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New direction for NSW digital funding

by Ellen Sanderson •
Free resource

The NSW Government’s expenditure model is out of pace with the government’s digital future – leading to a call for a more agile approach to ICT initiative funding under New South Wales’ 2018 transformation roadmap.

The new roadmap builds on the Whole-of-Government 2017 Digital Strategy, and focuses on revising the way ICT capabilities are currently funded, moving away from traditionally sluggish processes.

Introducing the model at AIIA’s November briefing, NSW Chief Information Officer Greg Wells identified limitations in existing funding models which are impeding transformation. He highlighted the NSW Treasury’s slowness in moving to an as-a-Service (aaS) model as one of the complications. He also called out the lack of greater cross-cluster collaboration within the government as hindering progress on digital ambitions.

The roadmap has a 10-year delivery model based on defined agency plans across three principal phases. This timeline is based on “ongoing delivery sprints, not a once off big bang”, according to Wells.

Focusing on outcomes that can be delivered before the 2019 election, Phase 1’s “quick wins” are driven by customer experience goals, including collecting customer feedback that can be tied back in to use-cases and inform improvements to front line services. Building trust with the user is one of Wells’ core values throughout the new roadmap, and the foundations established in Phase 1 are intended to be the key to the future success of the subsequent phases.

Large transformation, both structural and procedural, will occur under Phases 2 and 3. This transformation will be centred around improving data collection, access and security. The success of new initiatives under the final two phases is reliant upon an overhaul of the current culture of innovation and investment across the NSW government.  

Removing agencies reliance on legacy technology is a leading motive for Wells, and new platforms (such as buy.nsw) are working to reform procurement for new systems and improve digital literacy across the NSW Government.

Current expenditure platforms are initiative-specific: Service NSW delivers citizen-facing services through their budget allocation, while Digital.NSW Accelerator is funded partially by projects and a “range of agency specific arrangements in place”, according to a DFSI spokesperson. The current funding models are clunky by nature and obstructive of the department’s fluency of innovation.

According to the 2016-17 ICT Metrics report, NSW government expenditure grew by more than 41 per cent over the preceding five years, with a total exceeding $3 billion. This is predominantly indicative of the aggressive digital transformation efforts undertaken by the incumbent government.

However, as outlined in the 2018-19 NSW Budget, despite total general government sector expenditure being expected to fall as a percentage of gross state product, “depreciation and amortisation expenditure is forecast to increase by an average of 3.8 per cent per annum of the budget and forward estimates.”

This means that depreciation expenditure is absorbing a significant portion of annual funding in the budget part of which is partially dedicated to accommodating the government’s dependence on legacy infrastructure. This growth is largely driven by the government’s record infrastructure program and growth in the value of capital expenditure (CapEx), according to the DFSI spokesperson.

Wells believes that this drain on resources caused by the need to sustain legacy systems is also hindering the efficiency and viability of future funding for new digital platforms.

At the November briefing, calls for a more agile approach to funding that can adapt to the shift from a predominantly CapEx to an operational expenditure (OpEx)-centric model dominated the discussion. Lack of clear communication between DFSI’s digital arm and Treasury was the main obstacle highlighted by Wells, but NSW is not the first Australian jurisdiction where financial reform has been required to effect digital change.

In April 2018, then DTA chief Gavin Slater said that current budgeting processes are not conducive to transformation and are not designed with as-a-Service technologies (such as cloud) in mind. Slater had been lobbying Finance to look at options to replace the traditional CapEx and OpEx split, which he sees as a barrier to the adoption of cloud services, and subsequently broader transformation efforts in government.

Wells highlighted the same shortcomings in NSW, and proposed a “fast lane” digital investment fund – similar to what is being implemented at the federal level by the DTA – where smaller high-priority initiatives designed around ‘pain points’ receive prioritised funding.

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