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ICT expenditure down in NSW Government

by Paris Cowan •
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The latest survey of the NSW Government’s ICT expenditure shows that the State’s spending has not increased in three years - in fact NSW agencies spent a tiny bit less on technology in 2010-11 than they did in 2008-09 and 2009-10.

A high-level report on NSW’s 2010-11 ICT Benchmarking survey shows that the Government spent $1.989 billion on ICT in 2008-09 and $2.041 billion in 2009-10.

In 2010-11 the total expenditure is recorded as $1.987 billion, on par with 2008-09.

Only when the 2011-12 figures are finalised will it become evident what impact, if any, the change of government in April 2011 had on IT expenditure, and whether the stability brought about by a new electoral cycle boosted spending confidence amongst agencies.

It is, however, a trend that mirrors the ICT expenditure of the Federal Government, which also experienced a small but significant downturn in 2010-11, according to its own benchmarking data released by the Australian Government Information Management Office (AGIMO). The latest Federal report shows that its overall ICT expenditure dropped from $5.23 billion in 2009-10 to $5.19 billion in 2010-11.

Over the three years in which NSW has been surveying agency’s ICT spend, drops have been observed in the Gateway, Helpdesk, Midrange, Voice Services and WAN service towers.

The report makes it clear that the Government’s spending patterns will need to change significantly in future years if the NSW Government it is to meet the ambitions of its whole-of-government ICT Strategy. Areas targeted for reform include a shift in funding from capital to operational expenditure buckets.

“The NSW Government ICT Strategy 2012 positions government to take advantage of two major industry trends that are driven by technology commodification and the adoption of web services:

  • A move to a service orientation by both vendors and buyers, and
  • The deployment of cloud technologies into mainstream business operations.

“The move from a reliance on government owned and operated infrastructure and hardware to outsourced or as-a-service models is not well supported by traditional approaches to investment, which are geared around capital funding.

“An effective mechanism for moving from capital to recurrent funding, in line with modern ICT investment, will have to be developed to support the Government to be able to take full advantage of cloud and managed services,” the report says.

The current breakdown between ICT capital expenditure and ICT operational expenditure in NSW reveals a 30:70 split, which the report acknowledges does not match the industry benchmark of 21:79.

The Applications service tower makes up by far the largest area of ICT expenditure in the NSW Government at $831 million in 2010-11 or about 42 per cent of all expenditure (this figure includes all costs associated with agency-run applications, such as supporting services and hardware).

Consequently, the report highlights this as another key target for reform.

“This is the most significant of all categories of public sector ICT expenditure and represents a potential opportunity for long term and sustainable efficiencies and cost reduction,” it said, but added that a greater understanding of the nature of applications being used by NSW agencies needed to be achieved first.

The benchmarking also shows that the average annualised cost of a Full Time Equivalent (FTE) external employee rose substantially from $169,510 in 2009-10, to $192,000 in 2010-11. Figures were not provided for the proportional split in ICT FTE expenditure between external and internal staff for 2010-11, but the 2009-10 benchmarking shows it to have been 29% to 71% respectively in that financial year.

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