Qld confirms plans to sell CITEC



news The Queensland State Government this week confirmed plans to sell its ICT shared services division CITEC, as well as its information brokerage arm, adopting recommendations stemming from the Commission of Audit into the state’s operations led by former Federal Treasurer Peter Costello.

CITEC sits within the current Department of Science, Information Technology, Innovation and the Arts, with its core business being to deliver centralised IT services to departments and agencies on a user pays basis. However, over the past several years it has several times come under heavy fire from Queensland’s Auditor-General for not being able to deliver large technology infrastructure projects on time. For example, in June 2010 an audit report found that both the ICT Consolidation Program (ICTC) and the Identity, Directory and Email Services (IDES) project, both managed by CITEC, had substantially blown its timeframe.

The ICTC was a project established after the state’s Service Delivery and Performance Commission handed down a report on ICT Governance in the state government in October 2006. Its aim was to establish a whole of government consolidation of CBD datacentres, networks and infrastructure services. It was initially managed by the state’s Office of the CIO, but then transitioned to be managed by CITEC in September 2009. In mid-2010 it was slated to be implemented by October 2011. As at January 2010, there was “no method of identifying, recording, tracking and reporting demonstratable financial benefits” for the program.

The next project examined by the Auditor-General, IDES, had the aim of delivering a whole of government email, identity management and authentication service, to be based on Microsoft Exchange and administered by CITEC and with a budget of $252 million over ten years. But again, it has suffered problems. The project was expected to transition all existing agencies using Microsoft Exchange onto the new whole of government platform by December 2009 — 24 months after the project was initiated. But the date was extended to June 2011, after delays were experienced.

The implementation phase plan was originally expected to be completed and approved by December 2008, the report stated. “However, actual delivery of this milestone occurred on 18 September 2009.” In December 2011, the Courier-Mail newspaper revealed that the Queensland Government had spent $46 million on the platform, despite it catering at that point to just 2,000 accounts.

Because of these and associated issues, in June 2012 Costello’s Commission of Inquiry recommended that CITEC and other ICT shared services units within the Queensland Government be sold off, as there was no guarantee they could provide IT services to the government efficiently.

Costello’s report noted that CITEC was expected to record an operating deficit of about $26.4 million this financial year, with further deficits expected in succeeding years. “These financial difficulties relate to changes in its business model, and difficulties in the implementation of whole – of – government information technology initiatives,” the report stated.

In July this year, the State Government engaged consulting firm EY (formerly Ernst & Young) to conduct a strategic review of CITEC. And this week the state’s ICT Minister Ian Minister confirmed CITEC was definitely to be sold.

“CITEC ICT and CITEC Information brokerage will be divested from Queensland Government in a move that will deliver much needed benefits to the IT sector, the economy and the people of Queensland,” Walker said in a statement.

“A plan has been approved by government that promises no job losses and a smooth transition for clients. CITEC staff will be offered positions with the new owner and will also be invited to take up other opportunities within the Queensland Government.”

Walker said the Newman Government was getting on with its ICT reform agenda and was transforming ICT to deliver the best results and value for money to Queensland taxpayers.

“Research shows strong market interest in CITEC’s agency specific services, its information solutions business and in continuing the CITEC business as a going concern,” Walker said. “A CITEC Divestment Board will progress the plan with support from commercial and industry experts. It is expected the CITEC divestment from the Queensland Government will be complete before the end of 2014.”

Walker said the divestment of CITEC was recommended by the Commission of Audit and outlined in the state’s new ICT Strategy. It is seen as a key part of the government moving away from owning and operating ICT services.

“CITEC has valued government and private sector clients and is a trusted provider of services. This trust will be maintained through open lines of communication with all customers. The welfare of staff and continuity of service to clients are priorities,” said Walker.

It is not yet clear what is to happen to Queensland Shared Services, a separate division which also provides some IT services to government departments and agencies.

As I wrote earlier this year:

“I am strongly of the view that the once-hyped IT shared services paradigm is virtually dead in Australia’s public sector and should be abandoned. I would support a recommendation by the Queensland Commission of Audit that the state’s internal IT services units be privatised or sold off to commercial IT services firms.

It’s good to see Queensland progressing this one. I would suspect that likely buyers might include Queensland-based diversified IT firm Data#3, as well as some of the major global players — Fujitsu, perhaps, which has proven itself willing to buy local firms recently, or NEC, which has also been on the acquisition trail.”


  1. First link tag needs fixing.

    But aside from that; who would buy CITEC? Given their industry reputation, I just can’t see it being attractive to anyone.

    If/when it does sell, the previously public servants will pretty quickly feel exactly how it is to be an accountable cog in the wheel of the corporate machine. You fail; you’re fired. That is of course after they cull all the dead wood and trim the fat, the usual MO for ex-public workers, while the C-levels double their own pay

  2. Hmmm … tricky situation. The nub of the issue is that (like Victoria’s CenITex) CITEC is a legacy model of ICT service delivery in all respects so the Government is on the horns of a dilemma. On the one ‘tactical horn’ (ouch!) the sale proceeds and ‘quick fix’ gains are maximised by locking agency demand into an old-school outsourced arrangement for a sustained period – swaping an in-house shared services monopoly for an outsourced shared services monopoly. On the other ‘strategic horn’ (ouch!) the longer term transformation and cost cutting agendas require transition to a lower cost and more flexible approach to ICT … not just the perpetuation of the old model under new ownership.

    The right solution is to ‘sell’ the transformation outcomes … not the inputs (i.e. not the structure, assets and people of the shared services agency). So, an ideal ‘sale’ process would actually ignore the CITEC starting point and instead focus on buying the destination (i.e. a suite of ICT services delivered to agencies at leading-practice standards of quality and cost parameters).

    The big question is the degree to which the existing assets, processes and people are an ‘asset’ or a ‘liability’ in the transformation journey that must happen one way or another. Selling CITEC ‘holus bolus’ actually just traps the poor buyer into having to struggle with a millstone that becomes a competitive disadvantage – particularly if the government imposes restrictions on staffing etc. There will be value in CITEC, so of course there is a price that a vendor would be willing to pay … but only with some assurance of locked-in demand for something like 3-5 years. The buyer is naturally seeking a captured monopoly market of agency demand to give ‘breathing space’ for modernisation … but this is unlikely to be something that agencies will regard as a good thing. Most would probably prefer the opportunity to transition as quickly as possible to more modern services, or at least to be more in control of their own destiny in a competitive market.

    This is a difficult conundrum to deal with however because the government will probably be reluctant to grasp the nettle on the real issues and will instead be attracted to shiny bauble of a lump of ‘easy money’.

    CITEC may not be an ‘asset’ at all. The modernisation of the services currently provided by CITEC to its customer agencies may actually require investment greater than the sale proceeds. The big risk is that the privatised CITEC actually just becomes a big contracted lump of inflexibility in the centre of the state’s ICT strategy.

    What do folks think about this? It is unpalatable to substantially ‘write off’ CITEC, or CenITex, but the right path may well be to do so … or at least to have a good hard think about the case for engineering the sale process to be more about buying contestable transformation outcomes than about selling a services monopoly.

  3. Having worked for CITEC in the past… Buying CITEC would be the worst investment ever. Period. The old CITEC Confirm business may still have legs, but the rest… Forget it! The good people have gone, the processes are poor, and customers don’t like them. Where is the value? 317 Edward St would.be a good spot to build a high rise… Maybe a construction firm/developer willl buy just to get the land?

  4. It’s easy to kick CITEC because they’re owned by the Government and they’ve been around for a long time. What’s not so easy to do is replicate their economies of scale, their pragmatic IT service management processes and the sheer amount of knowledge they have about the existing government IT landscape.

    Anyone can say they can do a better job for a cheaper price but for those of us who have worked on both sides of the private / public IT service provider fence we know CITEC can be proud of it’s capabilities and capacity to serve it’s government clients.

    What is abundantly clear is the fact that CITEC struggles to deliver large scale IT programs. You can argue the reasons why this is the case but any prospective buyer would need to quickly determine if this is a capability they want to invest in or move away from.

    CITEC also needs to unshackle itself from the entrenched public service performance reporting model that only wants to hear good news stories and green traffic lights. It’s my belief that moving CITEC away from government will actually improve it’s level of service quality and drive down costs. Not because the people at CITEC are lazy, disinterested and hopeless, but because they have been constrained by unworkable HR policies that reward people who complain rather than people who improve service delivery outcomes. Quite simply, there is no incentive for people at CITEC to work harder or smarter because it is almost impossible to sack a lazy co-worker who turns up to play World of Warcraft all day.

    If CITEC is not making a profit then questions need to be asked of their Executive Management Team and maybe it’s time for some of them to take that golden handshake and move on. The good money will be found in SAP BASIS services, network services and information brokerage. The fat will be found in the myriad of empires found in most government agencies e.g. the HR, finance and other back office (but mandated) functions that contribute to the ever increasing cost of corporate overheads but add little value to the improvement of service delivery outcomes.

    Would CITEC be better off in private hands? The answer is YES!!

    Would I buy all of CITEC? The answer is No!!

    What would I do first?
    1. Refresh the leadership team with people who care more about IT than their next public service role
    2. Immediately cull the contracts they’re losing money on, even if that meant paying out termination penalties.
    3. Open the door to servicing commercial and gov’t customers across APAC, not just QLD.
    4. Dramatically scale back the corporate support headcount.
    5. Put the PMO under a microscope and develop some strong project acceptance criteria (i.e. Don’t sign up for programs CITEC knows it does not have the capacity to deliver).

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