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Treasury CIO discusses ERP tender, providing shared services to agencies

by Judy Hurditch •
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The implementation of a shared, cloud based, vendor-provided ERP platform will be a key part of the Federal Department of the Treasury’s (Treasury) plans to provide differentiated shared services to agencies with similar corporate servicesrequirements, according to Chief Information Officer Peter Alexander.

The move to the shared services model in Treasury has been a progressive one. Some instances of service provision to other agencies existed prior to Alexander arriving in 2011, but since then things have accelerated. Even so, he says, there is no burning platform and things will be done at a considered pace.

“One of the things we think is really important is getting our platforms right for shared services. In our legacy environment, we can do some things quite well, but not others. Our principles of operation are to be flexible, adaptable and integrated.  We would say our current ERP is none of those things. That’s why we’re about to go to market”, Alexander said. (N.B. Treasury released its ERP Request for Tender on 20 March, 2015, shortly after Alexander’s interview with Intermedium.)

As an indicator of what he hopes will happen more in the future, he told Intermedium that the Australian Bureau of Statistics (ABS) will join Treasury in the Approach to Market. 

He says that while Treasury would have about 1000 seats in conjunction with the ABS, the requirement will be for 3,500 seats, generating better scale and therefore better pricing.

The expectation is that this platform will allow for separate instances to best suit individual agencies who come into Treasury’s shared service arrangement.

Alexander has an open mind about what ERP platform will best suit their needs, stating that there are a number of suppliers who are well suited to provide a cloud based platform for small to medium agencies.  These include local vendors and new challengers to the traditional ERP suppliers to government.

Treasury intends to offer the full range of corporate services functions to its client agencies, including human resource management, financial management and IT Services.

“We already provide full corporate services to six agencies in the Portfolio. These agencies range in size from 10-50 people. We’ve also had several agencies come to us for payroll services. Some of these are part of our Portfolio but some aren’t”, said Alexander.

Alexander says Treasury is not looking to support agencies with ‘massive’ transaction loads, and is not seeking to offer services that other agencies are better placed to offer, such as grants management. 

He says that in contrast to the Shared Services Centre (SSC), the scale of operations at Treasury is ‘small to medium’.  The SSC, with its 600 or so staff, is looking for medium to large Departments as potential customers for its shared services and where the security classification is largely at the ‘unclassified’ level.

Instead, Treasury intends to offer its capability with protected level networks to small to medium agencies who have similar security classification requirements. Due to its depth of understanding and experience in this area, Treasury could readily position as a ‘centre of excellence’, according to Alexander. 

He feels that a key reason for the provision of shared services by government agencies is that they have a better understanding of the inputs and outputs of government and have a fundamental understanding of where the inefficiencies in processes lie. They also have a better sense of the service provision required by the ministerial level of government, he said.

In addition to these advantages, unlike commercial service providers, there is no profit motive in government and therefore no consequent requirement for shared service providers to factor risk into their fees. This allows them to price competitively, in Alexander’s view.

Instead of Service Level Agreements (SLAs), Alexander says that Treasury’s services will be based on ‘Statements of Intent’, and Key Performance Indicators which focus on improvement. He envisages pricing will be kept as simple as possible, and will be fixed, reflecting the fact that agency budgets are fixed.

“Why do we think we can make it work when the States and others have failed? It’s fundamentally that it will be an opt-in choice for agencies, said Alexander. “Everywhere where people have been forced into shared services, it hasn’t worked”, he added.

Alexander is not intent on being a ‘traditional’ service provider, and envisages that Treasury could act as a broker of services for agencies, where the use of the private sector to deliver IT Services made more sense.

“In many of the failed shared services instances, they’ve basically had one provider for everything. In our model, there will be a series of providers, each the best possible provider of the service. Some will be government and some of them could be from industry. We’ll have contestability.”

He foresees that there will be impacts on suppliers arising from shared services such as the model being offered by Treasury.  Some suppliers will lose contracts, but on the other hand, some suppliers will win substantially larger contracts due to a bigger requirement being put into the market.

Alexander envisages that internal shared services arrangements will be ready for market testing when the providers have harvested all of the efficiencies that are possible.  This will continue a trend where he believes agencies have become far more efficient in recent years.

The Treasury (and SSC) Shared Services arrangements are supported by the Coalition’s Policy for E-Government and the Digital Economy. According to the Policy, in instances where agencies are not meeting their KPIs, the government will expect them to move to shared or cloud services to avoid “duplicated, fragmented and sub-scale activities across agencies.”

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