The Dim-Post

September 29, 2009

Treasury in a nutshell

Filed under: finance — danylmc @ 11:41 am

Via Stuff:

The Treasury is looking at plans to cut the Government’s administrative staff and costs by almost one third with a centralisation of back office services.

Recruiting, IT, finance and “a range of corporate services” in the public sector in offices nationwide are being earmarked for consolidation to save 30 per cent of costs and increase productivity.

This is the sort of thing that makes perfect financial sense to a bunch of economists sitting aroung looking at line items on a budget. Unfortunately, back in mean old reality an IT project that consolidates 250 organisations is likely to cost 250 times as much as any productivity gains you’ll make on the other side.

I think back office centralisation is a pretty good idea for, say, the various Commissions dotted around the capital, but larger departments (DOC, IRD, Corrections, Police) all have unique organisational profiles and wildly different IT requirements.

Maybe they should start with something small – all the websites in the government, say. Move them all onto one standardised platform, take a look at what happens to the budgets and completion times for that one project and then see if they really think it’s a good idea to try something hard like email or databases.

The notion of a hub managed by a single, private multinational company that hosts all of the government’s data is also likely to attract some exciting conspiracy theories.

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18 Comments »

  1. The simple fact is that Govt expenditure grew at 50% above inflation over the last nine years. That has to be reduced back, in due course, to something more sustainable.

    Another simple fact is that reducing such expenditure will require cut backs in programmes and staff attrition.. computer programmes won’t do it.

    A final simple fact is that this recession isn’t yet deep enough or long enough to give the political mandate to make such hard decisions.. or to put it another way, this Govt will end up like Bolger’s in the second term if it takes those decisions.

    JC

    Comment by JC — September 29, 2009 @ 12:14 pm

  2. As long as they’re domestic servers and Nokia Siemens don’t get the tender, I’d consider a hub.

    Comment by Will de Cleene — September 29, 2009 @ 12:36 pm

  3. The tyre swing project seems appropriate here.

    L

    Comment by Lew — September 29, 2009 @ 12:44 pm

  4. i work for one of the education agencies. i can see how a consolidated, all of education site might be helpful.

    but HR?

    Comment by Che Tibby — September 29, 2009 @ 12:53 pm

  5. “an IT project that consolidates 250 organisations is likely to cost 250 times as much as any productivity gains you’ll make on the other side.”

    250 x $0 = $0, so it won’t cost a thing.

    Comment by Adhominem — September 29, 2009 @ 12:56 pm

  6. JC wrote: “The simple fact is that Govt expenditure grew at 50% above inflation over the last nine years. That has to be reduced back, in due course, to something more sustainable.”

    Obviously no rate of growth is sustainable forever. No rate of spending cuts is sustainable forever either. The relevant questions, which presumably they asked, were ‘what services do we need to provide? and what do we have to increase spending to to provide them?’.

    The simple fact is that whether a certain level of spending is sustainable or not has absolutely nothing to do with what rate of increase or decrease it took to get to it.

    Comment by kahikatea — September 29, 2009 @ 1:08 pm

  7. This consolidation buzz was probably proposed by IBM or HP pushing their pricy hardware and services. Datacentres are getting bigger and more efficient. But the logistics of a huge series of data migrations is quite daunting and will initially cost a LOT in software consulting. The IT industry is looking up! :)

    Comment by ropata — September 29, 2009 @ 1:52 pm

  8. ANZ and National Bank were supposed to merge their IT systems last year – I understand its been postponed indefinitely because it was going to be so expensive, so likely to have huge bugs, and require a large amount of retraining of the Nat Bank staff. If two well organised private sector organisations can’t do it efficiently, why on Earth does Treasury (or people such as JC) consider that it’ll be a lovely efficient money saver when the evil inefficient socialist bloated government tries to do it with many, many more organisations?

    JC, the issue isn’t whether money needs to be saved, its whether what is proposed will actually save any money. History tells us that IT consolidation (putting aside the other proposals) is hugely expensive and, even in the long run, saves little to no money. INCIS, anyone?

    Comment by Eddie Clark — September 29, 2009 @ 1:55 pm

  9. Eddie and Ropata have this spot on.

    IT consultancy managers and salespeople will be rubbing their hands with glee at the prospect of such a quagmire. Everyone else, from the engineers to the end-users, will be filled with fear and loathing. And rightly so. This sort of thing is the very origin of the word ‘clusterfsck’.*

    L

    * The ess is not a typo.

    Comment by Lew — September 29, 2009 @ 2:09 pm

  10. The law of thirds will apply. the project will:

    - have an initial budget one third of the final cost
    - have an initial timeline one third of the time actually taken
    - achieve one third of what was expected

    Comment by gomango — September 29, 2009 @ 2:22 pm

  11. Misguided to say that changes in IT dont lead to large productivity gains, if it didnt then the world wouldnt be so dependent on them and private companies wouldnt invest in new systems.
    There have been some nightmares where whole systems are redesigned from the ground up but that is not being proposed here. Payroll, webhosting, email and IT procurement should be centralized, multi national companies manage it no reason the government couldnt.
    INCIS was 15 years ago for goodness sake.

    Comment by David — September 29, 2009 @ 2:58 pm

  12. Misguided to say that changes in IT dont lead to large productivity gains, if it didnt then the world wouldnt be so dependent on them and private companies wouldnt invest in new systems.

    Investing in a new system can be VERY productive. Merging two existing systems is often incredibly complicated (there is a vast body of literature on why this is). If you have large, historic organisations like government departments then their systems can have millions of hours of software development invested to optimise their system for their culture. So merging two seperate, large systems can involve a fantastic amount of work. Merging 250 systems . . . there probably aren’t enough software developers in the country to staff such a project.

    Do you have large productivity gains afterwards? Not really – all you’ve done is duplicate existing systems. You can (probably) trim down your IT department and retire some surplus infrastructure. Big deal.

    The conventional wisdom in the private sector is that when two large companies merge the IT consolidation is done organically over an extended period of time, because rapid large scale projects can easily cripple/bankrupt the new company.

    Comment by danylmc — September 29, 2009 @ 3:30 pm

  13. David – from the linked story it doesn’t seem to me that a centralised IT system has been ruled out. It didn’t look like they were just talking about IT procurement. And, necessarily, co-ordinating the IT systems of dozens of different organisations with dozens of different ways of doing things will be very difficult. And given this government’s predilections, done on an budget which will almost guarantee failure. Doing complicated things on the cheap is never a good idea.

    Comment by Eddie Clark — September 29, 2009 @ 3:32 pm

  14. not to mention attempting to merge some of the legacy systems in place. merging is a herculean task.

    then there are issues like privacy, access to information, blah blah blah.

    yet another insane idea from the boffins at treasury. those guys sure are far out.

    Comment by Che Tibby — September 29, 2009 @ 5:34 pm

  15. As a lefty IT worker I’m thrilled by the prospect of an all-government IT project. It’ll boost my wages, and at the end there’s likely to be egg on the faces of both Treasury and the government. Score!

    Comment by Owen — September 29, 2009 @ 5:34 pm

  16. The Stuff story says:
    “Nobody at the meeting who was spoken to by The Dominion Post would be identified for fear of losing out on future work, but several said the skills and capabilities required played into the hands of multinationals, and small local operators would be left out.”
    What skills and capabilities would they be?
    I thought Steven Joyce would have a mate who could do it.

    Comment by Adhominem — September 29, 2009 @ 5:52 pm

  17. Eddie,

    Check my post again, esp. where I say “computer programmes wont do it”.

    There’s only one basic way to reduce costs in Govt depts and that is to shed staff and programmes.

    Kahikatea,

    Sustainability at the moment is determined by how much and how cheaply we can borrow money.. and what effect the borrowings have on a future economy.

    JC

    Comment by JC — September 29, 2009 @ 6:44 pm

  18. Imagine this:

    http://en.wikipedia.org/wiki/NHS_National_Programme_for_IT

    Only dealing with so many more departments, database amalgamations and conflicts of interest.

    Comment by chris — September 29, 2009 @ 7:57 pm


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