No doubt OASITO would argue that to be disliked by both sides means they got the balance just right, Radik believes.
Essentially the role of OASITO was to bludgeon both outsourcers and agencies roughly in equal proportions to get outsourcers to reduce their prices, and to convince government agencies to accept lower levels of service than the "over-servicing" they might have enjoyed in the past. "The result of this approach is a low-cost, low-service contract," Radik says. "I used to describe these deals as lose - lose - win: the losers were the agencies and outsourcers; the only winner was Minister Fahey, with his press release announcing further outsourcing savings."
The relationships between outsourcers and government departments were adversarial from the start. There wasn't even a honeymoon period. Mixing his metaphors, Radik likens OASITO's role to the ugly stepmother holding the shotgun to the head of an unwilling bride and groom and then letting them sort out their relationship once the marriage contract is signed.
"Having OASITO as a go-between - filtering and manipulating the information - prevented the development of a normal one-to-one business relationship." Radik says. "OASITO was single-minded in its focus on getting the contract signed and had little interest and no accountability for how things went afterwards."
How One Agency Made IT Work
There is little doubt that most of the group or cluster IT outsourcing contracts have had their fair share of problems. There are press reports of embarrassing system failures and of the imposition of the consequent contractual penalties (termed "service credits"). Rumours abound of outsourcers losing money with particular clients. Have there been any success stories?
"I would single out the Department of Health and Aged Care as being a clear case where outsourcing has gone relatively well," Radik says.
In December 1999, the Health Group (Department of Health and Aged Care, Health Insurance Commission, Medibank Private Limited) signed contracts with IBM Global Services for outsourced IT infrastructure services. Health handed its infrastructure over to IBM GSA in June 2000, at the same time as around a hundred Health IT staff accepted redundancy packages. More than four-fifths chose to accept work with IBM GSA or its subcontractors ASI, Hallis and Advantra.
Health has had a reasonably untroubled move to outsourced IT infrastructure. In Radik's opinion, one of the measures of a successful outsourcing project is when the users perceive nothing as being different after outsourcing has occurred. "Typically, in the early weeks or months of outsourcing you expect diminished service as the new people and processes bed down," he says. "However, in Health's case, things went pretty smoothly, due in part to the high take-up rate of ex-Health IT staff by IBM GSA. Both parties worked pretty hard to encourage this outcome."
What did Health do differently? Radik has some strong views about the success factors.
"One of the first things I learned about Health was that its chief executive was supportive of the move to outsource IT infrastructure. This was not the case in all government departments. Because of the widespread opposition to outsourcing, some chief executives were happy to delay or frustrate the process in the hope they might escape outsourcing. This is where OASITO with its ministerial backing came in to flex its muscles," says Radik. "Health realised early that IT outsourcing was much less about information technology than the management of changes to internal processes and culture. They brought in a project manager with experience in Defence, non-IT, projects, and he built up a strong team under him."
One of the factors that aided Health was that the department could draw upon the experiences of the federal government agencies that had been outsourced earlier. Other departments had underestimated the resources required to manage the transition. This is where recognising that IT outsourcing at its heart is about change management is critical: Health worked with IBM GSA to redesign internal processes - mundane matters such as a request to relocate a group of PCs have to be formalised when an outside company is undertaking the work. It no longer can be as simple as an informal request between work colleagues.
Considerable investment by both IBM GSA and Health went into these new processes - and this has paid off since IBM GSA arrived. "It seems to me that other agencies rushed their transition and handed over the infrastructure to meet a contractual date rather than when there was manageably low risk," Radik says. He warns: "If the transition work is not finished at the time of handover you'll never catch it up. Your outsourcing staff are running on the treadmill at full pace just to stay stationary once handover has taken place."
Radik believes IBM GSA views Health as a demanding customer. "Health has been insistent on IBM GSA's work being of a high standard. This is tough for an outsourcer if you're working with a contract with extremely competitive pricing; you inevitably are looking for shortcuts. However, IBM GSA has, with some coaxing and cajoling, delivered the goods and I am told that their staff see the Health site as a good one to work at. I suspect without Health's strong contract management team the shortcuts would have been taken and the results would accordingly have suffered."
Was it Worth it?
No organisation would go through the unavoidable strains and stresses of outsourcing and simply hope that the best outcome is that "things will be no worse". So, nine months after outsourcing its IT infrastructure, has Health seen any benefits? In Radik's view it has.
"The question of whether there have been savings is a political one and I think you could prove there have or have not been savings depending on how you chose your definitions," he says. "In my view, it is difficult for an outsourcer to come into an organisation, make a modest profit and deliver savings unless the target organisation was grossly inefficient to start with, or the outsourcer could offer significant economies of scale, or a smarter way of delivering IT.
"Yet you want to change as little of the technology as possible at handover because that is one source of risk you can do without at that time. Conversely, if you wanted to guarantee failure, you would change people, management structures, processes and the technology! Now that IBM GSA understand Health's IT and business better, it is starting to come up with new approaches which have the potential to deliver Health genuine savings."
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.