Published on the 28/05/2012 | Written by Chris Bell

“A sceptic might argue you can achieve more efficiencies by having better trained, more well-informed customer services staff rather than through the implementation of IT, but you still need the means to make them better-informed in the first place,” says Murray Foster, CIO at Thames Coromandel District Council (TCDC). “Almost 100 per cent of our data is electronic, all of our processes are electronic. There isn’t a way to be better informed without using systems to find it.”

Foster is a technology convert in a smaller council, but understands that good IT does not necessarily result in better service, nor reduced costs. “I’d like to say that by using technology effectively you can be more efficient and keep rates down but I don’t think there’s a group manager around who’d say, ‘Because of IT we’ve been able to reduce rates.’”

What ratepayers get for their dollar might come down to personal experience. Good customer service may come from someone bright on the other end of the phone, not necessarily use of the latest technology. Likewise, outdated business practices might be to blame for a bad experience rather than poorly operated IT systems.

Around half of the 1,000 business respondents to an MYOB Business Monitor survey of perceptions of council services last year said they were dissatisfied with local government. Bad customer service and lack of responsiveness to the urgency of business needs were frequently cited concerns.

The cost of delivering IT systems to support council services has been in the spotlight since the early stages of the Auckland Supercity amalgamation. The Royal Commission on Auckland Governance first recommended a unified local governance structure and amalgamated councils as recently as 2009.

Government only announced an Auckland Supercity would be set up in time for the 2010 local body elections.

A high level of ICT duplication in the region was noted in the Commission’s report, which continued: “The Commission does not contemplate the Auckland Council’s ICT infrastructure will be built from scratch. The objective will be to ensure smooth transfer of the eight current councils’ ICT systems to the Auckland Council and to plan the migration of the numerous duplicated council business systems to a single ICT infrastructure platform.”

Cost comparisons
Following murmurings of an IT budget blowout and a price hike to more than NZ$500 million, Auckland ratepayers as well as those involved in the transition process are asking questions about the necessity of a brand new IT system and about senior management governance.

Auckland CIO Mike Foley was once headhunted by Deloitte. He became CIO of Watercare before being appointed information services manager of Auckland Council in 2010. Recently he’s been under fire for not insisting on a more rigorous evaluation of the legacy councils’ systems. But Foley is adamant new IT systems will improve ratepayers’ ability to interact with Auckland Council through multiple channels. “We’re looking at online processing of resource consents, dog licences, online payments, more interaction through the call centre if you need it.”

“WHERE WE HAVE TO, WE BRING IN A SPECIALIST BECAUSE WE DON’T MERGE SYSTEMS EVERY DAY. WHEN YOU’RE TRYING TO MERGE EIGHT INTO ONE, YOU HAVE TO BRING IN THE PEOPLE WHO UNDERSTAND THEM”

Mike Foley, CIO, Auckland Council

SAP implementation specialist Deloitte provides consultancy services to Auckland Council. Since the New Zealand Herald obtained a confidential Deloitte proposal showing it charging daily net rates of between $1200 for an analyst and $3400 for a senior manager, the minister of local government has been asked before Parliament if he has confidence in the Council’s financial management.

An IS Capital Plan presented to Auckland Council in May 2011 shows a correction in its forecasted “Enterprise Capability Development” investment of around $230 million in the years between 2011 and 2015. But Auckland Council chief financial officer Andrew McKenzie says this considerable variance is attributable to the eight legacy councils halting their investing in systems. “When we came in, the proposed investment levels were well under $20 million a year for the eight councils, about $2.5 million each, so they weren’t realistic. We’ve just done a long-term plan and we’ve flattened out our investment profile. We’re still refining it at the moment but it won’t be as peaked as we’ve suggested for 2012-2014.”

Beyond the pain barrier
Malcolm Fraser is CEO of the Future Cities Institute, a nonprofit organisation focused on empowering citizens. “If central government says it’s going to amalgamate a city because there’s too much duplication and they don’t communicate that there will be a period of pain, they’re setting the wrong expectation.”

It seems Aucklanders are going to need a high pain threshold.

“IF CENTRAL GOVERNMENT SAYS IT’S GOING TO AMALGAMATE A CITY BECAUSE THERE’S TOO MUCH DUPLICATION AND THEY DON’T COMMUNICATE THAT THERE WILL BE A PERIOD OF PAIN, THEY’RE SETTING THE WRONG EXPECTATION”

Malcolm Fraser, CEO, Future Cities Institute

Bernard Orsman reported in the Herald in May last year that the cost of building a new SAP computer system over the next eight years would be NZ$506 million. Already spent during the transition was $54 million to set up the bare minimum for day-to-day functions, including payroll, email, telephone and recruitment, which the Council’s 16 December strategy and finance meeting agenda says was within budget.

Comments on the Public Address blog after Russell Brown published a post titled ‘Someone has to be accountable for this’ last May were largely connected with the ballooning cost of systems and a lack of transparency about decision-making.

“If it transpires that [the Auckland Transition Agency (ATA) the local government minister, Department of Internal Affairs, Cabinet and the Prime Minister] knew that the costs would be far in excess of what we were told, then there is only one way of characterising what happened,” Brown concludes: “We were lied to.”

Auckland City CEO Doug McKay admitted to “poor communication” on the part of the Council in a Computerworld article in June last year. But he told iStart media portrayals of the Council signing off on a $500 million IT spend are inaccurate.

“In practice it’s nothing like that. It’s broken down into all these individual projects. I’ve met with a number of our critics over the past few weeks and I’ve got a better idea of where they’re coming from. But in a lot of cases they’re out of date on their information, they’re still poring over the ATA investment cases.

In many of these situations we’ve moved on.”

The Auckland Council senior executives remain unable to provide a total cost for the new system because, they say, they have yet to decide to what extent SAP will be used.

“We’re seeing how much extra we want to put onto [SAP] as opposed to other technologies,” McKenzie says.

Starting from scratch
Former Auckland Regional Council (ARC) CIO John Holley questions the SAP project’s governance. He’d like to know why Auckland Council didn’t follow best practice by having its vendor migrate data onto the existing systems at a fixed price.

The admittedly much smaller council-controlled organisation Auckland Transport did just that when it ‘cloned’ the existing Auckland Regional Transport Authority (ARTA) SAP system for $2.2 million. Transport started its implementation after the Council’s and had it fully operational in time for the Council’s ‘day one’, 1 November 2010, including functions yet to be fully deployed at the Council.

Foley counters that since Auckland Transport only had to replicate the functions of the legacy Auckland Regional Transport Authority from 1 November 2010, its migration was simpler. “We were merging eight separate businesses into a new entity. It was felt better to put it under the umbrella of the overall programme and do the data migration within that programme.”

CFO McKenzie adds that Transport also didn’t have so many financial applications: “We have five different systems and a multiplicity of brands.”

Questions remain over why ATA chose a new SAP install for Auckland over one built on an existing implementation as had originally been planned. Holley says the Council’s December agenda document – in which it states a fresh installation was “a better fit for the scale and longer term needs of Auckland Council” – is full of misdirection and inaccuracies. Among these, says Holley, is a worrying knowledge gap about ARC’s ERP system.

“At the ARC and ARTA we had SAP asset management. It had two components: plant maintenance and a module called real estate.” The strategy and finance agenda document claims “ARC’s system did not include the real estate solution” when in fact it was incorporated in asset management.

Foley, on the other hand, remains convinced the existing ACC and ARC SAP systems were unsuitable. “They were way behind in terms of support and the versions they sat on and didn’t have some of the modules we needed. So we’d have had to do significant upgrades. Starting from scratch gave us a more robust platform. It gave us the version compatibility that we wanted so we don’t now have to do another significant upgrade for another 12 or 18 months, which is a huge task to undertake. You always want to go back to a vanilla implementation, which is where we started from. The other systems had some kind of customisation buried somewhere and the majority wouldn’t have worked.”

Holley defends ATA’s selection of SAP, as well as that of Deloitte as implementation partner. However, he maintains there was no consultation with the council CIOs on the implementation approach. “After Deloitte was selected it was effectively given free reign with the ERP implementation steering group, which had no real SAP implementation experience, no CIO representation and no one from the councils with experience in dealing with SAP implementations and external consultants.

This meant the key advisor to the steering group was Deloitte.”

The Council document contradicts this: “The decisions, assumptions, costs and implementation approach were tested and validated by a numbers of parties throughout the life of the project including … chief information officers of the legacy Auckland local government organisations.”

McKay has said it was preferable not to have legacy council CIOs on the steering group because they lacked objectivity but Holley contends anyone with significant council experience of implementing SAP would have recommended a clone of an existing environment. “The consultants, with the most to gain from a green-fields implementation, were taken at their word that none of the environments was suitable.”

Foley says Auckland Council follows accepted project management standards and all large investments have to be ratified by councillors. “There are two internal checkpoints for every project: an IS governance review that makes sure it technically fits with what we want, and then it goes up to the executive prioritisation group to ratify the solution and in terms of the investment and whether the business case stacks up. Once we get into an inflight project there are the usual committee meetings around scope, budget, quality, timelines and milestones.”

McKay is also sensitive about governance, given his CEO responsibilities. “We have to put up a 10-year plan for our IT investment, which we’ve done, but we don’t consider that an approved budget. Every single project within that overall 10-year timeframe, we put them all in front of the politicians, either for an approval or an FYI. They’ll have somewhere between 80 and 100 opportunities over that 10 years to make comment on any of those investment proposals.”

Sour grapes?
Richard Hunter is director of Origen, a vendor whose product was squeezed out during the amalgamation. Origen’s ERP suite Ozone was installed at Franklin District Council. Hunter is disappointed ATA didn’t evaluate any of the Auckland councils’ legacy software. “No one ever came to see Origen or Ozone.

The decision-making was based on prejudice and not robust evaluation. None of them was ever evaluated, a cost-benefit analysis looked at or a strategic fit for the longer-term view.”

A neutral observer might dismiss these as the sour grapes of a vendor whose products weren’t chosen but Hunter dismisses that. “Irrespective of the system it’s the process I’m talking about. They’d never select Ozone – it’s a New Zealand product. I’m not talking about what’s happened to Origen. I’m talking about the entire process and decision-making.”

Mike Wanden is both CIO of Otorohanga District Council and president of the Association of Local Government Information Managers (ALGIM). Wanden saw Foley’s presentation at ALGIM’s annual conference last year. Foley is on the ALGIM executive. For the CIO of a small council like Otorohanga, Wanden says, it’s hard to comprehend the IT task faced by Auckland. “I don’t think they’re going to realise the potential of Auckland Supercity until the next generation – you’re talking 20 or thirty years down the track before any benefits will be realised.”

“I DON’T THINK THEY’RE GOING TO REALISE THE POTENTIAL OF AUCKLAND SUPERCITY UNTIL THE NEXT GENERATION – YOU’RE TALKING 20 OR 30 YEARS DOWN THE TRACK”

Mike Wanden, CIO, Otorohanga District Council: president, ALGIM

Origen’s Hunter was also at the ALGIM conference for Foley’s presentation. “Everyone just listened to this guy talk and their jaws dropped – they’d never heard anything like it. He was coming out with some very big generalisations and rationalisations.”

What about my rates bill?
Auckland Council’s current programme of work is part of a wider organisational transformation to assess which applications are best suited for council-specific functions such as managing consents, field services, licensing, property records, websites, document management. The legacy Papakura and Franklin rates systems are currently being migrated to the old Auckland City Council rates system, Pathway. In October, says Foley, the Council will probably migrate the regulatory systems, but this will only be an interim fix. In the longer term the Council will need to evaluate a permanent replacement.

Foley says the Council has yet to select suppliers for licensing, compliance, regulatory and rates functions. However, iStart understands from one industry source that the decision to implement SAP’s regulatory modules has already been made, although the Council will still issue a request for proposal later in the year.

Ratepayers around the country may be wondering whose interests their council serves. Foster from the TCDC says the fact IT is still considered a “black art” by the public increases the difficulty of communicating IT project costs.

“I’d like to say that by using technology effectively you can be more efficient and keep rates down but I don’t think there’s a group manager around who’d say, ‘Because of IT we’ve been able to reduce rates.’”

Auckland Council’s CEO says the fact its new systems will make the Supercity a more efficient council will ultimately cut costs, but rate increases are beyond the control of council executives: “Politicians make the rating decisions, we make the cost and savings decisions,” says Mackay. “We saved $81 million in our first eight months – not all of it was related to IT but a lot of it was enabled by new processes and systems – and that couldn’t have been achieved under the legacy councils. It was the equivalent of 6 per cent of rates we didn’t have to ask the people of Auckland for – 1 per cent of rates is about $14-16 million.”

McKenzie says ratepayers ought to view IT costs relative to total Council spending. “In the technology area you’re talking about a $0.5 billion investment and about $300 million of that is in new IT infrastructure and systems.

Across Council we’ll spend about $13.5 billion on transport, wastewater, storm water, new buildings, libraries, and of that $13.5 billion around $9 billion is on buying new assets.

In spite of that massive investment in the city, we’ve got rates increases of 3.6-4.9 per cent over the next 10 years.”

Passing the ‘Dom Post test’
Citizens want to see their council operating efficiently to reduce rates, says Julian Moore, director of organisational services at Wellington City Council (WCC). “What ratepayers want is evidence that we’re not spending money we don’t need to spend.”

So who’s accountable for ensuring that? Foster of TCDC’s take on that is straightforward: “The guy who signs the cheque.”

“WHAT RATEPAYERS WANT IS EVIDENCE THAT WE’RE NOT SPENDING MONEY WE DON’T NEED TO SPEND”

Julian Moore, director of organisational services, Wellington City Council

Moore sees it as a standard chain of command with the CIO accountable to the CEO who’s accountable to the mayor and councillors. “I’d be accountable for the effectiveness and efficiency of our IT operation but these things are not just IT decisions – the decisions you make around systems need to be driven by business.”

Hunter of Origen is sceptical ratepayers will notice benefits from Auckland City’s new system. “They keep talking about improved customer service but I don’t really see any value in it at all. It’s got more consistent but it’s not actually lifting the bar in any way.”

Moore of WCC says his council places the interests of ratepayers above those of suppliers. “Most people on councils want to be sure they can defend their procurement. That can lead to us having undue process around it. In Wellington we call it the Dominion Post test – any decision you make, you have to defend it to the public.”

It’s always challenging for councils to justify expenditure to ratepayers. Foster of TCDC reckons the public sector should hire more CIOs who’ve worked for suppliers. “It’s always good to go and work for a vendor and have some P&L responsibility – that sharpens your focus.” Ratepayers are more likely to appreciate sharpened focus if the picture makes sense. That calls for a more business-like attitude on all sides of the debate.

AUCKLAND COUNCIL BEHIND THE SCENES Since ‘Day One’, 1 November 2010, the following applications have been merged and are live: > Email > SAP (core finance functions, asset register, procurement, HR, payroll) > Hyperion (budgetary planning – monthly, yearly, 10-year plans) > Telephony (common platform across most legacy councils) > Website (currently an overlay – legacy websites are still operating where online payments were in place)