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Moving ICT procurement away from CapEx to OpEx is a key goal according to departing NSW GCIO Michael Coutts-Trotter

by Pallavi Singhal •
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The departing Department of Finance and Services (DFS) Director General and NSW Whole of Government CIO (GCIO) Michael Coutts-Trotter provided indications on the future of the NSW public sector ICT environment when he addressed Intermedium’s budget briefing on Tuesday 18 July, in what is likely to be his last briefing to the ICT community before taking up his new role as DG of the Department of Family and Community Services. 

At the end of his two-year stint at DFS, Coutts-Trotter said that the NSW Government will increasingly look towards as-a-service models of procurement and move away from major, long-term capital expenditure (CapEx) funded projects.

In line with sentiments expressed by GCIOs (or equivalents) in Victoria, Queensland and South Australia, he said “we need more agility in managing projects, we don’t want to engage in big long-term projects that lock in expenditure”.

The move to the use of cloud computing is a key manifestation of this goal. A desired end point for NSW government would be externally managed infrastructure with a consumption-based pricing model that scales up and down with changing patterns of public sector demand where it is appropriate to implement such solutions, said Coutts-Trotter. 

According to Intermedium’s research, recently handed down State budgets all reflect an overall downtrend in new ICT initiative funding. Managing Director of Intermedium, Judy Hurditch, attributes this to an Australia-wide determination to restore budgets to surplus - predominantly by reducing costs.  There are only limited means available to the public sector to do this, she said at the briefing, and these are by reducing staff costs, administrative costs and, where possible, ICT costs.

The 2013-14 NSW budget contains the lowest level of funding for new ICT initiatives in the last four years. The $262 million in funded initiatives (comprising 39 CapEx and 3 operating expenditure (OpEx) initiatives) identified by Intermedium from the budget papers (and itemised line by line in its Budget IT online tool) is significantly less than the peak of $609 million for new projects in 2011-12 and slightly lower than $291 million in 2012-13. 

The continued predominance of a CapEx base to funding indicates that the goal of moving to an OpEx base is currently largely aspirational and may remain so for some time. Coutts-Trotter indicated that moves in this direction would be carefully considered, having regard to a number of considerations, including the impact of such a shift on the State’s credit rating. 

The need for agencies to buy-in to a situation in which they do not own ICT assets will be another factor influencing the rate at which the transition to OpEx can be made and will require a change to public sector culture and attitudes, brought about by effective and ongoing change management.

An indication of the degree to which the NSW government is starting to recognise the importance of adequate change management in major reform projects is seen in the recent approach to market by the Department of Transport when an RFT was issued for change management services alongside the RFT for an ERP systems integration.

Efficiency measures will also play a part in the increased public sector consideration of cloud-based services. 

The efficiency dividend for NSW and South Australia is set at 1 per cent for 2013-14 and is 2.5 per cent in Victoria. Efficiency dividends across the Western Australian, Tasmanian and ACT public sectors vary between agencies, and the Northern Territory has a base rate of 1 per cent. The Queensland Government has specified an efficiency dividend savings target of $375 million per annum, expected to increase to $500 million from 2014-15.

Notwithstanding that it may be a long journey to convert all candidate CapEx based ICT procurement to OpEx, indicative of the determination to adopt the new OpEx based model and the rate at which the NSW Government is prepared to embrace it are the five cloud pilots already underway:

  • The ServiceFirst multi-tenanted proof of concept trials that were recently awarded to Hewlett Packard for desktop-as-a-service, Unisys for Microsoft-based messaging-as-a-service and Fronde for Google-based messaging-as-a-service;
  • The Department of Trade and Investment, Regional Infrastructure and Services’ consolidation of its ERP systems through an SAP cloud solution that is well underway;
  • NSW Fire and Rescue’s implementation of email-as-a-service through a transition to Microsoft Exchange in the cloud;
  • NSW Businesslink’s introduction of email-as-a-service across its client agencies; and
  • NSW WorkCover’s implementation of infrastructure-as-a-service.

“Cloud is part of the future of ICT service delivery and these pilots will play a key role in helping government make the right decisions about adopting cloud-based solutions,” said NSW Minister of Finance and Services Greg Pearce during the announcement of the ServiceFirst cloud pilots.


View the NSW FACS profile on GovFacts >>>

View the NSW DFS profile on GovFacts >>>


Related Articles:

Opinion: Coutts-Trotter required at FACs as a pair of safe hands; leaves behind ICT stewardship legacy that may be hard to match

Coutts-Trotter offers frank feedback on ICT industry engagement

Budget 2013-14: NSW finally funds reform promises

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  • NSW
  • IT Services
  • Finance & Services
  • CapEx
  • Cloud Computing
  • Department of Trade and Investment
  • Regional Infrastructure and Services
  • ERP Services
  • Greg Pearce
  • Hewlett Packard
  • Michael Coutts-Trotter
  • NSW Budget 2013-14
  • OpEx
  • SAP
  • ServiceFirst