Why is Transport for NSW signing a 10-year, 1bn deal with IBM?



blog IBM might have been banned from signing new contracts with the Queensland Government over the Queensland Health payroll systems disaster, but that apparently hasn’t stopped other Australian jurisdictions from dealing with the vendor. The Financial Review reports this morning that Transport for NSW (which was formed from the merger of the NSW RTA, maritime, transport construction authority and Country Rail groups) is poised to jump into bed with Big Blue in a big way. The newspaper writes (we recommend you click here for the full article):

“Transport for NSW is poised to sign a contract worth up to $1 billion over 10 years with global computing giant IBM to consolidate and operate data centres and servers across the state department.”

To my mind, both the size and length of this contract are quite strange. For starters, the size of the deal would imply that IBM will be conducting a substantial amount of work not just administering Transport for NSW’s servers and datacentres, but also hosting them. However, the NSW Government has recently built its own top-class datacentre facilities and ordered its departments and agencies to migrate their own widely spread infrastructure into those facilities.

Secondly, Transport for NSW has recently flagged plans to move strongly towards ‘as a service’ style solutions — essentially cloud computing. I would anticipate that the department’s server and datacentre needs would shrink over the long-term because of this switch. Signing up with IBM doesn’t necessarily signal a willingness to shift to the cloud — Big Blue being more known for its traditional solutions.

Then too, only very rarely do we see ten-year outsourcing contracts in Australia any more. Even massive Federal Government departments such as Defence and the Australian Taxation Office are shifting to shorter contracts. Technological change and change in the market amongst suppliers means it’s no longer sufficient to sign ten year IT outsourcing deals with major vendors. It would be much more usual to see five year deals at a maximum, with limited options to renew. The fact that Transport for NSW has flagged ten years with IBM as a possibility up front is a little disturbing … a lot can change in a decade.

The size and length of this contract says to me that Transport for NSW really has quite an outdated and dispersed datacentre environment with a number of trouble spots. We’re probably talking about server rooms in the back of tiny train stations, server infrastructure that isn’t virtualised much at all, low-tier datacentres being used around the state, and different agencies needing to be consolidated together after the merger under NSW’s Liberal State Government.

Transport for NSW is likely throwing the whole deal at IBM for this long because it knows it has a gargantuan task ahead of it, and that IBM, at least, will be around for long enough to handle most of the situation. Big Blue is viewed as a “safe” option in such circumstances, at least if you’re a bureaucratic organisation like a state transport organisation.

However, personally, if it was me, and if the guesses I have made above about Transport for NSW’s infrastructure are correct, I would take a radically different approach. In 2014, ten-year IT outsourcing deals are virtually dead. I would start by hiring a nimbler and younger firm such as Dimension Data on a shorter engagement, and with an explicit mandate for transformation rather than ongoing maintenance and operation.

Initially I would focus the vendor on troublespots — areas where Transport for NSW’s existing IT infrastructure is regularly failing. I would aim to resolve these infrastructure issues and start to deliver better uptime in general throughout the agency’s wide-spread infrastructure. This would win plaudits from Transport for NSW’s management.

At the same time, I would conduct a rapid-fire virtualisation initiative amongst Transport for NSW’s more readily accessible and stable assets, shifting them quickly into cheap infrastructure in the NSW Government’s brand new datacentre facilities.

Conducting these two tasks would give Transport for NSW’s IT management a solid idea of the worst and best cases for its IT infrastructure — the boundaries. When these are well understood, the middle of the road infrastructure — the kind that has just kept ticking along but might have a few specific requirements for consolidation — can be addressed. Perhaps at this latter stage, some less critical resources can be shifted into Australia-based public cloud facilities to save money. Hell, all of the banks use the public cloud for some infrastructure, these days — so should government agencies.

I suspect that Transport for NSW doesn’t have a great disaster recovery strategy, given that a recent report by the state’s Auditor-General found a list of 16 agencies which didn’t have any DR plan. Virtualising as much as possible in as quick a manner as possible is a great cheap and dirty way to get such a strategy off the ground.

Perhaps I’m wrong. But in general, I view this style of contract with IBM as a regression to the past, when government departments signed huge, decade-long, billion-dollar valuation IT outsourcing deals. These days things are very different and more niche, targeted contracts are the norm, for quicker, nimbler outcomes. What Transport for NSW probably needs right now in terms of its IT infrastructure is not just maintenance and operation, but transformation.

I certainly hope Transport for NSW knows what is doing here. Because experience from the past shows that once a government agency gets into bed with this sort of deal with a major vendor over the long-term, it’s hard to change things up later on.

Image credit: David Ansen, Creative Commons


  1. Dimension Data? Are you kidding? The worst solution integrator in NSW and I speak from a decade of experience with them in NSW government.

    Furthermore, this deal shows that NSW government agencies will do what’s best for them and won’t follow “orders” or mandates from the Office of Finance and Services, particularly the large agencies.

    The GovDC environment is a white elephant to date. The marketplace is not finalised either. This is because ideologies are at work without a real understanding of how current NSW systems work. CIOs will just ride this out and continue to do what they are comfortable with, particularly as there are no consequences for them in the current environment. Tie their performance to moving to modern hybrid clouds with a view to move to “as a Service” (where appropriate) and watch them start having to deliver.

    • hey Janus,

      I’ve only ever personally heard good things about DiData — can you provide any references or evidence of problems with them?

      In addition … in terms of “what is good for them” — one would suspect that the sorry state of NSW Govt IT at the moment (where no less than 16 agencies have no DR strategies) shows that urgent intervention is required, which is certainly happening at the Ministerial level right now. Departmental CIOs will not be left to their own devices — you can be assured of that ;) I’ve seen an interventionist approach from several successive finance ministers in NSW over the past several years.

      I don’t think the marketplace for the NSW GovDC needs to be finalised for Transport for NSW to engage with the facilities. And engage they will — over the long term they will no doubt be forced into this infrastructure. I can’t see them being left to use IBM datacentres permanently.

      Perhaps I’m not very well informed. But there is a huge appetite for change in NSW at the moment on these issues, from the top down. That’s why the IBM contract looks so weird to me.

      Perhaps I am wrong about all this! Very happy to be corrected :)


      • I’ve only ever heard of Dimension Data in relation to training courses. Just looks at their website, apart from the fact its as slow as a wet week (not a good advert for any IT company), they seem to be more focuses at small solutions (like wintel servers). They do mention datacentres, but it only seems to be in the context of “hosting”. Do they really own and manage their own datacentres? or just lease space in someone elses and resell hosting services?

    • And perhaps the Financial review have got their facts wrong. Seems strange that they didn’t quote anyone from transport or IBM so likely that they have got it wrong. The 10 years possibly includes an initial contract period plus several options which may or may not be realised

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