ICT “Business as Usual” Review Project
Background
In November 2008, the Government accepted the recommendations of the review of ICT expenditure in the Australian Government undertaken by Sir Peter Gershon. Sir Peter found, among other matters, that “Business as Usual” (BAU) ICT spend was not, in general, subject to robust scrutiny. Accordingly, recommendation 3.1 seeks to reduce the ICT BAU expenditure by an average 15 per cent for the largest 28 agencies by ICT spend (excluding Defence which is already undertaking a program to find significant savings) and by 7.5 per cent for the next 25 agencies.
Sir Peter recommended that the reduction be phased in over two years.
The top 28 agencies, with ICT spends greater than $20m, are to achieve an average 15% savings - 5% in 2009-10 and an additional 10% in 2010-11 and ongoing in future years. This makes the total savings in 2010-11 and ongoing in future years 15%.
The next 25 agencies, with ICT spends between $2m and $20m, are to achieve 7.5% savings - 2.5% in 2009-10 and an additional 5% in 2010-11 and ongoing in future years. This makes the total savings in 2010-11 and ongoing in future years 7.5%.
Progress to date
In accordance with the recommended approach, the Department of Finance and Deregulation (Finance) established a number of ICT Review teams to assist agencies to achieve their respective targets using a common methodology. The teams consist of Finance staff, secondees from other agencies and an external consultant, the Boston Consulting Group, which was selected following a competitive tender process.
Implementation of these recommendations is being undertaken in two phases. Phase one has been completed. This included working with the 53 agencies with ICT expenditure in 2007-08 greater than $2m to: validate information and communications technology (ICT) and business-as-usual BAU financial baselines; develop and refine cost reduction initiatives; develop implementation plans and support the budget process. Each Agency has worked cooperatively with its ICT review team to identify the drivers of the BAU ICT costs, validate the baseline for BAU ICT costs, and savings to be applied to BAU ICT costs. The savings realised for 2009-10 were $109.2 million - half of which will be reinvested in agency or whole of government projects that improve effectiveness and efficiency in ICT BAU expenditure.
The first ICT Reform Program BAU reduction targets were 5 percent from the 2007-2008 ICT BAU budgets of the large agencies with ICT spends of more than $20 million; and 2.5 percent from the 2007-2008 ICT BAU budgets of the medium agencies with ICT spends of between $2 million and $20 million.
Results of the ICT Reform Program BAU reduction as at 1 Jul 09
| 2009-10 | 2010-11 | 2011-12 | 2012-13 | Total | |
|---|---|---|---|---|---|
| Estimated total savings as at Budget 2009-10 | 109.2 | 298.2 | 303.1 | 306.1 | 1016.52 |
| Estimated total re-investment pool as at Budget 2009-10 | -54.6 | -149.1 | -151.5 | -153.1 | -508.3 |
| Savings identified as at Budget 2009-10 | 109.2 | 139.2 | 152.5 | 168.5 | 569.3 |
| Reinvestment pool as at Budget 2009-10 | -54.6 | -69.6 | -76.2 | -84.2 | -284.6 |
Sir Peter Gershon estimated the potential savings in 2009-10 at approximately $140m. As a consequence of work done by agencies and the ICT Review Team in Phase One, Finance was able to establish a better understanding of agencies’ ICT expenditure. The amount of savings realised in Phase One for 2009-10 is $109.2 million, half of which will be reinvested in agency or whole of government projects designed to improve the effectiveness and efficiency of business as usual expenditure.
The lesser savings amount is primarily a result of data quality issues and issues associated with the delineation between BAU and non-BAU expenditure as reported by agencies during Sir Peter Gershon’s Review.
These reductions were found in a number of ways with 75% of the reductions coming from the following 8 areas:
- Renegotiation of contracts;
- Rationalisation of applications maintenance expenditure
- Overall reduction in contractor numbers
- Consolidation of servers and server virtualisation;
- Better ICT management;
- Rationalisation of Desktops and Laptops;
- Mainframe capacity review and tuning; and
- Conversion of contractors to APS staff.
A data collection exercise has also been completed to provide the data for the development of benchmarks on ICT expenditure and usage, which has been provided to agencies. In addition, whole of government benchmarks will be provided for comparison purposes. The benchmarking is providing agencies with a view of the efficiency of their ICT operations and opportunities to identify further savings.
The review process has provided a number of additional benefits to agencies by providing greater understanding and transparency of ICT BAU spend across government as well as establishing and coordinating a range of cross government benchmarking activities and data collection, through which agencies can develop a greater awareness of the cost drivers for services and identify possible improvements. The review process also identified that agencies had strengths and weaknesses in various areas and that there were lessons to be learnt from each other to assist us in developing future savings initiatives.
Phase two
Over the next few months, agencies will identify further initiatives to be implemented from 2010-11 towards the target of $1,016 million over the forward estimates to 2012-13, half of which will be reinvested.
In addition, phase two of the project, to be completed in late 2009, will deliver an ongoing benchmarking methodology to be reported against by agencies annually; and implement an ICT chart of accounts across agencies.
Contact for information on this page: ICTReview@finance.gov.au