Local councils starved of money for IT

Senior IT staff at local councils are starved of funds to replace legacy systems and are competing with business managers and councillors at the executive table, who are themselves battling to meet ratepayers’ demands, according to research.

IBRS analyst, Alan Hansell spoke to 25 senior and non-IT managers at local councils in Queensland, NSW, Victoria, ACT, and South Australia, finding that IT spend (opex + annual depreciation) averages 3.5 per cent of gross revenue. It’s as high as 6 per cent for large councils and a measly 1.5 per cent at small councils.

Large councils are operating mature IT services and can justify the cost of maintaining them whereas smaller councils often use technology and that is ‘out of date’ and already written-off, said Hansell. These councils are forced to sweat their IT assets, leading to a spend that is lower than average.

“IT management competes at the executive level with business managers and councillors, who themselves are struggling to meet demands from ratepayers for better roads and footpaths and comply with environmental requirements. This is melting pot, there is no winner,” said Hansell.

Local governments are faced with rate capping legislated by state governments, demands to transform their businesses and reduce expenses, an increasing number of requests for online services, as well as pressure from states to merge.

These pressures are making it difficult for councils to provide a secure environment, digitally transform business processes, retain tech staff, and deliver projects on time and on budget.

For instance, transformation activities are unfortunately being driven by IT management (sometimes with executives) but very rarely by business people, Hansell said.

“And they receive very little strategic advice from the major vendors,” he said.

Research respondents said some vendors provided guidance regarding their products but vendor account managers typically lack skills to help council implement and assimilate business systems. Consequently, councils are engaging major consulting firms for strategic advice, the research said.

“Few vendors provide strategic advice to IT management. While a cause for concern, managers must take the initiative and get their vendors to invite them to industry events,” Hansell advised.

Like other market sectors, councils are finding it tough to source business analysts to support their digital transformation initiatives.

“Business analysts are critical for making digital transformation initiatives effective,” said Hansell. “They [councils] also need project managers (that’s pretty common) but also architects to find how they move from where they are now to their future state. That’s problematic aswell.”

Rate capping is preventing councils from offering competitive salary packages to technology specialists, and regional councils are also finding it hard to attract skilled people from the cities, the research suggested.

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