Vic Govt opens IT offshoring door


news The Victorian Department of Human Services has reportedly investigated handing the re-development of its troubled client and case management system to an offshore provider in the popular IT outsourcing country of India, in one of the first signals that the state recognises the unsustainable nature of its current onshored resources.

In November 2011, Victoria’s Ombudsman has handed down one of the most damning assessments of public sector IT project governance in Australia’s history, noting total cost over-runs of $1.44 billion, extensive delays and a general failure to actually deliver on stated aims in 10 major IT projects carried out by the state over the past half-decade.

One of those projects was the development of a new Client Relationship Information System (CRIS) for the Department of Human Services, which had ballooned in cost from $22 million to $70 million. More recent estimates have placed the blowout related to the development of the system at around $100 million.

In the days following the report, various options were publicly discussed as to how the state could start to resolve its problems. One of those options, highlighted by Peter Carr, the managing director of Queensland-based analyst firm Longhaus, was for the state to realise that it was unlikely that enough skilled labor existed for state governments to competently run their own on-shore IT service delivery centres at cost levels which they can afford to pay.

In the view of Carr, the state needed to increasingly look to the private sector to source its IT project and service delivery needs.

Victoria has indeed started pursuing this aim, initially through seeking to outsource the core services currently being provided internally by IT shared services division CenITex. However, up until now the state — like every other state and Federal Government around Australia — has been reluctant to follow the private sector and make use of offshored IT resources, due to issues with data sovereignty and the sensitivity of giving foreign nationals access to data on Australian citizens.

Over the past several decades, the nation’s major banks alone have shifted the jobs of thousands upon thousands of IT workers offshore over the past decade. ANZ Bank alone currently employs around 5,000 predominantly tech staff in its Bangalore facility in India. However the practice is extremely rare in the public sector.

However, last week the Victorian Government was revealed to have taken the first steps down the offshoring path. The Age newspaper reported that the re-development of the DHS client and case management system could be handed to an IT services company based in India.

Minister for Community Services Mary Wooldridge was questioned by the Opposition on the issue, as reported by The Age and iTNews, in parliamentary Question Time last week, and did not deny that an Indian provider was being considered.

Wooldridge said that the Victorian Ombudsman had reported on the project and found that it had blown out by over $100 million under Victoria’s previous Labor Government. “That is what we inherited as a Coalition Government across IT systems management,” the Minister added. “HealthSMART, police systems …”

“… We have example after example of where we have had to manage an IT system, in whichever portfolio or department we have responsibility for, that has been bungled, mismanaged and overrun in terms of cost by the former government. As a government, we are making substantial inroads towards improving these systems. Whether it be the police information system, the education system, HealthSMART or the case management system in the Department of Human Services, we have had to fix the failures of the former government.”

Wooldridge added: “What we are doing is undertaking, as anyone would expect, a probity-managed tender system so that we can deliver an integrated client view, and there are four permanent jobs in relation to this IT system. I support the fact that we look for value for money in relation to services and the capacity to deliver an IT system, in contrast to what we saw in the past from Labor, which gave jobs to its mates ahead of what happens in terms of service delivery and capacity.”

“We are going through an appropriate process with a publicly advertised tender to find someone to deliver an integrated IT system which will mean that we can deliver integrated services for vulnerable families. That process will continue under this government so we can make sure we are investing in good outcomes for vulnerable families in this state.”

The news comes as IT problems continue to plague the Victorian Government in general. Several weeks ago, the Victorian police force laid part of the blame for an 11-year-old boy’s death this week at the doorstep of its ailing IT systems, which failed to provide officers with sufficient information to apprehend an offender in a timely manner.

A 54-year-old man was shot by police in the town of Tyabb that week after he killed his 11-year-old son following a cricket training session. Following the tragedy, this morning Victoria Police Chief Commissioner Ken Lay reportedly revealed the man had five outstanding arrest warrants against him, but that local police were not aware of the warrants due to the failures of Victoria Police’s IT systems when they previously spoke to the man. We recommend you click here for the full article published by the ABC on this subject.

“Now, many of you would be aware our IT systems have been subject to review over the last 10 years or so where there’s been significant criticisms about their inability to help us do the work we need to do. This seems to be another indication of a problem with those systems,” Lay reportedly said.

The news comes after several years of extensive IT project failures at Victoria Police. Perhaps the most obvious problem faced by the division, known as Business Information Technology Services or BITS, is that there are severe doubts about its division to deliver major IT projects that affect frontline policing operations. A report published by the State Services Authority in Victoria in March 2012 found that the division had no ability to deliver such projects.

Wow. Huge step being taken here by the Victorian Government. I think most informed commentators will agree that investigating offshoring initiatives is absolutely necessary for the Victorian Government in particular at this point. There is no doubt that the state’s attempts to develop an internal IT project and service delivery function have broadly failed across the board, and that it will face problems being able to afford onshored IT vendors for all of its needs. That just leaves offshoring. I anticipate that in many cases, the state government will face a choice between offshoring this kind of work or not doing it at all. And not doing it at all is not an option for governments.

There will be many who will complain about this kind of initiative. However, I would point out that the Australian Labor Party does not directly represent the IT workers affected by this kind of offshoring initiative, as union membership amongst IT professionals is very, very low compared to blue collar jobs like manufacturing. By and large Australian IT workers are used to working with offshored resources at this point, after a decade of the practice in major private sector organisations such as banks.

I think the quicker everyone gets over the stigma of this kind of work and gets on with the job of delivering better services for Australians, the better. I certainly don’t think many IT jobs are at risk. Certainly, any competent IT professional who wants a job with a government department or agency is probably going to be able to get one at this point, given the labor shortage in Australia’s IT industry and the ongoing requirements of government.

It may sound like a harsh reality, and I’m probably exaggerating a bit here. But the trend is clear: Australian State Governments are failing at IT project and service delivery right now, and they need to look for out of the box options. Offshoring is one such option which has worked very well for the private sector. The model usually works along the lines of shunting the grunt work offshore while keeping the smarts (high-level IT workers and managers) and the data located in Australia. Let’s hope this trial works well in Victoria.


  1. The US company I work for outsourced to India recently. Holy hell. I didn’t honestly think they could be so bad.

    I have dealt with other helpdesks before but these guys are terrible. I am the only one who has anything nice to say about them, and that is because I tell them what to do when I ring up.

    Constantly telling our users that they will call back, and then not doing it. Asking our staff to call an indian mobile. Not understanding our underlying infrastructure and installing something across the network instead of at local site, TAKING LUNCH DURING A CALL. Seriously that last one has happened twice now. Once to me on a high priority and once with a user who I happened to be with at the time. No comment saying passing call to someone else, or that they will come back in 20 minutes or anything, just silence, then “Oh I was on a break” when they got back.

    I am truly astounded at how bad these guys are. I have 0 confidence in them.

    • Oh and not meaning to tar all Indian helpdesks with the same brush. This is simply the experience I have had recently. I am sure there are some brilliant helpdesk companies over there. (Probably charging rates similar to those in other nations)

  2. The obvious problem with this is that the cause of the failures, essentially incompetent project management at very senior levels, are exactly the ones off to India to chose the replacements of the workers they have thrown to the wolves.

    The problems have never been with technical expertise or its price, it’s that their design methodologies and project management systems can’t work. (Unless it’s a vendor selling them a pup of a system they’re too blind to see).

    So they’re changing the workers and keeping the structures of fail, they will simply offshore the failures and add a contract management cost on top of their other incompetencies. Different shovel, same shit, same result.

    But they’ll declare it a success no matter the real results as they always do.


    • Agree with this – in my experience most department heads and managers are bureaucrats who have got there through their core competence of being good at playing politics, not rising to the top as a result of exceptional skills or abilities within their field. As long as that is the dominant culture within the public sector issues like this will never be overcome as the competent people further down the chain designing, planning, managing and implementing various solutions are constantly fighting (a losing battle) against senior management, who are then only going to blame those same people when things go South.

      Problems like this are just symptoms if the system, not a result of ‘bad apples’ that can be easily weeded out. It will be another four or five years before this issue is revised and people start pointing fingers at the offshore contractors as yet another scape goat, again avoiding the light of scrutiny that should must be shone brightly on their world if we have any hope of ever coming to grips with waste like this.

  3. I would like to know exactly what went wrong to blow it out this far and for this long. From my experience with failed IT projects, it all point to poor governance. Incomplete, ambiguous and non-frozen specifications, poor communication, inadequate skills and manpower, unreasonable client demands and expectations, poor estimating, failure to break the project up into manageable chunks. All these should be sorted out by management. How exactly would an Indian IT contractor do better? Especially if the governance would be run largely by the same Australian Vic govt managers?

    Very very sad that this may have contributed to the death of that little boy.

  4. I have to comment on this since I can’t see how outsourcing could do anything but bring more failures that also move the knowledge of the systems you rely upon to a country that has a track record for dodgy dealings and corruption, hang on that suits our governments perfectly, what am I saying, I will shut up now.

    PS: I have not seen or heard of a project outsourced to india that has been anything but an abject failure, I am sure there must be one out there, but I have only seen and heard first hand accounts of the failures. Most people usually remember the bad in these situations but I would like to hear from someone that has had a good experience with an indian outsource???

    I think the so called shortage of IT staff needs to be shot in the foot. There are plenty of people not working in IT because the money has collapsed, that is why there is a “skills shortage”. Teachers are some of the worst paid professions and they are quickly catching IT wages… what ever happened to buy local buy australian, otherwise there will be no local economy, except for the 10% which are in management, accountants or lawyers… why do they not get outsourced, because hey control the outsourcing of other peoples livelyhoods for their own bonuses.

    Rant over…

  5. It’s no good arguing with Renai; he’s quite obviously got religion where this topic is concerned.

    If the entire Aussie IT industry gets outsourced to India, well that’s the free market, isn’t it? So suck it up.

    Mind you, if he can’t get his Game of Thrones because Foxtel’s got the Aussie rights all sown up, well that’s different. It’s whinge after whinge after whinge in that case, even though it’s the same free market that’s responsible.

    Nothing like a sense of priorities, eh, Renai?

      • And what “evidence” have you presented, Renai?

        There’s been some cock-ups with some govt projects. Big ones. That’s it! Offshore the whole of IT! It’s the only answer!

        If that were true, Renai, there’d be no IT industry left in Australia within 5 years. Would you even care?

        • Have to agree here. You didn’t really provide any evidence Renai except that “the banks do it”.

          As I’ve mentioned before, the “labour shortage” is fictional. It’s really about big organisations getting cheap labour at KMart prices.

          I’m also guessing that most of your readers work in the IT industry too, so if we all dry up, then maybe a majority of your audience dries up too.

  6. They are not the first government department to run offshore. How many ministers or members can critisise the private sector for doing likewise is astounding. But we have to look beneath the single instance listed and look for an industry solution. We (Aus IT) are either not up to it technically, pushing out poor product, or not able to project manage ourselves out of a carboard box. The ability to compete on service costs is an angle but this is a reality we have to overcome with better product. From personal experience working with government departments, there is also a fourth problem – these departments just want to buy foreign product from big brandnames – and expensive crap at that (from a software point of view). Then the Aussie component is installation, training and operation at best.

  7. There is also the argument that governments have an obligation to provide employment to its own citizens. I completely agree that where it is impossible to find local skilled workers with the competence to do the job then those skills must be found wherever they are available. But even the argument about cost is a red herring – if we could afford to throw hundreds of millions at the car industry (and continue to force tariffs and duties on imports to protect an industry that no longer exists) we can afford the higher costs of local labour/skills/expertise when it provides direct employment without sending profit dollars to overseas shareholders.

    • “There is also the argument that governments have an obligation to provide employment to its own citizens.”


      I’m sorry, but what the hell? There is no such argument … Governments are not responsible for ensuring everyone has a job. Their job is to set stable underlying economic policy and then let the private sector provide jobs.

      • Of course there’s an argument. You don’t have to agree with it, but that doesn’t invalidate the position.

        I suppose there’s no argument for governments to protect local businesses either, so no companies or industries in this country have ever received subsidies or government protection? The government is the lalargest single employer in the country – to take you position to its logical conclusion, the government should fill all roles with offshore or migrant workers because they are cheaper, so why don’t they? If the government is concerned with employment of the population generally, it must then be concerned with employment opportunities within the public sector because that is the easiest direct way for it to affect employment.

        You can’t have it both ways – if it’s acceptable for the government to offshore IT roles, why isn’t it OK for them to offshore other public servant jobs? At what point should a line be drawn? Even the neo-cons that chopped up the US government stopped short at off shoring them.

  8. My considerable experience in working with both federal and state governments is that they’ve no idea on what they’re producing and rely on poorly trained staff to guide the large corporates.

    I disagree that there’s an IT skills shortage or that Australia has subpar IT skills. They should be open to outsourcing jobs to smaller companies that specialise in development.

    This offshoring is simply to reduce state government costs but it’s at the expense of higher unemployment (federal cost) and de-skilling the local population. Maybe we can offshore our politicians while we’re at it.

    • “Maybe we can offshore our politicians while we’re at it.” Steady on. Just check out Singapore if you want to see what outsourced heads of government and ministers will cost you. It is quite high. On the plus side, they seem to know how to actually get results despite having no major primary industries to leverage.

      Their salary is also tax free.

  9. hey everyone,

    thanks for your comments on this issue. I suspect I didn’t give this article the thought that it deserved, so I thought I’d post a follow-up comment that will outline some of my thinking on this issue.

    Firstly, the fundamental principle that I am working from here is that basic IT project and service delivery within Australia’s State Governments is currently broken. We’ve seen conclusive evidence of this along a number of fronts. Some of the articles which have highlighted this:

    What is the cause? There are several major causes, as agreed upon by auditors, ombudsmen and CIOs across Australia.

    Firstly, there is poor project management of IT projects in state government. We’ve seen this time and again. The controls and the structures are not in place for state governments to manage major IT projects. They cannot keep the vendors they hire under control. Qld Health’s payroll nightmare is a perfect example, but there are many more.

    Secondly, there is chronic underinvestment. Ministers tend to only approve major IT project investment at the last minute, when legacy systems get to emergency level, instead of investing regularly in the area for regular upgrades, as the private sector does. Ministers do not like spending taxpayers’ money on IT, which they see as a cost.

    Lastly, there is a chronic labor problem. Salaries and conditions are vastly poorer in the public sector compared to the private sector, and given that there is a shortage of IT labor in the private sector, there is little incentive for competent IT professionals to settle for the poor conditions and chaos that comes from working for government.

    So how do we get out of this quagmire?

    Well, everyone has their opinion. But I can tell you what is actually happening on the ground.

    1. State Governments are moving towards cloud computing solutions instead of major in-house IT systems. Why? Because it forces Governments to standardise their business processes and entails ongoing monthly IT operational spend instead of major capital spend. Small opex is much easier to get approved than major capex.

    2. Internal government shared services divisions (eg CenITex) are being wound down and those functions outsourced to the private sector, which can provide those same services in a more efficient and competent manner. Hell, at least they can do the job at a basic level, which groups like CenITex have struggled with.

    My article here argues that a third step is necessary.

    I don’t believe that State Governments will easily be able to afford to outsource the degree of their IT services and project work which they need to, to move forward. IT labor is just too expensive in Australia and the state governments are competing with other major organisations, both in the cashed-up Federal Government sector, which soaks up a huge amount of IT labor and IT outsourcing resources, as well as the private sector.

    I think in order to be able to afford to bring things in state government to the point where they need to be, the state governments will need to look at offshoring some work, the more the better. This will allow them to improve their systems while also keeping costs down, but it will require strong governance and opening the kimono of some services going offshore, which they have been reluctant to do in the past.

    Am I the only one that thinks this is going to be a substantial part of the way forward? No. This is common practice in the private sector and state government needs to catch up with that practice. A lot of state government IT work is drudge processing work. It should be handed off this way, as major private sector organisations have already handed it off. This is not controversial. It’s common practice in 2014 in the private sector.

    I hope this post goes some way towards illustrating my thinking here. I do care about Australia’s IT industry — deeply — and I do also care about what happens in state governments when it comes to IT. The model is broken right now. In fact … it’s fucking broken. State Governments desperately need to try all the options right now to get out of their quagmire. If they don’t, they will see more of this:

    And nobody wants that.

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