One of the earliest - and most successful - of Australia's government outsourcers, the Department of Veterans' Affairs is now counting on a policy of "selective sourcing" to deliver new benefits to the agency.
Given its function and title IT seems somehow appropriate that the Department of Veterans' Affairs (DVA) should have been one of the first Commonwealth agencies - one of the first enterprises in Australia in fact - to outsource its information technology. The agency is as proud of its status as a veteran outsourcer as it is of its service to Australia's veteran community.
For a trailblazing novice at the outsourcing game, DVA did not do too badly out of its original outsourcing deal, signed way back in 1992. Indeed in the overall scheme of things, that original sourcing deal was considered quite a success - especially in its contrast to the abysmal whole-of-government contracts that came later.
But time and humanity's knowledge of the state of things inevitably moves on, and now DVA is looking to capitalize on its early experiences, and the lessons it has studiously been learning ever since, to achieve even greater benefits from its outsourcing arrangements. CIO Bob Hay says by unbundling some of its services from its renegotiated contract with IBM, DVA is confident that it can continue to benefit from outsourcing while achieving vastly better cost transparency.
"Bundling was seen as being a strategic move at the time, but the other side of bundling is that you lose transparency about the cost drivers of the various services that you obtain," Hay says. "And that's where I think the direction is heading these days - that you try and unbundle them all [so that] even though you may get the services provided by the same provider, you get more transparency into the nature of the costs of those services. It gives you a better opportunity to test the market for those services and whether you are still getting value for money on an ongoing basis, especially where the technology changes and your environment needs to reflect that so the services you get from your service provider need to change as well, to support that new environment."
Selective sourcing is enjoying new currency in Canberra, and expectations of outsourcers have changed dramatically. Essentially, a selective sourcing approach involves choosing a stable of "best of breed" vendors to administer carefully selected business services or business functions, in either a total or limited point solution. Growing numbers of organizations are starting to recognize the selective sourcing model as a viable and attractive alternative to the single-vendor approach.
Australian Customs Service CIO Murray Harrison told CIO recently the government's CIO Committee is leading the push towards selective sourcing.
There is evidence to suggest that selective sourcing does better for sourcing clients in terms of critical success factors such as achieving targeted cost savings, maintaining or improving service levels, and renewal of contracts. Now DVA is determined to put that theory to the test.
Hay says one year into a three plus one year extension to its 1997 contract with IBM (renegotiated from the initial five plus two plus two arrangement), DVA has a highly effective cost projection model that has given it an excellent handle on its costs and likely future cost changes, giving it vastly improved control over the arrangements it has put in place.
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