Due to considerable reader feedback, questions and conflicting media reports about the Australian Taxation Office's stand on issues ranging from offshoring to open source deployments, the following is an edited version of an interview between the Australian Taxation Office's CIO, Bill Gibson and Computerworld's Julian Bajkowski on Tuesday March 16 2004. Before becoming Tax's inaugural CIO less than six months ago, Gibson was a senior IT executive at Qantas, with particular oversight over high volume transaction systems.

To view the list of topics covered in this interview, refer to the contents box here.

On ATO's vision and strategy

Computerworld Q: What's the IT vision you bring to the ATO and what will be the deliverables?

Bill Gibson: The main differentiator over the next few years is that the Tax Office will be more and more visible to the tax community, so the online channel is one of the mediums where we have a lot of visibility and performance will be assessed against that. Coming from a background of 14 years in airlines, I have an ingrained understanding that it is very important that systems perform all the time to the required levels - so we meet customer needs and expectations. It's about bringing that real-time view and emphasis.

Q: What do you define as real-time?

BG: The [ATO's business customer] portal is a good example of that at the moment. It's allowing members of the tax community [businesses and tax agents] to access the ATO in their own time. They would previously have to have make a phone call, or apply for information, which would then be mailed out. The time is at [the customer's discretion]. Portals are great conduits for that.

Q: What are the main challenges you see ahead of you in the job?

BG: The Change Program is something that has been reinforced by interactions with the community and the way [customers] would prefer to interact with the ATO. That [means] listening to the community. What has come from that is the commitment, and the realisation, that there are things that we can do differently in the way in which we interact [with customers].

What I see ahead of us is a major transformation. [It will be in] both business processes and technology to support [enhanced customer interactions and experiences]. We want to, and are committed to making [a better interactive experience] for our customers.

Q: How does the time-line look?

BG: Over the next few years my challenge will be 'business as usual' activity. Our existing systems have to continue to run in parallel for some time with a range of new systems [we are introducing]. The existing systems [have to continue to run concurrently] because we are a business that is critical to the government. We are the primary revenue source for the government.

We also have a responsibility to interact with the whole taxpayer community [at the same time] in a way that is effective to them. In two or three years time we intend to decommission some of the legacy applications. So the big challenge there is to do that in a way that is seamless, not visible and not disruptive to the community.

The instalment processing system is one [example]. [Also] NTS, one of the original tax systems that processes the tax return that is around 25 years old - even though it has been enhanced over time. They are mainframe systems like CICS, DB2 on IBM Z series mainframes.

Around 2006-7 [they will] ultimately be decommissioned and replaced by a single, integrated system.

Q: What is it about the information environment that has led to the decision to decommission?

BG: Over time you have had an evolution of enhancements. With the tax technical system, there will [always be] be either legislative, policy matters that we have to enhance [our] systems [for] - whether we inherit them from [changes in] excise, or things like that.

You end up with an accumulation of systems that interoperate - but don't present a tightly coupled view [of the business]. It means that our operators have to have two screens open at once when they are interacting with a customer. They have to look [into] two systems to get the complete picture.

[With] those sorts of inefficiencies, we will bring them together and replace them as one system. So we have four or five systems we will bring together as one.

Q: Is it a matter of rebuilding the business process?

BG: Given that tax systems have changed, it's time we looked at what produces the most effective way of dealing with our community. Some of it will be re-engineering of business process; there is no doubt about that. But it's also re-engineering the engagement of our customers [and delivery to them]. It's fairly broad.

ATO's role in the federal information agenda

Q: How do you view the formation of the federal CIO Committee and the role it will play?

BG: As one of the government CIOs, I am a member of the [federal IT] community. ATO, as a stakeholder, has a very strong presence in a number of the working committees [of the CIOC].

We realise that one of the things that differentiates us from private enterprise is that we have the obligation to ensure that, from a whole of government perspective, investment in IT is not only right for [an individual] agency, but [that it] fits with the requirements of other agencies where there is overlap.

We're not permitted to, nor do we ever, get in each other's way. But where we have to interoperate we make sure we doing that in a cohesive and standard way. We – ATO, Centrelink and the HIC - are all grappling with how you effectively interact with your customers.

With [strategies like communication] channel management we are displaying good progress. Some of the other agencies are taking note of that [progress], just as we are cognisant of the way Centrelink interacts with its customers. (Communication channel management refers to the process by which agencies plan and distribute resources to communicate with customers, such as call centres, helplines, mail outs and print campaigns.)

Q: How big a strategic imperative is interoperability across the whole-of-government context?

BG: As a newcomer to the [federal] environment, my perception is that there is a good understanding of the benefits of [interoperability] at [CEO or departmental] secretary level. There are things that we can do together, and it's not at odds with the business imperatives of [any given] agency.

The Commissioner for Taxation, Michael Carmody sits on the federal information management strategy committee. From that is spawned a number of CIOC committees [such as] security, identification and authentication, interoperability, channel management. The tax office and others are very involved with that.

[Recently] there has been a draft paper produced using Boston Consulting [on sourcing] and its evolution over the last 20 years. There is a pendulum. You can go from in-house to fully outsourced, to selective sourcing. Who knows where the pendulum will swing back to…

Sourcing strategy

BG: The way [ATO] is heading is down a selective sourcing path - which is in fact now more the contemporary thinking than in the 90s which was whole of government IT outsourcing, which we have delved into as well, quite successfully.

Q: What are the pitfalls of the swinging pendulum? How are the new breed of contracts being thrashed out?

BG: There is a maturity in our organisation that has occurred as a consequence of being through the [whole of government outsourcing] experience. There's [also] a maturity in the provider landscape as well. Their capabilities to meet our business needs have improved as well. That has improved.

There are also new players in that space. If you go back five or seven years, there were no Telstra or Telstra Enterprise Services then, even though that has been re-integrated into the parent body now.

There just wasn't that capability or that offering there then. So I think we have moved quite naturally.

The market in terms of capability and demand from customers has shifted. 'Best of' sourcing strategies, selectively [applied are effective]. You might aggregate at a network or processing level, but you wouldn't split it too much finer than that for it to remain effective.

You still are looking for cost effectiveness, still looking for economies of scale, still looking for expertise you never have. Technology change rates are so high you just cannot be across it all.

We are looking, on a case basis, at what is right for ATO in terms of service delivery and cost efficiencies to re-engineer some of that. We are in the throes of a request for tender at the moment [for voice services]. I can't comment on the outcomes because we are still in negotiations, but that is an example of what was previously in a bundle that was in 'whole of' outsourcing.

There are real service and cost benefits to the tax office by [extracting] that and dealing with specialist service providers.

Voice over IP

Q: Will you be entertaining Voice over IP?

BG: Not yet. We are only talking pure voice, not the wide area network. To tease these things out of an existing contract, takes time and you want to be in a position where you, as well as the service provider, benefit from that.

Q: So is the RFT about getting better value for money, or taking advantage of technological change?

BG: It is not technology driven, although clearly to get the benefits in terms cost effectiveness there will be some technology change. But that's more the space of the service provider. We are not going to say 'we want one of these green things here', because they are the experts.

We will say what we want as the business outcomes, and we expect them to deliver that. As an example I have a mobile and a desktop phone – why do I need both? If I am in the office why can't my mobile phone act as if it were a desktop phone [and vice versa]. But that is very difficult for me as the tax office to build that. It is business defined and nothing to do with the technology. Whether I have one hand spare or two is really what I am interested in.

There will be some pricing regimes that can come from that. [For example], can I get superior pricing? I don't want to pay mobile rates in the office. Things like that.

Voice over IP is something where the business experience in some cases good, and sometimes not so good - we are just taking it one step at a time.

Q: What is still immature about VoIP?

BG: I am concerned about the true and underlying stability of the technology. Having a dedicated voice link still gives me comfort over having to share bandwidth with other activities. In terms of capacity management and being able to differentiate traffic, that's something we have to get much better at.

We have to be able to profile traffic so that we can give priority to contact centre staff, versus sending a transaction from a CICS DB2 environment from, say, Burwood (Vic) to wherever they are at Moonee Ponds (Vic).

The tax office is not an expert player in that space. Some of the telcos are getting better at it, there are some experiences overseas where the management processes are coming together, but we will take a watching brief on it.

In-house development versus offshoring

Q: In terms of the way any government agency, department or service provider chooses its sourcing, is it not inconceivable that some work will ultimately be sent somewhere [offshore] along the line. Is it tenable, therefore that there is conditionality on that work, when security is not an issue?

ATO media adviser: We will not be doing that. No. That is part of our contract.

ATO media adviser reads from statement: "We have no intention of outsourcing applications development work, in fact a requirement of the contract is that no significant applications development will go offshore."

ATO media adviser: So no. It is possible that some work will be done outside the ATO, but in joint contracts with the ATO. When I say outside I don't mean offshore, I mean external. In fact I think it's actually requirement of the contract.

Q: So there is a requirement the work be performed by, let's say EDS or IBM…

ATO media adviser: We won't be setting up shops in India.

Q: But if you give the work to someone else, can they then send that work out?

ATO media adviser: That's part of the contract. No.

Q: When you say part of the contract?

BG: It will be a condition of the contract. Basically it will come down to that. If anyone were to do that [offshore] they would be in breach of contract.

BG:If I can talk about, generically, the problem with that kind of thing - nothing to do with ATO - in previous lives, and not only myself but other large corporations, have looked into [offshoring] to see if it is viable and there are tradeoffs.

It is very dependent on your pure business circumstances. Not just that you may have a policy for or against it. There are systems definition matters. Then there's the whole question of how you effectively interact over a telephone to build a computer system. I mean it is difficult to do.

Some profiles of applications are suited better to that than others. So it has to be weighed up on a case by case basis. To say generally that it [offshoring] is appropriate and that you should do it is not fully considered.

Q: Some people say that they have had successes with it. I realise it is an emotive issue…

BG:For some it may be a good experience, but for the tax office at the moment we are not going down that path.

Retention of intellectual capital

Q: Do you have any strong view in terms of keeping intellectual capital or business capital within the organisation? There have been some recent examples where the loss of intellectual capital or business knowledge has created problems. How do you value and manage that sort of capital?

BG: I think that the intellectual property about the business processes, my personal view is that it is essential to retain that within the organisation. That is the knowledge of how to be effective. In fact to date, the ATO has only outsourced commodity processing type items. We have retained the full design and build of our own applications. So we have only done the desktop provisioning, the processing…the classic data centre types of things.

[That is not] our intellectual capital at any point in time. It belongs to IBM, Microsoft, Computer Associates or whomever. We have no problem with that.

Underpinning the Change Program is the realisation that business process intellectual property is very, very important to us. So what we are doing is…we will retain business analysts and we will retain and engage our expert business users to build, define and design the system. In the Change Program, we are looking at [what we call internally] a solutions transfer. Basically we have got a number of legacy applications that we wish to replace with an integrated whole system.

Q: When you say legacy, do you mean the software or the hardware or the architecture?

BG: Business applications. With that you might have to change architecture and the underlying platform as well. What we are doing is saying, quite sensibly, that the least risk and the most cost effective way of doing it is to find an equivalent tax jurisdiction, of the same scale and complexity and of a similar profile to the ATO and use that as the basis of for our solutions transfer as we go forward. That would form the basis of what we would be doing. We would need to modify it and customise it to fit the unique tax regimes here.

Our intention is to do that. When you do that you reduce a lot of the risk. For that to be effective you must engage your business experts. For them it will be a two-way thing. They will learn about contemporary processes in other tax jurisdictions and will be able to make sure that those processes are appropriate, with modification, to our environment as well.

We really do understand that this is critical to a successful outcome. To build it ourselves is something that we are uncomfortable with because you end up getting all these tensions and distractions.

It's much better to go and acquire one and say 'well look, we are 50 or 60 percent of the way there' in terms of the system and we are going to embody in it [a component], or put [that component] around the periphery.

Things like channel management, CRM, document management, those types of things – there are commercial products that we can use to bolt in around that as well.

That's basically the philosophy around the common sense approach to the Change Program from an implementation perspective.

We retain governance of the architecture. That architecture may be seeded by a pre-existing system that's very sensible - but it is not the sole thing that determines what the architecture is. So we will take it and modify it to fit our requirements and basically we will have a new architecture that will be a variation on what we had before.

Standard operating environments, proprietary and open standards.

Q: What are your views on how SOEs, and open or proprietary standards should be handled?

BG: The SOE question has got a lot of visibility in the senate and in the media.

A standard operating environment is only standard for an instant in time. The are always things that are changing both within our environment and outside driven by vendors. It is always in a state of change. What we are doing with our Change Program is acknowledging what we have as an SOE that defines the systems and the platforms in which we operate today… so that developers and suppliers can interact efficiently with us and design efficiently.

We know that in two or three years time, when we implement the Change Program, that landscape will have changed. That is still a work in progress for us.

I cannot make any statement about what that end target environment will be - other than it will be a different profile to what we have today. That is for sure. But it would have been whether we were doing a Change Program or not, because these things evolve.

Q: When would you expect to know, or be able to say what you expect that environment to look like?

BG: I would expect by the third quarter of this calendar year to have some reasonable crystallization of what that environment, from major building blocks, would look like. There is no doubt, as we go forward in time there will be some refinement . So July to September. Our Change Program is in transit. Around that time we go from a particular phase around design, to making a decision to as to how we go forward.

People have had a go at the tax office and said that 'you are wedded to Microsoft'. [But] we have [other proprietary software like] IBM proprietary software as well as Microsoft…other agencies are heavily into WebSphere or Lotus or things like that. It's more that we made a [big] investment, and a decision at a point in time that this was an appropriate development environment for us. We are not unhappy, it is not unstable and it is not putting us at risk. So there's a lot of investment.

We are very comfortable with [Microsoft] as a development environment [and] as a stable and secure environment. We don't have a problem with it.

Open source

Q: What about open source and open standards?

BG: What we have recently indicated, and Second Commissioner [Greg] Farr mentioned, is that we are prepared to consider use of open source in appropriate circumstances. In the past we have been very, very uncomfortable about security, integrity matters and control matters about what happens to the source when you release it.

We have a lot of sensitive information that we protect vehemently, we are required to by law. Until recently we felt that there really weren't appropriate governance or integrity mechanisms available. We commissioned a study by Gartner, and we will publish the full report. What that reinforced to us was that there was [now] a maturity in the environment of these products – and for some cases, on a case basis, we would consider using open source.

We have nothing that we have either precluded or locked-in in that respect at the moment. We have an internal policy, for which we are in the final stages of getting approval' this supports that we are prepared to consider, but we have gone no further.

Q: So the products would need some sort of DSD evaluation?

BG: All of our security, we comply with all the DSD security requirements, so the answer to that would have to be yes. Whether it be DSD, or our own view on what is important or imperative.

As to when you release the source to the developer community, and …they provide enhancements for you, you still have to a governance mechanism whereby you retain the authorship so to speak. That is the sort of things we are still grappling with – how you [would] effectively do that.

We don't expect our core processing systems [to use open source]. They are huge transactional volumes. They are not the sort of systems we would put up for open source; there may be some specialist things.

Budget blowouts

Q: In terms of the amount of money ATO collects, and the allegations that there have been blow-outs in the amounts paid to EDS, how do you view that?

BG: I'm aware of that article. We don't agree with the conclusion that [there was a cost blow out with EDS]. I also believe that, not withstanding, that there are some peaks in investment that are one-offs, that the cost of delivering the IT services has come down on a unit cost basis. There's no doubt. If you look at the volumes of processing that have gone up, and really, I think our costs have been held static or in fact reduced in time.

From a purely cost effective [view] of the running of our IT systems, we are seeing transactional volumes grow and IT costs either diminish or flat-line, which is what you see in the industry anyway.