DIA: Oracle deal could save up to $30 million

Published on the 23/08/2016 | Written by Donovan Jackson


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The Department of Internal Affairs said it expects to save anywhere between $16 and $30 million over three-years…

However, said the DIA in response to questions posed by iStart last week, commercial sensitivity precludes advising whether or not those savings are contractually guaranteed; the wide range of ‘potential savings’ does tend to leave the impression that a few thumbs were sucked in coming up with a figure.

As for how those savings will accrue, the DIA explained that it is simply ‘in savings and avoided costs over the life of the project’.

The DIA said there are presently 84 agencies using Oracle services that collectively spend about $40 million per year. “We are unable to provide detailed rates or projected savings percentages as this information is commercially sensitive. Individual agency rates and savings will vary depending on the mix of products, services, and configurations being purchased,” said Tim Occleshaw, Government CTO in the DIA by email.

Asked how, if no assurance can be given that any savings will in fact eventuate, citizens can know that this is likely to happen, Occleshaw added: “Optimising the government’s investment in technology is one of five focus areas set out in the Government ICT Strategy, and the Department of Internal Affairs is presently setting up an approach to monitor and track the public sector’s progress against this. The Official Information Act sets out specific grounds for government agencies to withhold commercial information.”

Asked what additional benefits contracting with the vendor as a single client will bring, the DIA explained: “There are a range of benefits particularly suited to the needs and requirements of government agencies including beneficial discounts for products, the ability to transfer licences between agencies, multiple agency licensing for joint programmes, and a new, optional support service specifically for government customers. These terms give government agencies more flexibility and options to adapt standard [Oracle] services.”

However, services and products from Oracle will not be mandated. “In essence, the Oracle agreement offers pre-agreed rates and terms against a product catalogue that agencies can choose from and purchase directly from Oracle,” said Occleshaw.

According to the GCIO’s website, Government agencies seeking to access the products and services are required to undertake specific procurement obligations, and any risk and assurance requirements when buying new licences or cloud services. The site has more details of the agreement and how it can be used by eligible agencies, which include the likes of Auckland Transport and Kiwibank.

To take up the savings, agencies need to pay their share of what it cost the DIA to establish the deal. The DIA said that “Other than any procurement costs and a lead agency fee to contribute towards the agreement’s establishment and management costs, there are no transition costs for government agencies wishing to take up Oracle products or services through this agreement.”

iStart asked what the establishment and management cost of the agreement is, and how the lead agency fee is to be calculated. “Most all-of-government agreements established by DIA and the MBIE include an administration, or lead agency, fee, which is a simple and transparent way for the lead agency to recover the cost of establishing and managing an agreement. Agencies that wish to subscribe to the Oracle agreement agree to pay a ‘lead agency fee’ to the DIA. Lead agency fees vary depending on the number of agencies that are expected to subscribe. There is no payment made to Oracle in relation to contract establishment,” said Occleshaw.

The DIA pointed out that the Oracle agreement is the second supplier-specific pan-government agreement entered into the Software Acquisition Strategy following the 2012 Cross Government Framework and the All of Government Microsoft Licensing Agreements (aka G2012 and G2015). It said discussions are continuing with a number of other suppliers.

Asked if the agreement makes Oracle the choice of the GCIO for agencies, the DIA said this is not the case. “No, agencies select their suppliers through their normal procurement processes. The GCIO has negotiated pan-government terms and conditions for Oracle’s catalogue of products and services. This agreement means that eligible government agencies benefit from enhanced savings and benefits if they choose to adopt Oracle’s products and services. The catalogue includes all of Oracle’s service offerings.”

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