The Australian Government is investing in reforms to implement and adopt digital technology. The Australian Public Service (APS) is critical to supporting Australia’s digital economy transformation. Like many other large enterprises, grappling with the challenges of implementation, adoption, and, most importantly, financial sustainability.
The challenges to the financial sustainability of ICT have accumulated over a decade leading to structures and practices that will be difficult to unpack. At the same time, the need to uplift the capacity and capability of the ICT workforce to take on digital transformation and adopt new ways of working is pressing.
Paulette Robinson interviews Matt Watkins, Partner for Digital & Technology. Matt steps us through some of the critical ICT financial sustainability issues facing government departments and shows us how the APS can get started addressing these concerns strategically.
Paulette Robinson: ICT sustainability in the APS is about balancing the delivery of ICT services (and meeting required service levels) with the available funding level, aligned to Departmental priorities and outcomes and operating within approved risk tolerances. What are the significant challenges government leaders face in addressing ICT sustainability?
Matt Watkins: Unfortunately, the current budgeting and funding cycles in the public service do not allow for much agility in how an ICT organisation can meet the many needs of the business that tend to change through the year.
Additionally, many budget pressures handed down over the years have left ICT organisations with the increased risk of requiring annual top-ups to their baseline funding to achieve what they need to do. We have instances where new policy proposals from business areas have not considered impacts to ICT, or the money handed down from government does not cover the full cost of sustainment. The cumulative effect is what is leading to an un-sustainable position financially.
This issue is more acute with the small to medium government agencies, who typically don’t receive significant investments to uplift ICT capability, and the cost of uplift has to be buried in non-ICT business cases.
Paulette Robinson: Why is funding ICT services a growing challenge?
Matt Watkins: The shift to the cloud has enabled agility in ICT organisations to respond to emerging needs. However, the underlying consumption-based model, where you pay more as you use more, has meant the risk of an ever-growing IT bill is materialising.
The significant growth in data driven by a desire to move to evidence-based policy design, digital transformation, and cyber and open data initiatives has meant that the ICT cost footprint is growing rapidly.
Funding pressures are further exacerbated during digital transformation when legacy ICT and inherited applications run simultaneously as the new solutions are being delivered. Often those platforms have passed end-of-life and have limited or no associated funding to maintain or decommission them and archive their data in line with records management policies.
Organisations where ICT investment and technology governance has not kept pace with what modern digital technologies and services can offer have also led to instances where business areas can acquire those services without involving their ICT team. This has led directly to a rise in the overall cost of ICT, fragmented un-governed data across multiple digital platforms and increased cyber risks where external services have been insufficiently hardened against cyber-attacks.
The growth in those externally acquired services has also led to cost pressures through the increased use of back-end ICT infrastructure without any additional funding being made available. The cost pressures are not self-evident when the organisation has low IT financial management (ITFM) maturity. Identifying what funding source supports which ICT service is often complicated. Pinpointing the true cost drivers with any measure of accuracy to business areas which are increasing ICT consumption is nearly impossible.
Paulette Robinson: The last few years have been characterised by some significant events impacting at the national level that have required active intervention from Federal Government, pivoting from policy into service delivery, or taking a coordinating role across the States and Territories. The government requirement is now one of national resilience, by intervening directly in a way only the government can. Responses by the government to Covid-19, bushfires and floods, bio-security threats, and adverse actions from our international trading partners have been pivotal to keeping people safe and the economy going. What impact are these national drivers having on re-evaluating ICT strategies and funding?
Matt Watkins: There is a clear need for greater agility in government policies and processes and an ability for our public sector to pivot rapidly to emerging threats. This can only be achieved when the organisation’s ICT capabilities are supported effectively. There is a need to review the organisation’s ICT and data strategies to check for alignment to the need to be agile and adaptive, followed by investment in modern digital and data capabilities, as well as upskilling the APS workforce.
The Australian government has set its strategy on a digitally enabled future. The intention is to digitise all government services in this decade. The public sector ecosystem is also undergoing a significant transition with consumers at the centre, enabled by technology. This is backed up by data from industry which shows IT spending in most sectors is growing at the highest level due to increased demand for digitisation of services, big data, AI, mobility and IoT.
While a positive change, these investments have exacerbated the shortage of an ICT literate workforce and fuelled inflationary pressures further. The tech skill deficit has meant an over-reliance on relatively expensive external workforce and service providers.
Paulette Robinson: Where should organisations start?
Matt Watkins: Fortunately, plenty can be done to improve the financial outlook of government ICT organisations.
To respond to the question of how to fund ICT in organisations sustainably, there needs to be a shared appreciation and agreement among the department’s executives of what the ICT organisation is there to achieve and support.
Once that is clear, we can look at how investment decisions are governed and made to provide the executive and, in particular, the CIOs with the tools they need to manage ICT effectively and be fit for purpose.
Getting the design of ICT investment and technical governance aligned to departmental outcomes will stimulate the right decision-making culture and help avoid rogue decisions that are not aligned with strategy.
For those organisations who find a more significant shift in ICT is required to meet their needs, a review of ICT and data strategies should be high on their list of priorities, and if necessary, a re-design of the ICT operating model to support the execution of those strategies.
An excellent example of this type of switch is an organisation that wants to use modern digital platforms with citizen developers. This would have an implied shift in ICT operating model, moving from a centralised ICT function to one that is more democratised with appropriate controls in place to ensure standards are followed, data remains appropriately governed, and security is not compromised.
Paulette Robinson: The past decade has seen advancements in thinking and supporting toolsets around how to approach improving IT financial management maturity, including the establishment of industry standards such as technology business management (TBM). How can uplifting ITFM maturity lead to better decision-making?
Matt Watkins: The application of standard ICT service taxonomies has allowed the rapid building of IT cost models that provide a measure of financial transparency and an ability to benchmark performance. These models enable CIOs to communicate what value business areas are getting from their ICT team and which business decisions are material to driving cost.
With an accurate view of the cost of ICT, the question of funding can be more readily addressed. The standard ICT cost models can be extended to show where funding comes from currently, whether it is a base allocation or subsidised from programs, business areas, or cost recovered. This puts business areas in a position to decide which services they want, what can be rationalised or decommissioned, and to support their digital transformation strategies.
The investment governance supported by appropriate financial transparency allows the alignment of cost with funding and can support improved budgeting and approaches to government with new policy proposals. The same data can be used to enact proper and fair cost recovery strategies and help a business case to uplift the organisation’s baseline funding.
Paulette Robinson: We should not forget the APS workforce will be central to the success of ICT implementation and adoption. What are the critical workforce considerations?
Matt Watkins: With the current ICT and data literate workforce shortages, organisations should implement an explicit strategy about what kinds of skills they want to source externally, what should be insourced, and their future state’s requirements of their own APS workforce.
With that in mind, a capability uplift education program can be enacted to deliver the outcomes the department is looking for from their team over time.
Paulette Robinson: Thank you very much, Matt, for sharing your experience and expertise on ICT sustainability.
For any APS leader experiencing issues with ICT sustainability, there is a time imperative to act before matters get worse. For advice on where to get started, reach out to Matt Watkins at email@example.com.