The renewal of a $36 million ICT services contract between the South Australian government and Dimension Data last week, that saw the value of the deal drop by $4 million but with an increased scope, is a sign of things to come, according to the state’s CIO.
For several years the South Australian government has been focusing on improving the use of its ICT through reform projects such as Just Ask Once. CIO Andrew Mills told Computerworld the approach had always been based on tight purse strings.
“If you look at South Australia, we didn’t have the [minerals] boom, so we haven’t had as much of the bust,” Mills said. “In some sense it is based on not having that much investment money in IT for a long time. The downturn hasn’t changed the way we are going.”
According to some in the industry the result of the South Australian ICT programs - which also saw the state move away from a large deal with EDS a few years back – has been a mini-boom for other providers. It has, for example, led NT-based outfit CSG (ASX: CSV) to open up a new office facility in the state and announce plans to bring on 100 new staff after winning an education contract.
“Without commenting on the particular South Australian situation, the consequence of whether it is the South Australian government or a federal agency anybody who is breaking up a monolithic outsource into multiple streams plays into our hands as a specialist in certain areas,” DiData CTO, Gerard Florian, said, while adding the company was happy with the outcome of the announced deal.
“It is about working with the customer, which in this case is the South Australian government,” he said. “Not only has the contract value come down but actually the scope of what we are doing has increased. So we are doing more for a lower contract value. But we are still quite happy about it.”
Mills pointed to a project called Future ICT undertaken a in recent years as providing the foundations for the state’s strategic sourcing approach.
“In a lot of senses we have gone into a much more structured approach to vendor management and working through and saying to our companies, if you want the second portion of the contract then we want to talk to you about serious improvements, etc,” he said. “We don’t just roll anymore; it’s not about a rolling contract.”
Government sector analyst firm, Intermedium head of consulting, Kevin Noonan, said the South Australian approach was familiar to that of many governments across the country.
‘There is a general swing in government back to central leadership,” he said. “As part of that all governments are really putting a lot of thought into getting that formula right. In the past if you looked across Federal Government and the States, they were at every level of the spectrum; between totally decentralised which was Federal to totally centralised which was some of the larger states.”
IDC IT spending and vertical markets senior market analyst, Melissa Martin, said while the purse strings were still tight, there is business to be had for many service providers and vendors.
“Longer term, our research shows that public sector IT budgets will get squeezed harder than ever over the next 3-5 years as governments attempt to refill their coffers,” she said.
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