Red flags as Government signs on for Oracle deal

Published on the 17/08/2016 | Written by Donovan Jackson

Oracle deal_nz govt

Decision could cost ‘a massive amount of money’…

Led by the Department of Internal Affairs (DIA), the New Zealand Government is trumpeting the anticipated advantages of entering into a wide-ranging agreement with Oracle – but some in the analyst and service provider space have serious reservations.

Acting Government technology officer Russell Cooke said the agreement entered into with Oracle ‘cements an 18-month commitment from many agencies across government and shows the strength of agencies working collaboratively’. “This is a significant milestone for New Zealand’s public sector that will generate substantial savings and benefits for all government agencies,” he added, in a statement.

The statement issued by the Department said the agreement has an initial three-year term, which is also expected to save time and resources through a simplified procurement process.

However, in the announcement, there was no dollar amounts put to those savings and little explanation of how they might be realised.

Instead, offered Cooke: “We have established the New Zealand Government as a single customer, which has given us a number of direct benefits including the scale to negotiate more favourable and flexible terms, particularly around costs and minimum commitments. This approach has enabled us to negotiate substantial savings and benefits tailored to government needs and requirements.”

In the absence of figures, and given high profile local, national and international government ICT failures which typically involve many millions more of taxpayer dollars than initially anticipated, scepticism is arguably justified. Wellington IT industry figure (and frequent critic of large-scale IT projects) Ian Apperley said the agreement is at odds with previously stated intentions.

“My understanding is that the GCIO Strategy is to create an open marketplace and move away from this kind of deal and the panel approach that hasn’t worked in the past. So I would question if this is aligning with that approach.”

Furthermore, said Apperley by email, “It looks like this has very little to do with IT transformation of Government at all. [Instead] it looks like a procurement deal and as such should probably be under the All of Government programme along with other consumables.”

He also noted that while promises of savings are made in the initial announcement, it lacks in detail. “There is nothing in here on the overall value of savings, which is a little remiss. Can we find out how much this is expected to save and by when and whom?”

These and other detailed questions have been sent to the DIA.

The potential for problems runs deeper. Approached for comment, Melbourne-based IT probity advisor Darryl Carlton raised a number of red flags. By email he said, “Oracle has been selling the ‘whole of catalogue’ approach for a few years now. They generally approach the non-IT executives and convince them of the savings associated with committing to the entire portfolio of Oracle products.”

This strategy, said Carlton, is designed to ward off ‘shadow IT’ efforts which generally favour cloud and SaaS solutions. “By getting the top of the organisation to commit to an entire Oracle portfolio they create a situation internally in the organisation where choosing any other solution gets refused, on financial grounds, on the basis that ‘we have already bought Oracle’, so any other expenditure is wasted.”

That’s problematic, explained Carlton, because it ignores the total cost of ownership, “Where implementation and modification costs far exceed the ‘sticker price’. Organisations become locked in to technologies that don’t work for them and expensive implementations. This will cost the Government a massive amount of money and it will delay their shift to genuine cloud and SaaS solutions.”

The agreement places the New Zealand Government in Oracle’s top 200 global customers, which it said provides direct access to the company’s strategic decision makers. In a further odd detail, the DIA said that as the lead agency, ‘it will provide a representative to liaise with Oracle and attend global forums on behalf of New Zealand’s government sector’.

In its own statement, Oracle NZ MD Robert Gosling said: “The agreement, which is closely aligned with the Government’s ICT Strategy, allows New Zealand’s government agencies to make use of Oracle’s extensive cloud services to gain reductions in cost, increased operational agility, improved security, and to enhance service levels to the people and businesses they support.”

He added that agencies can also take advantage of the knowledge and experience Oracle has gained from working with government agencies internationally, “assisting them to transform themselves into smarter and faster-paced organisations that can keep step with the rapidly changing expectations of the people they serve.”

Cooke rounded it off and said the agreement “demonstrates the collaboration and collective strength that agency chief executives aspired to when we developed the Government ICT Strategy. Our vision is to create a single, coherent government ICT system that enables a radical transformation of public services. Our agreement with Oracle is another big step towards achieving this goal.”

Questions or comments...

  1. John Blackham

    If Oracle had the antidote to IT systems’ failure the extra cost of these ‘savings’ might be justified. But this way, putting all your IT failures into one basket probably puts the normal incentive of potential litigation beyond reach.

  2. Richard Shea

    The agreement places the New Zealand Government in Oracle’s top 200 global customers, which it said provides direct access to the company’s strategic decision makers

    Well thank goodness for that, because once Oracle is well embedded Oracle really are going to give a hoot what anyone from Noo Zeeland thinks about anything aren’t they ? If the views of the NZ govt are filed in Oracle’s cylindrical filing cabinet what is NZ going to do about it – tell them we’re going to rewrite the system using something else ?

  3. Dave Lane (@lightweight)

    Yeah, this is a major step backwards. Committing to a single vendor (who supplies almost entirely proprietary products for which they, by definition, have a monopoly) is simply bad business. There is no competition for providing Oracle products. If we build NZ gov’t services that depend on those products, we will be in no position to move without rebuilding most of those systems at huge cost. This is effectively our gov’t handing Oracle the ability to *tell us* how much we’re going to pay them. Any idea that we’ve achieved a “savings” is based on a flawed idea of what “savings” means. Without a competing offering, at a different (higher) price, we’re not making savings, we’re just paying slightly less than the arbitrary amount Oracle originally told us we were going to pay. People entering voluntarily into such agreements are clearly ill suited for a decision making role.


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