Outsourcing the management of information systems and utilising industry expertise
Immediate Past President of the Australian Computer Society
For: Developing and Implementing Profitable Government Strategies for Trading on the Internet
11.30 am 16 June, 1999, Rydges Hotel, Canberra
Draft 1.0, 6 June 1999: http://www.tomw.net.au/papers/outint.html
Tom Worthington, will give an overview of the ACS's Senate submission on IT outsourcing and detail how the Internet provides new opportunities for IT Outsourcing. He argues that the Internet is fundamentally changing the nature of organisations and we need to retrain our workforce, particularly senior management to be able to take advantage of the new opportunities, including outsourcing.
- ACS Outsourcing Paper and Senate Hearing
- The Government doesn't make things, it processes information
Outsourcing can work, if done right. The issues which are important any time: standards, professionalism, documentation; are even more important with outsourcing.
This presentation is intended to first give a quick overview of IT outsourcing , summarised from a study of outsourcing (2) commissioned by the ACS evidence presented to the Senate Finance and Public Administration References Committee IT Outsourcing inquiry by Ian Dennis and myself. Then I want to look at how the Internet might be used in implementing outsourcing, both for IT and more generally.
Preparing the study and evidence was itself an exercise in the use of IT, which is applicable to Government processes. Apart from the copy submitted to the Senate, there were no paper copies of the submission, it was done on-line. We were able to prepare a detailed paper on a complex paper in a relatively short time. Members of the press commented on the benefits of having the detailed paper immediately available, with links to background material.
In its Senate submission the ACS recommended caution on whole-of-Government IT Outsourcing, warning that it was a high risk approach, for individuals, organisations and for the community as a whole. The paper concluded that outsourcing assessment processes are a valid tool for Government and private organisations in matching operations to strategic needs. However, particularly in the case of government there is a need for processes to be open, accountable and participatory. Decisions made behind closed doors and communicated as a fait accompli are not in the public interest. It is important that all those involved understand their obligations and the risks, as well as the potential benefits.
Given that outsourcing is a valid tool for use by Government how can IT be used to implement it? One way is that the Internet can be used to deliver government services and to help run the Government. This doesn't require any new or revolutionary technology: the technology is already here and the revolution is already happening. However, it requires new skills for the people involved both in the outsourcing client organisation and the outsourcing company. In particular it will require new management skills for senior executives.
In response to growing concern from ACS members I put a proposal in May 1997, for the ACS to provide advice to members on outsourcing issues. The ACS Management Committee endorsed this proposal on 13 May 1997.
On Tuesday 27 May the Senate referred information technology outsourcing to the Senate Finance and Public Administration References Committee (3), with a reporting date of 25 August. The ACS had been providing copies of its work on outsourcing to the committee secretariat and made some suggestions as to who in the IT industry would be useful to talk to.
On Tuesday 24 June, Ian Dennis, a newly elected fellow of the ACS and David Goble, MACS, both of Whitehorse Strategic Group Ltd, agreed to prepare the ACS position paper. I wrote them the one page brief for the work, which I had prepared in consultation with the ACS Council.
The brief gave them three weeks to write a four page document to provide advice to IT professional members of the ACS on issues to consider in preparing for and working with outsourcing. A secondary purpose is to provide a submission to the Senate Committee.
I issued a second draft of the ACS paper on 27 July (6).
With some minor editing, the final version of the ACS paper was issued on 6 August (7). The ACS made a submission to the Senate committee the same day. The submission consisted of a one page letter (8) and a copy of the paper. As the committee secretariat was reluctant to accept an electronic submission, I printed out a copy. This was about the first copy I had to print after weeks of discussions, drafts and hundreds of comments.
On 1 September the Senate Committee formally invited the ACS to give evidence at a public hearing on Friday 5 September. Ian Dennis FACS and myself appeared for the ACS.
"An arrangement whereby a third party provider assumes responsibility for performing information systems functions at a pre-determined price and according to predetermined performance criteria." (11).
- Cost Savings: However, economies of scale may have changed for IS.
- Focus On Core Business
- Access To Skills
- Access To Technology
- Transaction Costs
- Hidden / Additional Costs
- Lack of Flexibility
- Loss of Control
- Human Resource Problems
- Lock-In, Vulnerability and Dependence:
- Privacy and Confidentiality
- Intellectual Property and Competition
- Opportunity Cost
- IT Professionals may be suppliers; consultants or IT operatives, in the outsourcing company or the agency being outsourced.
- IT Professionals member actions will be subject to the Trade Practices Act, contract law, other streams of law.
- IT Professionals are also subject to professional codes, such as: ACS Code of Ethics & Code of Professional Conduct and Practice
- consistent with ACS ethics,
- not a panacea for IT problems
- Deliver cost savings and other benefits
- If used inappropriately, significantly diminish service levels, incur major reconstruction costs, and cause social damage
Outsourcing assessment processes are a valid tool for Government and private organisations in matching operations to strategic needs. However, particularly in the case of government there is a need for processes to be open, accountable and participatory. Decisions made behind closed doors and communicated as a fait accompli are not in the public interest.
In general the Government doesn't make things, it processes information. The technology used to process information has remained relatively stable over decades: office buildings, meeting rooms, filing cabinets and the printing press. More recently the photocopier, telephone and fax machine have made a modest change the process.
The Internet is now starting to deliver near universal electronic communications, supplanting the technology. In the first phase of this revolution we saw the Internet used as a direct replacement for existing technology: e-mail in place of paper mail, web publications in place of paper publications. This technology-by-analogy approach is coming to an end. We will now see the Internet used in ways which have no off-line equivalent and providing insights on how to build and run organisations.
We have the opportunity to redefine, or rediscover, what an "organisation" or "job" is and how to organise work. These questions are threatening to senior managers, both inside and outside the public sector.
Without some training and experience senior executives can't cope with hundreds of messages arriving on-line from people inside and outside their organisation. The problem is not just information overload, it is a direct challenge to how they work, provide leadership and define their authority. At the time when organisations need a new model of leadership and direction, senior manager will try to do business as usual and not notice as the walls of their organisation melt around them.Robert M. Pirsig wrote (12)
The real University...has no specific location. It owns no property, pays no salaries and receives no material dues. The real University is a state of mind.
Pirsig only got it half right. Organisations in general are legal fictions. They can own property, pay salaries, but need have no material existence. Organisations are virtual and so suit computer technology and the Internet. The way virtual organisation are run may be much the same as we have now, minus the trappings of material reality. What will define an organisation really will not change: a common purpose shared by the people involved. But, this may be small comfort to worried managers.
Where government a service is delivered via telecommunications, the outsourcing of the function can be facilitated. It should be noted that this only indicates that outsourcing is made possible; if it should be carried out is a wider public policy question.
When a service is made available by phone or on-line, all the client knows is what they hear, or see on the screen. This flexibility is one reason why on-line services need special security features, such as those proposed for the Public Key Authentication Framework (13).
An on-line service could be moved from an in-house network to an outsourced service provider. Alternatively the system could remain in-house, while the service and support of the information on the system was outsourced, or both the system and support could be moved.
To facilitate outsourcing each service would need to have a separate identity, such as a set of web pages and e-mail addresses. With this in mind, agencies might want to keep separate there general policy web pages and service delivery pages. Distinct services delivered might also be separated, to facilitate separate outsourcing.
Partitioning of information and services to facilitate outsourcing will require additional work when a service is set up. The skills required are similar to those applied by computer systems analysts and designer. They look at the application and the information needed and then use analysis techniques to divide the problem up into constituent parts. These are then assembled in to function units to be built.
Delivering a public service requires internal information and communication for coordinating the service. These have been traditionally provided using paper based manuals, face-to-face training courses, circulars, manuals and meetings. People had to be in one close physical proximity to work together.
Internal communication and information can now be provided using internet technology on an internal corporate network commonly called an "intranet". There is nothing magical or special about an intranet, its just a bit of the Internet which has been cut of from the rest of the world, or hidden behind a firewall. The services could have been provided by any one of a number of technologies over the last 10 years. The Internet has just popularised, standardised and lowered the cost of what IT professionals have been trying to do for years. (14, 15).
For organisations building staff information systems it simply does not make sense not to use the web. Staff manuals and commonly used information can be coded as web pages. Databases of client or product information can be interfaced to web forms. Simple transaction systems can be built using the web forms as the interface.
A fad which came and went a few years ago was "groupware"; that is computer software designed for people to work together on-line. The problem with groupware was that everyone had to be using the same product and had to be trained to use it. With e-mail and the web we now have simple standardised groupware.
Once the staff member's primary means of communication with the rest of the organisation is via the 'net, there is no compelling reason for the staff to be in the one location. This allows options of home based teleworking or working from neighbourhood offices. However, it also allows the option of the staff not working for the same organisation at all.
While the Internet may provide the tools for on-line business, people may not necessarily know how to use them for business. The problem is to get staff to take the Internet seriously as a business tool. Staff have to have the security issues of the 'net explained to them. Backup and security of information is important.
The discipline of putting all information on-line can be difficult to learn. The need to keep on-line sources up-to-date and to rely on them can be difficult.
Maintaining personal contact when you are physically separated can be difficult. There may be a need to bring staff together for social events. These might need to be disguised as work meetings or training courses to make the staff feel more comfortable.
While the staff may be learning to cope with on-line working, the managers may not. If you can't see your staff, how do you know they are working? How do you measure your self worth, as a manager if you don't have an office with a size and location set by your "position" in the organisation?
- 1. Tom Worthington, "Outsourcing for no good reason?" from "Australia's 'Net Futures", Address to the National Press Club, 11 December 1996 http://www.acs.org.au/president/1996/epubs/npctw.htm#OUTSOURCING
- 2.,7. Ian Dennis and David Goble, Outsourcing and contracting out of IT products and services, ACS Paper, 6 August 1997 http://www.acs.org.au/president/1997/outsrc/paper.htm
- 3. Additional terms of reference on information technology (IT) requirements of Commonwealth departments and agencies, Finance and Public Administration References Committee, Motion by Senator Allison, 27 May 1997, Senate Hansard Page: 3438 http://senate.aph.gov.au/committee/fapa_ctte/toradint.html
- 4. "ACS Urges Caution on Whole of Government IT Outsourcing", Submission to the Senate Finance and Public Administration References Committee, Wednesday, 6 August 1997
- 5. "ACS Urges Caution on Whole of Government IT Outsourcing", Media Release, Friday 11 July 1997, Canberra http://www.acs.org.au/news/outsourc.htm
- 6. Ian Dennis and David Goble, Outsourcing and contracting out of IT products and services", Draft for comment 27 July 1997 http://www.acs.org.au/president/1997/outsrc/draft.htm
- 8. "ACS Urges Caution on Whole of Government IT Outsourcing", Submission to the Senate Finance and Public Administration References Committee, Wednesday, 6 August 1997 http://www.acs.org.au/president/1997/outsrc/sensub.htm
- 9. "ACS Details IT Outsourcing Problems to Senate Committee", Media Release, 5 September 1997 http://www.acs.org.au/president/1997/outsrc/outsrcpr.htm
- 10. "Contracting out of government services", Friday, 5 September 1997, Proof Hansard, Senate Finance and Public Administration References Committee http://www.agps.gov.au/parl/committee/s3755358.pdf
- 11. Dianne Northfield, Outsourcing of IT Services: Case Study of the Contract Between the Tricontinental Royal Commission and ICL Australia Pty Ltd, CIRCIT April 1992, Absratct: http://www.circit.rmit.edu.au/rr.html
- 12. Robert M. Porsig, Zen and the Art of Motorcycle Maintenance, page 150, William Morrow and Company, New York, 1974
- 13. "Encryption & Electronic Commerce in Australia, 22 November 1996 http://www.acs.org.au/president/1996/epubs/security.htm
- 14. Tom Worthington, Designing a Graphical User Interfacefor an Australian database product: background to the development of DBQ Windows, ACS Canberra Branch Newsletter, Canberra, April 1994
- 15 Tom Worthington, The Client - Server Model Applied to the User Interface, ACS Canberra Branch, Newsletter, Canberra, April 1991
Mr Worthington is a member of the Defence Department's Information Systems Year 2000 Project Management Office and Immediate Past President of the Australian Computer Society.
Information Age magazine listed Mr. Worthington as one of the 10 most influential IT&T people in Australia in 1998, citing his work on national IT policy. His work since 1994 has been on the policy and practice of implementing the Internet, including appearances before three Senate hearings. He is preparing a book for publication in August 1999 on this experience.