The Gillard government’s treasurer, Wayne Swan, has indicated in the Mid-Year Economic and Fiscal Outlook (MYEFO) that there will be a 20 per cent cut in capital expenditure for government agencies with IT projects worth less than $10 million under the knife.
The expenditure cuts are expected to deliver savings of $710 million over three years and will take effect from the financial year of 2012-13 onwards.
“Funding provided under departmental capital budget arrangements is intended to meet the costs associated with the replacement of minor assets valued at $10 million or less,” the Outlook reads.
“Affected agencies will accommodate the reduction in funding by reprioritising the replacement or maintenance of IT systems or by delaying activities such as property, plant and equipment works.”
The Outlook also stated that large capital IT projects over $10 million were not subject to department capital budgeting arrangements.
Ovum Australia research director, Kevin Noonan, said this would still impact government IT in a significant way, particularly asset replacement projects. “This comes on top of IT cost reductions that have already happened through the Gershon review so the cupboard is quite bare in an IT sense for running costs,” he said.
The Gershon review, which was publicly released in October 2009, noted the absence of a whole-of-government strategic plan for data centres could cost taxpayers up to $1 billion over 15 years if a more coordinated approach was not implemented.
Noonan pointed out that there was potential for government agencies to look at productivity improvements such as the Federal Government’s use of Cisco Telepresence video conferencing.
First announced in February 2009 as a joint initiative between Telstra and Cisco, the National Telepresence System (NTS) has achieved travel cost savings for the Federal Government of $12 million.
Noonan said IT contractors and consultants would be affected while IT projects under $10 million would need to take their share of the costs. “There will be some room for investing in IT innovation, however, it will need to be in projects where a track record of making savings has been demonstrated such as the NTS,” he said.
He added that one positive outcome would be no more IT “budget blow outs” experienced at a state level such as the Victorian government’s MyKi public transport ticketing system and HealthSMART e-health intiatives.
According to Victorian Ombudsman, George Brouwer, taxpayers in the state were left with a $1.44 billion bill because of these failed projects.
Noonan said the Outlook “will focus government agencies down to smaller projects that are tightly focused on outcomes.”
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