Once bitten - and now twice-shy - of the supposed benefits of outsourcing, CIOs at many organizations are radically adjusting their expectations of what outsourcers can deliver.
Since the Howard government's visions of $1 billion savings from a whole-of-government approach to IT outsourcing crumbled to dust, its chief information officers have had ample time to reconsider their approach to IT procurement.
In 1996 the federal government was aflame with dreams of the durable improvements in the structuring and sourcing of IT and more integrated program delivery it could win while saving a bundle by signing mega-contracts with outsourcers. Reality all too quickly exploded those fantasies but the legacy remains, with the cost above the original contracts reportedly running at a massive $750 million, most gone into the pockets of multinational corporations.
In hindsight, such cargo-cult thinking was bound to be cruelly disabused sooner rather than later. Now, like many early enthusiasts for mega-outsourcing deals who watched in dismay as cost overruns mounted into the millions and relationships with outsourcers soured, the government has learned to know better. Expectations these days are far more realistic. "If I was to summarize what clients want from their service providers, it's basically good service at a fair and visible price, and to be able to focus on their core business without having to worry too much about managing the service provider to deliver the IT services to make that happen," says Gartner research director Jim Longwood.
So like others once-bitten and now twice shy of extravagant promises, individual federal government agencies are busy rethinking - or actively renegotiating - deals to regain the internal capacity they should never have given away in the first place, and labouring to write vastly better visibility into IT contracts. Behemoth departments like Centrelink, Immigration and Defence are making strides to recapture control of IT architecture, development and spending while re-centralizing IT planning and procurement, and grappling with ways to recover the corporate memory they let go with barely a passing thought.
Selective sourcing is everywhere the flavour of the month, and expectations of outsourcers have changed dramatically. In keeping with the new mood, Australian Customs Service CIO Murray Harrison says the government's CIO Committee is leading a "bit of a stampede" away from the "big bang" approach to outsourcing while recognizing it is yet to face many of the likely problems with selective sourcing. Murray says the government knows all too well the lack of visibility inherent in the big bang approach, but is yet to fully encounter - and hence find remedies to - the problem at the other end of the spectrum, where just who is accountable for what is becoming a major issue.
The story is the same for a host of organizations that were early fans of mega-outsourcing agreements. Many parties are groping for ways to mend the fractured relationships between outsourcer and client that have become so common in both government and commercial enterprise.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.