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iStart - Council IT Amalgamation - rate buster or consultant cash in?

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As debate rages on both sides of the Tasman over Council rate rises …

As debate rages on both sides of the Tasman over Council rate rises
exceeding inflation, Auckland’s Super Council is spending hundreds
of millions amalgamating IT services hoping to improve customer
service and efficiency while reducing costs. iStart investigates what
Councils are doing with technology to improve service and asks
if amalgamation is the answer. Chris Bell spoke with a range of
councils and vendors supplying the sector and found that both IT
and amalgamation are touchy subjects...

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  • 1. Feature Council IT amalgamation – rate buster or consultant cash-in?50 Quarter Two 2012
  • 2. As debate rages on both sides of the Tasman over Council rate risesexceeding inflation, Auckland’s Super Council is spending hundredsof millions amalgamating IT services hoping to improve customerservice and efficiency while reducing costs. iStart investigates whatCouncils are doing with technology to improve service and asksif amalgamation is the answer. Chris Bell spoke with a range ofcouncils and vendors supplying the sector and found that both ITand amalgamation are touchy subjects...“A sceptic might argue you can achieve Commission’s report, which continued: “The Commission does more efficiencies by having better not contemplate the Auckland Council’s ICT infrastructure will trained, more well-informed customer be built from scratch. The objective will be to ensure smooth services staff rather than through transfer of the eight current councils’ ICT systems to the the implementation of IT, but you Auckland Council and to plan the migration of the numerousstill need the means to make them better-informed in the first duplicated council business systems to a single ICT infrastruc-place,” says Murray Foster, CIO at Thames Coromandel District ture platform.”Council (TCDC). “Almost 100 per cent of our data is electronic,all of our processes are electronic. There isn’t a way to be better Cost comparisonsinformed without using systems to find it.” Following murmurings of an IT budget blowout and a price Foster is a technology convert in a smaller council, but hike to more than NZ$500 million, Auckland ratepayers as wellunderstands that good IT does not necessarily result in better as those involved in the transition process are asking questionsservice, nor reduced costs. “I’d like to say that by using technol- about the necessity of a brand new IT system and about seniorogy effectively you can be more efficient and keep rates down management governance.but I don’t think there’s a group manager around who’d say, Auckland CIO Mike Foley was once headhunted by Deloitte.‘Because of IT we’ve been able to reduce rates.’” He became CIO of Watercare before being appointed informa- What ratepayers get for their dollar might come down to tion services manager of Auckland Council in 2010. Recentlypersonal experience. Good customer service may come from he’s been under fire for not insisting on a more rigorous evalu-someone bright on the other end of the phone, not necessarily ation of the legacy councils’ systems. But Foley is adamantuse of the latest technology. Likewise, outdated business prac- new IT systems will improve ratepayers’ ability to interact withtices might be to blame for a bad experience rather than poorly Auckland Council through multiple channels. “We’re looking atoperated IT systems. online processing of resource consents, dog licences, online Around half of the 1,000 business respondents to an MYOB payments, more interaction through the call centre if you needBusiness Monitor survey of perceptions of council services last it.”year said they were dissatisfied with local government. Bad SAP implementation specialist Deloitte provides consultancycustomer service and lack of responsiveness to the urgency of services to Auckland Council. Since the New Zealand Heraldbusiness needs were frequently cited concerns. obtained a confidential Deloitte proposal showing it charging The cost of delivering IT systems to support council services daily net rates of between $1200 for an analyst and $3400 forhas been in the spotlight since the early stages of the Auckland a senior manager, the minister of local government has beenSupercity amalgamation. The Royal Commission on Auckland asked before Parliament if he has confidence in the Council’sGovernance first recommended a unified local governance financial management.structure and amalgamated councils as recently as 2009. An IS Capital Plan presented to Auckland Council in MayGovernment only announced an Auckland Supercity would be 2011 shows a correction in its forecasted “Enterprise Capabilityset up in time for the 2010 local body elections. Development” investment of around $230 million in the years A high level of ICT duplication in the region was noted in the between 2011 and 2015. But Auckland Council chief financial ›› Quarter Two 2012 51
  • 3. Feature // Council IT Auckland Council: Behind the scenes Since ‘Day One’, 1 November 2010, the following applications have been merged and are live: • Email • SAP (core finance functions, asset register, procurement, HR, payroll) • Hyperion (budgetary planning – monthly, yearly, 10-year plans) • Telephony (common platform across most legacy councils) • Website (currently an overlay – legacy websites are still operating where online payments were in place) officer Andrew McKenzie says this considerable variance is attributable to the eight legacy councils halting their investing in systems. “When we came in, the proposed investment levels were well under $20 million a year for the eight councils, about $2.5 million each, so they weren’t realistic. We’ve just done a long-term plan and we’ve flattened out our investment profile. We’re still refining it at the moment but it won’t be as peaked as we’ve suggested for 2012-2014.” Beyond the pain barrier “ Where we have to, we bring in a Malcolm Fraser is CEO of the Future Cities Institute, a non- specialist because we don’t merge systems profit organisation focused on empowering citizens. “If central government says it’s going to amalgamate a city because every day. When you’re trying to merge there’s too much duplication and they don’t communicate that eight into one, you have to bring in the there will be a period of pain, they’re setting the wrong expecta- tion.” people who understand them. ” It seems Aucklanders are going to need a high pain thresh- old. Bernard Orsman reported in the Herald in May last year Mike Foley, CIO, Auckland Council that the cost of building a new SAP computer system over the next eight years would be NZ$506 million. Already spent dur- ing the transition was $54 million to set up the bare minimum “ I don’t think they’re going to realise the for day-to-day functions, including payroll, email, telephone and recruitment, which the Council’s 16 December strategy and potential of Auckland Supercity until the finance meeting agenda says was within budget. next generation – you’re talking 20 or 30 Comments on the Public Address blog after Russell Brown published a post titled ‘Someone has to be accountable for years down the track. ” this’ last May were largely connected with the ballooning cost of systems and a lack of transparency about decision-making. Mike Wanden, CIO, Otorohanga District Council; president, ALGIM “If it transpires that [the Auckland Transition Agency (ATA) the local government minister, Department of Internal Affairs,52 Quarter Two 2012
  • 4. “ If central government says it’s going to amalgam- ate a city because there’s too much duplication and they don’t communicate that there will be a period of pain, they’re setting the wrong expectation. ” Malcolm Fraser, CEO, Future Cities InstituteCabinet and the Prime Minister] knew that the costs would be ‘day one’, 1 November 2010, including functions yet to be fullyfar in excess of what we were told, then there is only one way deployed at the Council.of characterising what happened,” Brown concludes: “We were Foley counters that since Auckland Transport only hadlied to.” to replicate the functions of the legacy Auckland Regional Auckland City CEO Doug McKay admitted to “poor commu- Transport Authority from 1 November 2010, its migration wasnication” on the part of the Council in a Computerworld article simpler. “We were merging eight separate businesses into ain June last year. But he told iStart media portrayals of the new entity. It was felt better to put it under the umbrella of theCouncil signing off on a $500 million IT spend are inaccurate. overall programme and do the data migration within that pro-“In practice it’s nothing like that. It’s broken down into all these gramme.”individual projects. I’ve met with a number of our critics over CFO McKenzie adds that Transport also didn’t have so manythe past few weeks and I’ve got a better idea of where they’re financial applications: “We have five different systems and acoming from. But in a lot of cases they’re out of date on their multiplicity of brands.”information, they’re still poring over the ATA investment cases. Questions remain over why ATA chose a new SAP install forIn many of these situations we’ve moved on.” Auckland over one built on an existing implementation as had The Auckland Council senior executives remain unable to originally been planned. Holley says the Council’s Decemberprovide a total cost for the new system because, they say, they agenda document – in which it states a fresh installation washave yet to decide to what extent SAP will be used. “We’re see- “a better fit for the scale and longer term needs of Aucklanding how much extra we want to put onto [SAP] as opposed to Council” – is full of misdirection and inaccuracies. Among these,other technologies,” McKenzie says. says Holley, is a worrying knowledge gap about ARC’s ERP sys- tem. “At the ARC and ARTA we had SAP asset management. ItStarting from scratch had two components: plant maintenance and a module called Former Auckland Regional Council (ARC) CIO John Holley real estate.” The strategy and finance agenda document claimsquestions the SAP project’s governance. He’d like to know “ARC’s system did not include the real estate solution” when inwhy Auckland Council didn’t follow best practice by having its fact it was incorporated in asset management.vendor migrate data onto the existing systems at a fixed price. Foley, on the other hand, remains convinced the existingThe admittedly much smaller council-controlled organisation ACC and ARC SAP systems were unsuitable. “They were wayAuckland Transport did just that when it ‘cloned’ the existing behind in terms of support and the versions they sat on andAuckland Regional Transport Authority (ARTA) SAP system didn’t have some of the modules we needed. So we’d havefor $2.2 million. Transport started its implementation after the had to do significant upgrades. Starting from scratch gave usCouncil’s and had it fully operational in time for the Council’s a more robust platform. It gave us the version compatibility ›› Quarter Two 2012 53
  • 5. Feature // Council IT “ What ratepayers want is evidence that we’re not spending money we don’t need to spend. ” Julian Moore, director of organisational services, Wellington City Council that we wanted so we don’t now have to do another significant agement standards and all large investments have to be ratified upgrade for another 12 or 18 months, which is a huge task to by councillors. “There are two internal checkpoints for every undertake. You always want to go back to a vanilla implementa- project: an IS governance review that makes sure it technically tion, which is where we started from. The other systems had fits with what we want, and then it goes up to the executive pri- some kind of customisation buried somewhere and the major- oritisation group to ratify the solution and in terms of the invest- ity wouldn’t have worked.” ment and whether the business case stacks up. Once we get Holley defends ATA’s selection of SAP, as well as that of into an inflight project there are the usual committee meetings Deloitte as implementation partner. However, he maintains around scope, budget, quality, timelines and milestones.” there was no consultation with the council CIOs on the imple- McKay is also sensitive about governance, given his CEO mentation approach. “After Deloitte was selected it was effec- responsibilities. “We have to put up a 10-year plan for our IT tively given free reign with the ERP implementation steering investment, which we’ve done, but we don’t consider that group, which had no real SAP implementation experience, no an approved budget. Every single project within that overall CIO representation and no one from the councils with experi- 10-year timeframe, we put them all in front of the politicians, ence in dealing with SAP implementations and external con- either for an approval or an FYI. They’ll have somewhere sultants. This meant the key advisor to the steering group was between 80 and 100 opportunities over that 10 years to make Deloitte.” comment on any of those investment proposals.” The Council document contradicts this: “The decisions, assumptions, costs and implementation approach were tested Sour grapes? and validated by a numbers of parties throughout the life of Richard Hunter is director of Origen, a vendor whose prod- the project including … chief information officers of the legacy uct was squeezed out during the amalgamation. Origen’s ERP Auckland local government organisations.” suite Ozone was installed at Franklin District Council. Hunter is McKay has said it was preferable not to have legacy council disappointed ATA didn’t evaluate any of the Auckland councils’ CIOs on the steering group because they lacked objectivity but legacy software. “No one ever came to see Origen or Ozone. Holley contends anyone with significant council experience of The decision-making was based on prejudice and not robust implementing SAP would have recommended a clone of an evaluation. None of them was ever evaluated, a cost-benefit existing environment. “The consultants, with the most to gain analysis looked at or a strategic fit for the longer-term view.” from a green-fields implementation, were taken at their word A neutral observer might dismiss these as the sour grapes of that none of the environments was suitable.” a vendor whose products weren’t chosen but Hunter dismisses Foley says Auckland Council follows accepted project man- that. “Irrespective of the system it’s the process I’m talking54 Quarter Two 2012
  • 6. about. They’d never select Ozone – it’s a New Zealand product. lion in our first eight months – not all of it was related to IT butI’m not talking about what’s happened to Origen. I’m talking a lot of it was enabled by new processes and systems – andabout the entire process and decision-making.” that couldn’t have been achieved under the legacy councils. It Mike Wanden is both CIO of Otorohanga District Council and was the equivalent of 6 per cent of rates we didn’t have to askpresident of the Association of Local Government Information the people of Auckland for – 1 per cent of rates is about $14-16Managers (ALGIM). Wanden saw Foley’s presentation at million.”ALGIM’s annual conference last year. Foley is on the ALGIM McKenzie says ratepayers ought to view IT costs relative toexecutive. For the CIO of a small council like Otorohanga, total Council spending. “In the technology area you’re talkingWanden says, it’s hard to comprehend the IT task faced by about a $0.5 billion investment and about $300 million of thatAuckland. “I don’t think they’re going to realise the potential of is in new IT infrastructure and systems. Across Council we’llAuckland Supercity until the next generation – you’re talking spend about $13.5 billion on transport, wastewater, storm water,20 or thirty years down the track before any benefits will be new buildings, libraries, and of that $13.5 billion around $9 billionrealised.” is on buying new assets. In spite of that massive investment in Origen’s Hunter was also at the ALGIM conference for Foley’s the city, we’ve got rates increases of 3.6-4.9 per cent over thepresentation. “Everyone just listened to this guy talk and their next 10 years.”jaws dropped – they’d never heard anything like it. He wascoming out with some very big generalisations and rationalisa- Passing the ‘Dom Post test’tions.” Citizens want to see their council operating efficiently to reduce rates, says Julian Moore, director of organisational ser-What about my rates bill? vices at Wellington City Council (WCC). “What ratepayers want Auckland Council’s current programme of work is part of a is evidence that we’re not spending money we don’t need towider organisational transformation to assess which applica- spend.”tions are best suited for council-specific functions such as So who’s accountable for ensuring that? Foster of TCDC’smanaging consents, field services, licensing, property records, take on that is straightforward: “The guy who signs the cheque.”websites, document management. The legacy Papakura and Moore sees it as a standard chain of command with theFranklin rates systems are currently being migrated to the old CIO accountable to the CEO who’s accountable to the mayorAuckland City Council rates system, Pathway. In October, says and councillors. “I’d be accountable for the effectiveness andFoley, the Council will probably migrate the regulatory sys- efficiency of our IT operation but these things are not just ITtems, but this will only be an interim fix. In the longer term the decisions – the decisions you make around systems need to beCouncil will need to evaluate a permanent replacement. driven by business.” Foley says the Council has yet to select suppliers for licens- Hunter of Origen is sceptical ratepayers will notice benefitsing, compliance, regulatory and rates functions. However, iStart from Auckland City’s new system. “They keep talking aboutunderstands from one industry source that the decision to improved customer service but I don’t really see any value in itimplement SAP’s regulatory modules has already been made, at all. It’s got more consistent but it’s not actually lifting the baralthough the Council will still issue a request for proposal later in any way.”in the year. Moore of WCC says his council places the interests of rate- Ratepayers around the country may be wondering whose payers above those of suppliers. “Most people on councils wantinterests their council serves. Foster from the TCDC says the to be sure they can defend their procurement. That can leadfact IT is still considered a “black art” by the public increases to us having undue process around it. In Wellington we call itthe difficulty of communicating IT project costs. “I’d like to say the Dominion Post test – any decision you make, you have tothat by using technology effectively you can be more efficient defend it to the public.”and keep rates down but I don’t think there’s a group manager It’s always challenging for councils to justify expenditure toaround who’d say, ‘Because of IT we’ve been able to reduce ratepayers. Foster of TCDC reckons the public sector should hirerates.’” more CIOs who’ve worked for suppliers. “It’s always good to go Auckland Council’s CEO says the fact its new systems will and work for a vendor and have some P&L responsibility – thatmake the Supercity a more efficient council will ultimately cut sharpens your focus.” Ratepayers are more likely to appreciatecosts, but rate increases are beyond the control of council sharpened focus if the picture makes sense. That calls for a moreexecutives: “Politicians make the rating decisions, we make the business-like attitude on all sides of the debate.cost and savings decisions,” says Mackay. “We saved $81 mil- Quarter Two 2012 55