The Australian Federal Government's Clustered-Agency IT Outsourcing Experiment

Abstract

Two detailed public reports on the Australian Federal Government's Clustered-Agency Information Technology Outsourcing initiative were published recently. By analyzing these reports and drawing on additional material from various websites, it was possible to piece together four important lessons from the Australian Government's AUD$1.2 billion 1997-2000 IT outsourcing experience. The lessons are: First, because of increased coordination costs, attempting to group a number of disparate departments to achieve economies of scale in single omnibus contracts does not work. Second, if massive change projects are to succeed, senior management must be committed to the project, and the needs and aspirations of all employees need to be handled fairly and sensitively. Third, making the transition to outsourcing is hard. Even with all the expert advice at its disposal, the Australian Government's IT outsourcing initiative experienced enormous difficulties in transitioning to external service provision. Finally, cost savings are hard to achieve and surprisingly hard to measure. Many of these lessons were learned before and are well document in the literature. That they had to be re-learned by these new players in itself and important lesson.