XIV is a proven high-end disk storage system designed to eliminate storage management complexity and deliver high performance. The company asserts that the Gen3 models are optimised for cloud computing and virtualisation, and will provide the bank with ample room for service expansion in the near future without the economic and environmental costs of extra hardware.

The two XIV Gen3 units to be deployed will be part of a set of upgrades, which includes new IBM SAN Volumes Controller nodes, to improve capacity for Bendigo and Adelaide Bank’s customer service operations. The storage systems will support file/print applications, Exchange, SQL databases and backup and recovery applications. The upgrades are also expected to address the issue of steady increase in IO load and storage server CPU utilisation with deployment of new customer applications.

“The new IBM XIV Gen3 units will provide us with the capacity to deliver and maintain significant performance improvements as our storage utilisation grows, without storage issues. We expect to see considerable benefits, including improved and consistent application response times,” said Greg Smith, Storage Team Leader at Bendigo and Adelaide Bank. “Our objective is to be the number one customer-connected bank in Australia. The main thrust of application development has been around knowing and understanding customers better, and delivering applications which provide better services to them.”

He added, “We’re able to consolidate our storage requirements into a smaller number of controllers on the floor. The IBM XIV Gen3s will ensure performance improvements in our applications, allowing us to provision storage quickly so that the bank can continue to grow, within its current data centre footprint.”

All praise for the “seamless installation process” which would allow them to “leverage the new infrastructure well before the peak Christmas period,” Smith gave credit for this to the ongoing relationship between Bendigo and Adelaide Bank, IBM and ISI. ISI, an IBM business partner, is an Australia owned and operated IT solutions provider that is working on the implementation.

Image credit: Patrick H, Creative Commons

news IBM announced yesterday that it is developing a global private cloud computing system for the 2012 Australian Open as part of its technology partnership for the international Grand Slam tennis tournament.

IBM has long provided managed services, including consulting services and hardware and software solutions for building clouds for Australian customers, but has not been forthcoming about its cloud computing strategy to the Australian market until now.

According to a statement by IBM, the IBM private cloud is a virtualised environment hosted in three data centres based in the US. The private cloud enables continuous access to content, including a raised level of match and player data, from the Australian Open for millions of global fans, broadcasters and players.

The Australian Open organisers, Tennis Australia, can use the private cloud to rapidly scale its data in real time and ensure uninterrupted availability even in the event of a total data centre outage. IBM has virtualised a good deal of the event’s data infrastructure and server migration providing higher flexibility in technology solutions, which can scale up or down according to the fans’ changing demands.

In IBM’s statement, Samir Mahir, CIO of Tennis Australia, stressed that all tennis fans are important to the organisers, whether they attend the event or are watching from their homes. “We want to give a connected experience for the Australian Open. The private cloud solution provides the necessary volume of Australian Open data to anyone in the world at any time, without any excess demand affecting its quality or availability. This means fans can expect real-time access to more dynamic content even during the busiest periods of the competition” explained Mahir.

IBM has previously leveraged the private cloud at other Grand Slam tournaments to satisfy the data integrity and scalability needs of the USA, France and UK organisers. Mahir spoke about the high need for elasticity of computing power when dealing with audiences of a major tournament: “For most of the year Tennis Australia is a small and medium size business, but for two weeks every January we host the Australian Open and become a large global enterprise. We need to be able to rapidly adjust to the number of fans accessing our digital content and their changing interests throughout the competition.”

The Australian Open website, which was launched in 1996, has had a whopping 10 million unique visitors, with a 45% increase in the number of users and a 43% increase in page views since 2008. The cost per user has dropped by 35% and the cost per page view has also come down by 34% since 2008.

Mahir said that IBM’s private cloud allows the tournament organisers to manage peaks and troughs throughout the design, testing and live phases of the Australian Open with cost-effectiveness and flexibility. At this year’s event, Tennis Australia will be able to provision a new web server in under three minutes and transfer a live application workload from one IBM power System to another in under four minutes.

This year, the Australian Open will feature an enhanced IBM SlamTracker, a live scoring and analysis tool introduced in 2008, delivering match statistics across all courts, live text commentary and a momentum visualiser for featured matches. SlamTracker uses IBM business analytics technology to examine more than 39 million data points from seven years of Grand Slam tournaments, analysing for styles and patterns of winning players. The analysis is compared to the opponents’ style and patterns to establish the keys to the match for each player. A total of 256 singles matches will be played on seven broadcast courts and analysed.More than 35km of cables have been laid throughout the stadium.

IBM also plans to add an Android smartphone application to its existing iPhone app for the Australian Open, delivering live scores, highlights and news to additional mobile users. The private cloud will enable a direct interface with all of IBM’s front-end services.

The project lead for IBM’s Australian Open, Sarah Cole, said that 2012 is the nineteenth year of IBM’s role as Official Technology Partner of the Australian Open. She claimed that IBM’s investment in novel technologies has transformed Grand Slam tennis into one of the most sophisticated spectator sports in the world. “One of the hallmarks of the partnership with Tennis Australia has been the successful adoption of technology innovation to enrich the Australian Open experience for players, fans and organisers,” Cole said.

Image credit: Patrick H, Creative Commons

news New South Wales’s state government auditor-general revealed yesterday that a massive SAP-based project to replace finance, HR, payroll and student administration systems across the public education sector had gone off the rails.

The project, known as the Learning Management and Business Reform (LMBR) program was initially kicked off in 2006 and aimed to replace the systems at schools, TAFE institutions and the Department of Education and Communities’ head and branch offices throughout the succeeding seven years through to the middle of 2013.

However, in an audit report published yesterday (PDF), NSW Auditor-General Peter Achterstraat noted that the project had been delayed, had gone over budget, and had not provided all of the expected benefits to the department in some places where it had been implemented.

The finance aspect of the systems overhaul was slated to hit the department (including schools and TAFEs) from November 2009 through the end of 2010. However, in every instance it was delayed, and the deployment to schools had been prepared, but not carried out yet. The HR and payroll aspects of the project had similarly not been deployed, despite the fact that it was slated to be in place by mid-2011, and the student administration system overhaul was also delayed.

“In 2011, the department reviewed the status of the project to ensure it was a solution that met current and future business requirements,” the auditor’s report stated. “As a result, the implementation dates for the majority of components were realigned to provide an integrated solution for the department.” The Australian has reported that consortiums led by Accenture and IBM are vying to build that integrated solution.

Where the project had been implemented, the process had not gone that well.

“The finance system did not fully meet the department’s needs and users had to build some manual workarounds, which resulted in lost time and additional effort and costs not included in the original business case,” the report stated.

“System users had some difficulty obtaining accurate and/or relevant and timely information; the Shared Services Centre did not have the required skills, resources and knowledge to fully support the system; system users did not have sufficient knowledge of the new system and its functionality.”

As a result, the cost of the first phase of the project had jumped from $153 million to $210 million, although the estimated cost of the second phase had actually dropped — from $218 million to $176 million. A further $14.4 million has also been allocated by the NSW Treasury to fund additional staff and training. “This reflects the decision to deliver an integrated solution across the Department rather than separate implementations for finance, human resources and student administration and learning management,” the report noted.

In a separate statement (PDF), Achterstraat noted he was concerned that “another large government IT project is failing to deliver, is over budget and is behind schedule”.

opinion/analysis
With virtually every major IT project of any kind in the Victorian and Queensland State Governments going off the rails within the past half-decade, it is hardly a surprise to find that similar problems are being experienced in New South Wales. In fact, I would count it a surprise to find a major IT project in any state government at the moment which was 100 percent on track and on budget; now that would be worth writing about.

However, leadership around this issue has started to arise, as Australia’s IT community starts to deal with the long-term fallout of such dysfunctional government IT projects. Last week we looked at some of the things Victoria shouldn’t do in order to pull itself out of the IT governance hole it’s currently in; we’re currently working on an article looking at what it could do. Some of these lessons will apply to the NSW and Queensland Governments as well; stay tuned for its publication shortly.

Image credit: Natalie Singh, royalty free

news The Australian division of fast food chain McDonald’s today confirmed long-running industry rumours that it had given incumbent IT outsourcer IBM the boot, instead picking rival firm Unisys to support its IT infrastructure in a new five-year deal worth about $30 million.

In August this year Delimiter received an anonymous tip to the effect that IBM had lost the McDonald’s account, with the tipster alleging a competitor had beaten it in a competitive tender on a number of grounds. Big Blue’s top-level management wasn’t happy with the situation, the tipster claimed at the time. “Heads will roll.” However, we were never able to verify the story, with McDonald’s maintaining IBM remained a key supplier. Until today.

This morning, Unisys issued a media release noting McDonald’s had contracted it to provide IT support services to McDonald’s in Australia, New Zealand the South Pacific region. “Under the terms of the contracts, Unisys will provide service desk, on-site and remote support services to McDonald’s chain of more than 1,000 company-owned and franchised restaurants across Australia, New Zealand and the South Pacific region, including New Caledonia, Fiji, Tahiti, American Samoa and Samoa,” Unisys’ statement noted.

“Unisys will provide its Smart On-Site Services for end-to-end support of technology used in the McDonald’s restaurants, including point of sale devices, back-office PC equipment, peripherals, wireless networks, customer order display units and cameras.” Unisys’ central service desk supporting McDonald’s will be located in Wellington, New Zealand, and will provide 24×7 coverage — matching the operating hours of many of McDonald’s restaurants.

McDonald’s chief information officer Henry Shiner said Unisys had been chosen because the company needed a partner which could provide support across “a widespread geographic region” to agreed performance levels. A McDonald’s spokesperson confirmed the work had previously been provided under a contract with IBM, but stressed the company remained an important supplier to the fast food chain, especially in the area of systems integration.

IBM is believed to have supplied IT services to McDonald’s for some time. Big Blue published a case study (PDF) at one point detailing how it had implemented a PC-EFTPOS system from 205 that would integrate its point of sale platform with its existing IP network. The project allowed McDonald’s to connect securely to the bank which handles its transactions.

“After a series of pilot projects, IBM implemented the new system across 720 restaurants within three months,” IBM wrote in the case study. At the time, McDonald’s was using Telstra for its network connections. The fast food giant’s current CIO, Henry Shiner, stepped on board a little after that point — in March 2007.

opinion/analysis
I’m not surprised to see Unisys pick up this work. The company right now is one of the kings of desktop support services in Australia — holding huge contracts with major organisations like the Departments of Defence and Immigration and Citizenship. I’m sure Fujitsu and a few others had a stab at it as well.

I would view McDonald’s move as primarily a cost-cutting endeavour. Most CIOs are loathe to switch their major outsourcing partners around, as the transition period typically involves a significant changeover effort and lots of to-ing and fro-ing. It looks like IBM has been a long-time supplier to McDonald’s in a range of areas. Now that a few projects are out of the way — such as the point of sale integration conducted a few years back, Shiner is likely betting that he can take some costs out of his outsourcing budget.

IBM isn’t usually the cheapest partner on the planet. But you go with them because they have almost limitless resources and everything you can need in-house — from soup to nuts.

One thing further: When we first got the anonymous tip about IBM losing the McDonald’s account, I was a little suspicious. It turns out the tipster got almost everything right. However, they also claimed that McDonald’s was one of IBM’s biggest clients in Australia. I would be very surprised if this was actually true.

$30 million is not a huge amount for an IT outsourcing contract — in fact it’s at the lower end of contracts that I would bother reporting on. IBM has signed many contracts in Australia worth many hundreds of millions of dollars. Westpac, DIAC, Telstra and more … the list of IBM’s scalps locally is endless, and McDonald’s is hardly a huge client for a company which makes revenue of $4 billion in Australia every year.

opinion/analysis If you were a guardsman patrolling Westpac’s chrome and steel fortress in downtown Sydney as the company held its annual results briefing session several weeks ago, it would probably have been inevitable at some point that you would have recognised that something had gone rotten in good Queen Kelly’s normally prosperous realm.

On the face of it (as all great enterprises constantly strive to assure the public) everything was going swimmingly. The bank had announced record profits — up 10 percent to almost seven billion dollars — for the past year, and the future was looking swell. The annexure of luscious tier two target St George? Complete. Deeper relationships with loyal customers? Growing. Productivity savings kicking in? Nice.

Tick, tick, tick. As with all annual results sessions, you got the feeling that Westpac was heading for an explosive finale. Boom! We conquer the world. Make all of our shareholders millionaires. Buy CommBank. Whatever. Something larger than life. Something to inspire us all.

But as the day — and the week following it — wore on, it became increasingly clear that a thread of unease had made its way into Westpac’s golden future. A hint of that horrible concept which every major Australian corporation constantly dreads being associated with. Something rotten in the back of the fridge. As Gail Kelly smiled, nodded and accepted the plaudits of analysts graciously, whispers were beginning to circulate that the bank was planning a large round of job cuts in its technology operation.

To have this scenario associated with a record annual results session is the definition of a no-no, as viewed by any company’s board. Instantly, your successes turn into failures, as the redundancies become the story. A layoffs angle associated with a record profit session is every journalists’ dream and every chief executive’s nightmare. It allows the press to feel good about itself and get on its high horse — exposing corporate greed, putting the manacles on power and portraying smiling, well-dressed executives as Machiavellian manipulators. It allows unions to do the same, and forces the public into believing the worst of Australia’s corporate giants. In short, it’s top stuff. Not exactly the image that Westpac wants to be associated with.

And so, in its own moment of crisis several weeks ago, Westpac bank tried to spin its way out of its little mess.

Applying tried and tested techniques imported from Westpac’s marketing department, Kelly re-branded the offshoring of jobs as “best-sourcing” of the bank’s technology resources. Redundancies aren’t redundancies in 2011. What they are is bringing “rigour, discipline and cost efficiency”. They’re “more efficient workforce management”, ‘leveraging partners’, suppliers managing functions on “an outcomes basis”, “scalability”, “flexibility”, “a step change” in supporting the bank’s applications, and more.

The changes would involve “systematically identifying and engaging the most skills and cost efficient resources to identify functions or processes, whether they work through us directly or indirectly through one of our local or off-shore supplier partnerships”, iTNews quoted Kelly as saying.

“In other words, we specify what we’re looking for from that function, the processes are clearly documented, they bring their resources, expertise and people to it and we get the flexibility and get the best practice that they can bring to us,” she added later, according to The AustralianIT. “It’s a new model, it gives us scalability, it gives us flexibility.”

And Australia’s technology press ate it up wholesale. Headlines like “Westpac details multi-sourcing plans”, “Westpac CEO Gail Kelly spruiks ‘best sourcing plans’” and even “Westpac trusts contractors with more work” exploded across the web, as the bank’s new IT strategy found its footing and took on a life of its own.

If you believed the hype, a newer, more complex form of banking was emerging. One which would take us all forward into a glorious future, leveraging the right “resources” and improving productivity and effectiveness. As Westpac’s results briefing calmed down, this became the dominant narrative externally to the bank. There were no outraged staff members. No journalists asking pesky questions. No — God forbid — political interference. I’m sure the executive team down at Westpac Place was satisfied. All was well in Kelly’s kingdom. Calm and quiet — just the way CEOs like it.

Pedal hits the metal
But inside the bank, unfortunately, all was not well.

Just days after Kelly announced Westpac’s new ‘best sourcing’ IT strategy on Thursday November 3rd, the bank’s employees began to feel nervous. What, after all, did ‘best sourcing’ mean? Some articles on Westpac’s announcements — this one by iTNews being the most notable and detailed — had contained disturbing implications. Did Westpac expect “staff cuts”, as the publication reported? Was it true that possible suppliers included Indian outsourcing giants Tata, Infosys and Wipro, as well as IBM (which also has a substantial facility in India)? Sure, most of these names were already strongly associated with Westpac. What did “best sourcing” truly mean?

The answer was to come swiftly.

“Westpac is outsourcing all development functions over the next 20 months,” one industry source told me early the next week, as the rumours caught fire. “Affects maybe 2,000 jobs under the Software Delivery Applications area.”

The whispers continued to come thick and fast. Firstly, the announcement was to come from Kelly herself. Then, things shifted and it was to come from highly regarded Westpac chief information officer Bob McKinnon. The figure shifted as well. First, 2,000 staff were to be under review, as that was the total amount of staff in the Software Development Applications area. Then things moved — the outsourcing was to affect just some 1,200 staff who did development and testing work. Now, the rumour mill has focused on compulsory leave over Christmas for some staff.

As is turns out, Westpac did make an announcement on the day the rumours suggested. The bank confirmed in a statement last week that it opened consultation with staff on the matter on November 8 — a Tuesday. Five days after its annual results announcement the previous week. Five days in which rumours flooded around Westpac and the remainder of the banking sector like wildfire.

And indeed, although the bank said it doesn’t know how many staff were to be affected by the cuts, the 1,200 number keeps on floating around.

“As you know, we are currently at historically high levels of employment and have bought in an additional 1,200 contractors in the past year and a half to work specifically on application services work,” the bank’s spokesperson said last week. “As we are currently undergoing consultation and then transition we are not yet in a position to confirm future staffing levels and the breakdown between permanent staff and contractors.”

After the announcement, the situation only got worse for Westpac, as panicked internal staff called their union representatives in for help. That same Tuesday, the Financial Services Union wasted no time in issuing an inflammatory statement on the matter, including all the keywords to get journalists fired up. “Westpac announces first job cuts after making record $7 billion profit,” the union’s headline screamed. “The job cuts, mainly in Sydney and Adelaide, will mean that a number of IT functions will no longer be handled by Westpac, and will instead be provided by outside companies both in Australia and offshore.”

Boom. There’s a hot story right there. And as they had the week before, the headlines flowed in. But this time, Westpac wouldn’t have been too happy with them. “Best sourcing” was out. “Outsourcing to India” and “cutting Australian jobs” was in. “Union fires up over Westpac outsourcing,” wrote ZDNet. “Westpac to shed jobs as cost cutting bites,” was how the Sydney morning Herald labelled it. And iTNews was more blatant: “Westpac cuts 188 tech jobs”. Even Delimiter itself got into the act, with “Outsourcing to affect 188 Westpac jobs”.

Despite the bad press, the headlines didn’t appear to phase Westpac. The bank issued a cool statement noting it had announced to staff that it was “changing the way we outsourced some roles” and that the 188 jobs referred to “an initial consultation process”, but that it would “minimise the overall impact on our technology workforce”. Above all, Westpac emphasised it couldn’t be sure how many Australian jobs could eventually be affected. “The final impact on our full-time staff will not be known for a number of months as we work through the transition,” the bank said.

But despite Westpac’s best intentions, these comments sent a number of readers hopping mad.

Delimiter subsequently received a throng of anonymous tips alleging that the bank — as the union had already stated — had been outsourcing “for well over 18 months already”, was already using Indians in bulk for onshore jobs under 457 Visa, was handing over intellectual property to companies like Infosys and Tata, and was even keeping some Australian jobs just until they could ensure the Indians were reliable.

And there appeared to be some truth to some of the comments.

Westpac’s spokesperson confirmed it was already using a combination of permanent staff, local contractors, specialist organisations and its “existing offshore suppliers” to support its application development and maintenance needs. They confirmed the bank was looking at how that mix might change, as the bank’s business requirements changed. And they also confirmed comments that the bank had recently been integrating its BT and institutional bank technology workforce into its main technology division.

Do I think Westpac is looking to outsource 2,000, or even 1,200 staff? Do I think it’s not protecting its intellectual property? Do I think it had shoddy employment practices? No — there’s not much evidence that things are that bad, although I’m sure there are elements of these issues floating around, as there are at most companies. But some people do believe these things. And some of those people are the bank’s own staff members.

The wash
Now, what I don’t want to do with this article is give readers the idea that there is anything wrong with Westpac’s strategy of outsourcing jobs to Indian IT firms.

Frankly, and I can’t stress this highly enough, the Australian business community is currently extremely reliant on offshoring initiatives for one simple reason: It is completely impossible to source the amount of skilled labour which major companies like Westpac require purely through on-shore labour — and certainly not at any price level which would be considered reasonable. I’ve heard this story time and time again from Australian executives — enough times that I believe it to be true.

Secondly, it is also true that if you are one of the Westpac staff affected by the move, it is highly likely that your experience in Australia’s banking sector will enable you to find a new job — or, more likely a new, well-paid contract — pretty quickly. Good IT skills are in short supply in Australia right now, and the banking technology world is a small one. If you’ve got a few connections, you’ll probably pull through OK.

The angered emails I’ve received over the past several weeks on the matter, the heavy-handed union claims on the issue and the level of angst out there about Westpac’s actions … are pretty much overblown. Calm down, people. Westpac is enacting a legitimate business strategy here. It’s not the end of the world. ANZ has had a whole in-house IT facility in Bangalore for years. Offshoring is speedily becoming the norm — not the outrage which the unions would have us believe.

However, what is also true is that Westpac has enacted this strategy in a coldly manipulative way which I, and I’m sure many of its staff and contractors, find fairly offensive and a little Orwellian. It has attempted to rigorously control the way it communicates its job cuts, both externally and internally, in a way that will lead it to the greatest advantage — but in a way that has required it to obfuscate and hide the truth deceptively.

The bank’s marketing-esque ‘best sourcing’ language used at its annual results session was a blatant attempt to cloak its IT offshoring initiatives in a golden varnish of shiny corporate-speak. Take this example of nonsense doubletalk, for example:

“The current challenging market conditions require Technology to improve our capability, agility and productivity. To achieve this, a “step change” is required in our approach to sourcing and delivering applications services. We are moving to adopt an outcomes-based services approach to sourcing and delivering applications services. This approach will improve our productivity and agility through optimising our engagement with and value obtained from our preferred suppliers.”

What exactly does this mean? To most Australians, it will mean just one thing: Absolutely nothing. To a certain variety of corporate yes-man, it will mean: “We’re doing something, but we don’t want to put it in words which actually mean anything”. And to Westpac’s panicked staff, right now it means: “Get off the sinking ship before you’re forcibly jettisoned.”

I also don’t really believe Westpac when it says it has no idea how many staff will eventually go. These things don’t happen overnight — if the bank is confident enough to begin discussing the matter publicly, it has to have been in closed door discussions with the outsourcers for months — perhaps many months. In my experience, McKinnon and the other Westpac technology brass have always had a very, very concrete and solid idea of how they want the bank’s IT strategy to go forward.

Despite this, however, the bank last week chose to tell staff and union members that just 188 jobs were at risk in the short term. This action represents something fairly cold — a calculation that the bank can get away with more cuts than it would otherwise, if it sugar-coats them and extends them into a lengthy series of small job loss packages over time rather than a lot hit on the head in one fell swoop.

The difference between the narratives generated by Westpac and the Financial Services Union is that Westpac was easily able to predict what the union would do, confronted with any job cuts at all. So, in a calculated fashion, it limited its losses. Instead of fighting one major battle, it chose to fight the union — which represents its own employees — in a guerrilla war of attrition. It will cut down resistance to the job cuts one step at a time, one small division at a time, until it reaches the level it wants to. It’s a proactive strategy which will ultimately defeat the more reaction union, as it is designed to do. In comparison, the union is reacting entirely as predicted. Outrage, outrage, burn and outrage. It’s what unions do best. Westpac knows this.

The interesting thing about the first (at its annual results) and second wave (the union’s statement the next week) of reports about Westpac’s IT outsourcing efforts over the past several weeks is that they actually contain almost the exact same information. But the information was framed differently. One man’s “best sourcing” and “more efficient workforce management” is another man’s “188 jobs offshored”. One man’s ‘valued partners’ becomes another man’s Indian offshoring initiative.

From my perspective as an onlooker, it’s like watching a vast smothering blanket being draped over Australia’s banking technology coversation. Right now, with respect to its staff internally, onlookers externally and third-party stakeholders like its unions, Westpac is not being clear. It might be taking the right business strategic approach — in fact, knowing its CIO, Bob McKinnon, I’m sure that it is. But the way it is communicating that change reminds one of a vast, multi-headed bureaucracy stifling all dissent.

From this angle, it’s not hard to see why unions and other employee groups get so frustrated with corporations like Westpac. In a vain attempt to find out what’s happening with the bank’s workforce, they are confronted with waves of corporate jargon. Journalists are pre-brainwashed so that repetitive small rounds of cuts can be made later without fanfare. And staff members only find out about things after everyone else … including, most likely, many staff from the vendors who will help replace them.

One of the most extraordinary things about this whole process is that previously, I had considered Westpac one of the most open of Australia’s banks. I’ve sat down over lunch with its CIO Bob McKinnon and other senior executives. I’ve quizzed the bank many times on individual news stories — such as its shift to Microsoft Exchange — and gotten fairly normal responses. But after what we’ve seen from Westpac over the past few weeks, I’m disinclined to continue to trust it as I have been.

As a technology journalist, I’ve always been willing to accept a certain amount of conceptualised thinking. When you’re at a 30,000-foot view as a CEO or CIO, overseeing thousands of staff at a major organisation, those staff necessarily become ‘resources’ rather than people. Trends, cycles, variances. All of these things become more important than individuals when they’re writ large over such a huge canvas.

But there is a difference between that kind of conceptual thinking and the kind of cold manipulation which Westpac has carried out over the past few weeks. “Best sourcing” is not an acceptable metaphor for reviewing thousands of people’s jobs. “More efficient workforce management” should not be used as a catchphrase for a process which will influence the future careers of staff members who have worked passionately for your business’s advantage.

At a certain point, corporate-speak becomes more than an abstraction. It becomes more than a useful metaphor. It becomes something which is simply undesirable in the honest relationship between an employer and and an employee. It becomes something which is all-too pervasive in our media-saturated society. It becomes something which we must make war against, and attempt to outlaw. It becomes nothing more than that most odious of things: Spin.

Spin, spin, glorious spin.

news The Federal Department of Health and Aging has accused technology giant IBM of causing a “catastrophic failure” in its IT systems stemming from an update to its storage environment that took down a number of services for a period of time this week.

The department’s secretary Jane Halton sent a staff-wide email (first reported by Crikey) to the department’s employees yesterday acknowledging the issue. “As you are no doubt painfully aware, changes made by IBM to the department’s IT storage environment over the weekend have resulted in a catastrophic failure in our IT systems that has significantly affected everyone,” she wrote.

“I spoke to the managing director of IBM yesterday and this morning and am writing to him today to express my extreme dissatisfaction with this completely unacceptable event on top of the delay to the implementation of our new desktop hard and software systems. This letter follows recent meetings that I, Paul Madden, the chief information and knowledge officer and deputy secretary Andrew Stuart have had with senior IBM executives on the desktop delay.”

IBM issued a statement this afternoon noting that “a regular update” to the department’s storage environment had resulted in IT system performance issues on Monday. “IBM and DoHA worked closely together and this issue is now resolved,” the company said. “IBM is committed to supporting DoHA to deliver high quality services to its customers.”

Halton said she acknowledged the department’s communication with staff on the issue had been inadequate and had asked that communication processes be reviewed to ensure staff are “more appropriately advised of any future IT problems and attempts to fix them in future” – “hoping and planning, of course, that we do not have another issue like this again”.

“Our own departmental IT staff worked very hard with IBM on resolving the issue yesterday, overnight and continue today to attempt to fix the problem and restore the system as soon as possible,” said Halton. “I want to thank our IT people for their efforts and energy, and acknowledge the unfortunate disruption to all staff which we are working as hard as possible to resolve.”

“Once the system is restored a joint review will be undertaken to ensure a similar failure does not recur for staff and any potential financial penalties are applied.”

IBM has had a long-running IT outsourcing relationship with the department, dating back to 1999. The pair recently renewed their vows in the closing months of 2010, inking a deal worth some $109 million over four years which will see IBM continue to provide a range of services to the department, including mainframe, mid-range, storage, help desk and end user computing services. In addition, Big Blue said at the time that it would also provide new security compliance solutions and will conduct mainframe and storage upgrades.

It will also include the rollout of a desktop virtualisation platform to all of DOHA’s 4,500-odd staff.

opinion/analysis
Things just never seem to go well for poor IBM when it comes to the Department of Health and Aging. The pair’s relationship was under fire late last year and early in 2011 due to what some saw as a lack of proper tendering processes in their new contract. And now this storage upgrade – which appears to be part of the new deal – has suffered what appears to be a substantial hiccup.

One also wonders just what Halton was referring to in her email when she wrote of other delays in IBM’s implementation of desktop systems in particular. Desktop virtualisation projects are notoriously difficult to get right. It would be interesting to know what kind of problems are happening in that arena in Health. This is what we wrote when the desktop virtualisation deal was signed last year:

Perhaps the most interesting part of the new agreement will be the included rollout of a desktop virtualisation platform to all of DOHA’s 4,500-odd staff.

“Commencing in the first half of 2011, IBM will deploy a virtualised thin client desktop solution across the entire department, enabling the movement of staff and workloads at a moment’s notice, whilst lowering technology support costs and increasing network performance,” IBM’s statement said. It is not immediately clear what technology the virtual desktops will be based on, but one possibility is VMware’s View platform, which has recently won a number of small customers around Australia.

The thing about desktop virtualisation projects, of course, is that datacentre-related outages, which is what appears to have happened to DoHA on the weekend, also have the potential to take down desktop systems across the whole organisation.

We must also, however, give a degree of credit to IBM and Health’s own IT staff for the speed at which it resolved the outage. “Catastrophic” is a term usually applied to outages which last for a week or more … you know, like they have at Victorian shared services agency CenITex. A few days’ outage is more of a substantial inconvenience. The speed of resolution especially appears surprising given the involvement in storage systems in the outage.

In this writer’s experience, any time a storage system suffers serious problems in a corporate IT environment, the organisation’s IT staff will be in for a hairy few weeks indeed.

Image credit: US Government, Creative Commons

news Queensland’s Griffith University has become the latest educational institution to shift its staff email accounts into Google’s cloud, announcing yesterday that it would ditch IBM’s troubled Lotus Notes/Domino suite as it did so.

The university had previously shifted its 120,000 staff and alumni onto Google’s Apps platform in early 2010. However, up until now, the institution’s staff had still been using Lotus Notes/Domino, hosted on-premise in its own datacentre. According to a statement issued by the university last week, however, all that is about to change. Pilot groups of staff will move to Google Apps this month (October), the statement said, and most staff will move after the University’s examination period in November. All staff will be migrated by March 2012.

Google Apps will provide opportunities for staff and students to enjoy deeper, richer collaborations and tap into “the world’s latest communication innovations, according to Griffith’s pro vice chancellor (Information Services), Linda O’Brien.

“We were drawn to the fact Google shares similar characteristics to Griffith, with both organisations being innovative, youthful, fast moving, and committed to advancing knowledge — Griffith through its research and teaching, Google through making the world’s information and knowledge accessible,” O’Brien said. “Griffith is a leading research university that cares about its students and staff, so it makes sense to create an environment that places our staff and students in the same space, facilitating collaboration and learning.

“Our academics need the ability to collaborate globally, to communicate, share, and build strong research relationships if we are to advance knowledge and solve the world’s biggest problems. Google makes this borderless collaboration easy,” she said.

Griffith will give its staff access to the complete Google Apps suite, with 25GB of email storage space being unlocked and tools like Google’s Docs office suite, calendar and Talk collaboration suite being made available.

“We are very happy to see yet another leading University in Australia adopt Google Apps,” said Stuart McLean, Google’s Head of Enterprise, Australia and New Zealand. “Education cannot be restricted to the walls of a classroom, it is when ideas can be quickly expressed, shared and developed that learning takes a whole new meaning.” Google Partner Dialog IT will aid with the migration.

A number of major Australian educational institutions have migrated both their staff and students to Google Apps over the past several years. However, Microsoft has won more business than Google in the sector over that period, with its Live@EDU and Exchange platforms proving more attractive than Google Apps for most organisations.

Image credit: Robert Scoble, Creative Commons

Remember Uniloc? That little Aussie battler software company which took on Microsoft on patents and walked away with half a billion dollars? The company’s founder Ric Richardson this week posted a YouTube clip of an ABC News broadcast about the company back in 1993. Let’s just say it was a simpler age.