Will a Coalition Govt pump IT outsourcing?


Canberra Australia Parliament House Twilight

blog Those of you will long memories will recall that it was the Howard administration which first kicked the Federal Government into gear back in 1997 in terms of the now-common practice of outsourcing key IT services to the private sector. At the time, it was believed that the move would deliver substantial benefits. According to a very solid overview of the whole initiative published as a briefing document online at the website of the Australian Parliament, the 1997–98 Budget Papers contained the following statement:

“The Government is seeking long-term improvements in the structuring and sourcing of IT services across agencies aimed at facilitating greater integration in the delivery of programs and realising significant cost savings. Efficiencies will be obtained by consolidating the Commonwealth’s IBM and compatible data centres and outsourcing IT infrastructure services across all Budget-funded agencies subject to the outcome of competitive tendering (CT) processes. Agencies with Running Costs below $10 million in 1998-99, and agencies operating IT systems or services concerning national security, have been excluded from the scope of this measure.”

As many will recall, the ill-fated Office of Asset Sales and Information Technology Outsourcing (OASITO) was set up to manage the initiative. Various reviews have since panned the execution of the strategy, and it still has its critics in Canberra, with many believing that in-house IT departments are the best way to provide IT services.

As an article published in the Sydney Morning Herald this morning highlights, the possible election of a new Coalition Government with many of the bones of the old intact has renewed speculation that a new tranche of Federal Government IT outsourcing could be on its way under an Abbott administration.

From my point of view, while the speculation and commentary is interesting, I don’t think the opportunity is as obvious as it was back in 1997. At that stage, IT outsourcing as a phenomenon was virtually unknown, and government use of technology was very black and white — there was no IT outsourcing, so the balance was very much clustered at the “in-house” end of the scale.

Today things are a lot more complex. Inside the Federal Government, there is now a very good awareness of the dynamics of IT outsourcing. Those things that are better outsourced, usually are, while those aspects of IT services better done in-house usually are as well. There’s a gradual shift to purchasing goods and services as a service through the encroaching cloud computing paradigm, but this will be an evolution for the Government, rather than a revolution.

I don’t think a Coalition Government is likely to come in and change this scenario up wholesale. We may see some tinkering around the edges, likely in how the Department of Finance and Deregulation deals with other departments on these issues, and hopefully we’ll also see ministerial attention paid to major IT projects in areas where they are suffering — particularly Defence, which has its massive payroll replacement program to think about. This is good news. In terms of Australia’s public sector, the Federal Government is doing pretty well and keeping things stable when it comes to IT right now (the state governments very much are not). Let’s hope a Coalition Government doesn’t rock that boat — too much.


  1. One advantage of having all the state governments and the federal government is that the state’s are able to individually try out different methods of service delivery. If they are successful then others can adopt them but if they fail then the cost is contained to one state.

  2. I expect Peter Costello to do a similar audit, with similar advice, for the federal government, so look to Qld for the answer…

  3. Of course they will look to outsourcing look at QLD, NSW, “audits” and copying of the US cloud strategy. Telstra just moved some of those jobs to India. http://www.itnews.com.au/News/349473,telstra-to-offshore-170-cloud-computing-jobs.aspx

    The coalition and their constituents (Chambers of Commerce) are the biggest supporters of 457 visas. When they tell us there’s a “labor shortage” it really means a cheap labor shortage. So, a mass pool of unemployed people in Canberra coupled with cheap labour will for them hopefully bring costs down, achieving their goal of “better services” and improving the bottom line of business. Look to Europe of how that plays out.

  4. I’m not sure I agree with your conclusions here, Ren – the US administration had been on an outsourcing spree for two decades prior to Bush Jr, who’s tenure oversaw the most aggressive privatisation push in history (to the vast detriment of their country – privatised departments and functions now cost the Government far more than so-called ‘inefficient’ public structures did, with significantly less transparency and oversight).

    Abbot’s LNP has demonstrated its enthusiasm for policies that ostensibly run contrary to the public interest in the pursuit of corporate favour (which is understandable considering the lobbying efforts devoted to precisely that). Lobby groups aren’t going to just back off because the situation seems to be running well, thus there will be continued pressure (and incentives) for a LNP government to outsource as much as possible. Not that its a foregone conclusion, of course, but given that there has been very little in the way of repercussions or public backlash for previous outsourcing and privatisation initiatives that have quite obviously run counter to the public interest (pretty much every critical infrastructure company ending up as a private monopoly), what meaningful disincentive is there to stay their hand?

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