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On the Road Again

On the Road Again

According to most analysts, it is often in the contract where an outsourcing relationship breaks down.

VicRoads is leading the charge towards a new era of government outsourcing.

According to research firm Gartner, outsourcing is a practice in transition. While the majority of outsourcing contracts are what Gartner describes as "utility" operations, covering bread and butter IT activities with little if any value-add, there is a move to greater and stronger relationship building and a requirement for greater and more creative input from the outsourcer.

Simultaneously, there is a move to "selective" outsourcing - meaning a range of contracts and, presumably, of contractors - as opposed to the "big bang" approach of comprehensive outsourcing to a single supplier.

Speaking at a Gartner conference on outsourcing in July this year, Linda Cohen, managing vice president for Gartner's Global IT Management Sector, said that "many existing relationships [between client and outsourcer] are deteriorating", and she blames this, at least in part, on the fact that "contracts in existence can't respond to current uncertainty and change".

This means that second generation clients are looking to re-evaluate their outsourcing arrangements, often from the ground up, assessing what and how much to outsource (or whether to outsource at all), what to bring back into the organisation, the number and type of outsourcers used, changes to pricing structures and the measures used to assess performance, and the very nature of the relationships created.

These changes typify the moves that the Roads Corporation of Victoria (more commonly called VicRoads) is currently going through. And while this is still a work in progress, if it achieves what it sets out in its initial manifesto, VicRoads will represent the epitome of where outsourcing is apparently going and, just as importantly, where it has come from and why that past state is no longer enough.

The Story So Far

VicRoads is responsible for developing and implementing road safety strategies and promoting road accident prevention practices in the community; managing the arterial road network, including maintaining, upgrading and extending the declared road network; and providing vehicle registration and driver licensing services, including new registration and licensing, renewals and transfers. Think RTA in NSW, Queensland Transport, Main Roads in WA and so on.

In 1994, as part of a joint activity with Public Transport Corporation of Victoria, VicRoads entered into a contract with IBM Global Services, then called ISSC. That contract has run for nine years. In addition, "we went to market for best-of-breed applications development", says John McNally, VicRoads' CIO. "As a consequence we ended up with a number of third parties, with principally IBM Global delivering our IT services."

The outsourcing contracts with IBM covered:

  • hosting of VicRoads' main transaction systems for registration and licensing
  • hosting of its electronic service delivery capability
  • hosting of its financials and HR using Mincom's Ellipse suite
  • WAN and LAN services
  • applications support for the registration and licensing and electronic service delivery systems
  • some help desk activity
  • a range of back-office applications, such as its traffic volume and road crash information system

Other significant outsourcing contracts include:

  • a licensing system with ongoing support provided by DMR
  • voice communications components with Telstra and Optus
  • a VPN for the traffic signals and Intelligent Transport System with Telstra

Desktops, however, are managed internally. "It's probably the one area of IT that's understood by everybody," McNally says. "They can see it, they can feel it and it's certainly the one part that's very close to people in the organisation. We refresh the hardware every four years - 25 per cent per year - and the SOE and the apps servers that sit behind that SOE, which means our Lotus Notes environment. There's a mixture of stories about whether you can do better in-house or outsourced, but we made a determination to hang onto it."

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