AUSTRALIAN COMMONWEALTH GOVERNMENT IT OUTSOURCING (ITO) POLICIES: Helping or Hindering Practice? JOANNE HEIN

Transcription

1 AUSTRALIAN COMMONWEALTH GOVERNMENT IT OUTSOURCING (ITO) POLICIES: Helping or Hindering Practice? JOANNE HEIN A dissertation submitted in partial fulfilment of the requirements for the degree of Professional Doctorate in Public Administration University of Canberra February 2012

2 Jo Hein 2012 All rights reserved. Joanne Hein has asserted her rights under the Copyright, Designs and Patents Act, 2005, to be identified as the author of this work.

3 Page i Abstract The focus of this thesis is on identifying, learning from and leveraging recent Australian Commonwealth government experience with Information Technology Outsourcing (ITO) from a practitioner s view point. The specific desired outcome of this research is to learn from the past and inform the development of future ITO policies to the benefit of the Australian Commonwealth government, ITO policy developers and ITO practitioners. Thus the primary research question is Has Australian Commonwealth government ITO policy helped or hindered practice? The scope of the research spans more than two decades and three major and different Australian Commonwealth government ITO policy periods: the late 1980s to 1997 (Period 1), 1997 to 2001 (Period 2) and 2001 to 2011 (Period 3). Research on the impact of the three waves of ITO policy reform on government agency decisions through its outsourcing lifecycle has not previously been conducted and therefore affords evidence of originality by the discovery of new knowledge and by the exercise of independent critical thinking. This research shows, for the first time, independent research into practitioners views of the practical impacts the Australian Commonwealth government ITO policies and other factors had on agency ITO performance. The practitioner view is important because better policy outcomes are achieved where there is close interaction between those involved in policy development and policy implementation (Keating 2004:101). A sourcing lifecycle model (Lifecycle Model) is used as the scaffolding for collecting and presenting the data and a case study approach is used to explore the experiences of practitioners in agencies that had outsourced under each of the ITO policy periods: with a particular focus on practitioner views of the importance of the 54 Lifecycle Model steps and

4 Page ii the agency s performance. Collecting the data in this way allows the research findings to be incorporated into the practices of ITO practitioners and policy developers. This thesis makes a distinct and significant contribution to knowledge and understanding of ITO in the Australian Commonwealth government. ITO is a risky venture and demands strategies that treat it as such (Rouse & Corbitt 2003:89). As this thesis shows, a key area neglected in the growing literature on ITO are the views of those implementing such policies in ITO practice. Furthermore, the research set out in this thesis provides new opportunities to reduce this risk for the Australia Commonwealth government by re-crafting Procurement Policy instruments; retaining a devolved ITO policy framework supplemented by more central agency coordination; and incorporating the sourcing Lifecycle Model into the Procurement Policy Framework.

5 Page v Acknowledgements and Preface An insatiable passion for ITO as a practitioner in the field led me to want to explore, discover, learn and share more about this fascinating and controversial topic of ITO: hence this thesis. Motivation and support have been critical to success, and so much support has been generously given by many in this journey. Firstly I would like to thank my supervisors Dr Chris Sadleir and Dr Monica Kennedy. I cannot thank you enough for your generous support, wisdom and encouragement that you gave me as you helped me develop and culminate this work. Thanks also go to my initial primary supervisor Dr Chris Aulich who helped me formulate the early stages of this work. I would also like to thank all of the participants who took part in this research for their valuable time and assistance for, without them, this research would not have been possible. Of course my family and social circle too was severely impacted when they often became second priority to writing another few words or the urge to read another book. Thank you for your understanding when I had to reluctantly turn down offers like a trip down the coast staying in the penthouse overlooking the fish filled waters of Batemans Bay: Bron and Kerry you nearly got me on that one! Professional editorial services were provided by Lulu Turner from the University of Canberra and Frank Geurts from Zekerzaak. The scope of these services was restricted to the current Australian Standards for Editing Practice (ASEP) Standards D (Language and Illustrations) and E (Completeness and Consistency). So, my very sincere thanks go to everyone who supported me in this exciting journey.

6 Page vii TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION 1 CONTEXT 4 IMPORTANCE 6 RESEARCH FOCUS 10 THE RESEARCH QUESTIONS 13 METHODOLOGY 14 THE STRUCTURE OF THE THESIS 14 CHAPTER TWO: AUSTRALIAN GOVERNMENT ITO HISTORY 19 OUTSOURCING AND ITO ORIGINS 19 THE EMERGENCE OF THE AUSTRALIAN GOVERNMENT S ITO FRAMEWORK 22 AUSTRALIAN COMMONWEALTH GOVERNMENT ITO POLICY PERIODS 24 PERIOD 1 LATE 1980S TO PERIOD TO 2001 (THE IT INITIATIVE) 29 PERIOD TO ITO PERIOD COMPARATIVE ANALYSIS 41 CHAPTER THREE: POLICY AND THE ITO PRACTITIONER 45 PUBLIC POLICY INFLUENCES ON ITO CONTEXT FOR PRACTITIONERS 45 THE INFLUENCE OF NEW PUBLIC MANAGEMENT (NPM) ON ITO 46 PUBLIC PROCUREMENT POLICY MAY INFLUENCE FUTURE ITO POLICIES 50 DEGREE OF DEVOLUTION OF ITO RESPONSIBILITY 51 THE INFLUENCE OF CHANGING COMMONWEALTH PROCUREMENT GUIDELINES 53 THE AUSTRALIAN-US FREE TRADE AGREEMENT 56 IMPACT ON THIS RESEARCH 57 LITERATURE AND THE PRACTICE OF ITO 57 ITO GRAND THEORIES 58 ITO TERMINOLOGY 60 AUSTRALIAN COMMONWEALTH GOVERNMENT ITO FORMAL REVIEWS 64 STRATEGIC ITO DECISIONS 66 OUTSOURCING MODELS 81 THESIS FOCUS 91 CHAPTER FOUR: METHODOLOGY 93

7 Page viii METHOD 95 SELECTION OF THE CASE STUDY APPROACH 98 CASE AND PARTICIPANT SELECTION 102 DATA COLLECTION AND ANALYSIS TOOL 102 DATA COLLECTION AND ANALYSIS PROCESS 103 PRESENTING THE FINDINGS 109 CHAPTER FIVE: ITO POLICY ANALYSIS 113 PHASE 1: THE ARCHITECT PHASE 113 BUILDING BLOCK 1: INVESTIGATE - DISCARD THE MYTHS 115 BUILDING BLOCK 2: TARGET THE SERVICES IDENTIFY THE RIGHT ACTIVITIES TO OUTSOURCE 123 BUILDING BLOCK 3: STRATEGIZE GET PREPARED 127 BUILDING BLOCK 4: DESIGN DETAIL THE FUTURE 135 ARCHITECT PHASE 1 THEMATIC ISSUE ARISING FROM ANALYSIS 142 PHASE 2: ENGAGE PHASE 149 BUILDING BLOCK 5: SELECT CHOOSE THE BEST SUPPLIER(S) 150 BUILDING BLOCK 6: NEGOTIATE SEAL THE DEAL 161 ENGAGE PHASE 2 THEMATIC ISSUE ARISING FROM ANALYSIS 163 PHASE 3: OPERATE PHASE 168 BUILDING BLOCK 7: TRANSITION THE STARTING GATE 170 BUILDING BLOCK 8: MANAGE GET THE RESULTS 175 OPERATE PHASE: THEMATIC ISSUES ARISING FROM ANALYSIS 178 PHASE 4: REGENERATE PHASE 181 BUILDING BLOCK 9: REFRESH TOWARDS THE NEXT GENERATION 182 REGENERATE PHASE 4: THEMATIC ISSUES ARISING FROM ANALYSIS 185 KEY FINDINGS AND CONSOLIDATED ANALYSIS 187 BUILDING CRITERIA FOR FUTURE ITO POLICY DEVELOPMENT 190 CHAPTER SIX: PERFORMANCE ANALYSIS 193 CASE STUDY REVIEW 194 CASE STUDY 1 FINDINGS AND ANALYSIS 195 CASE STUDY 2 FINDINGS AND ANALYSIS 197 CASE STUDY 3 FINDINGS AND ANALYSIS 199 PERFORMANCE RATING REVIEW 201 FACTORS THAT HELPED AGENCY PERFORMANCE 203

8 Page ix FACTORS THAT HINDERED AGENCY PERFORMANCE 209 KEY FINDINGS 212 CHAPTER SEVEN: LIFECYCLE MODEL USEFULNESS IN PUBLIC SECTOR ITO 213 USEFULNESS OF THE LIFECYCLE MODEL 214 CHRONOLOGICAL ANALYSIS 217 LIMITATIONS OF THE MODEL 218 OMISSIONS 221 DUPLICATION AND PROCESS ORDER 228 SECTORAL DIFFERENCES 229 MULTI-SOURCING 232 USEFULNESS AS A RESEARCH TOOL 235 KEY FINDINGS 235 CHAPTER EIGHT: DISCUSSION AND IMPLICATIONS OF RESEARCH FINDINGS FOR FUTURE ITO POLICIES 237 CHAPTER FIVE FINDINGS 237 CHAPTER SIX FINDINGS 238 CHAPTER SEVEN FINDINGS 240 DISCUSSION OF FINDINGS FOR FUTURE ITO POLICY DEVELOPMENT 242 CONTRIBUTION 1: CRITERIA TO DRIVE HIGHER ITO PERFORMANCE 242 CONTRIBUTION 2: DEGREE OF DEVOLUTION 253 CONTRIBUTION 3: LIFECYCLE MODEL USEFULNESS AND LIMITATIONS 262 SUMMARY 265 CHAPTER NINE: CONCLUSION 267 RESEARCH FINDINGS 270 RESEARCH CONTRIBUTIONS AND IMPLICATIONS 273 CONCLUSION 279 APPENDIX 1 ITO SPECIFIC FORUMS 281 APPENDIX 2 TABLE DESCRIPTORS 285 APPENDIX 3 DETAILED RESEARCH FINDINGS BY CHAPTER AND LIFECYCLE ACTIVITY 289 REFERENCE LIST 293

9 Page xi FIGURES Figure 1: Australian Commonwealth government ITO Framework Figure 2: The Three Choice Frameworks Figure 3: The Outsourcing Lifecycle Framework: Phases and Building Blocks Figure 4: The Seven Key Attributes of ITO Configuration Figure 5: Research Design Figure 6: Research Design - Modified Figure 7: Relevant Situations for Different Research Strategies Figure 8: Data Collection and Analysis Process Figure 9: Case Study Average Ratings Figure 10: Case Study 1 Ratings Summary Figure 11: Case Study 2 Ratings Summary Figure 12: Case Study 3 Ratings Summary Figure 13: Central Agency Degree of Influence Figure 14: Case Study Performance Scores Figure 15: Degree of devolution

10 Page xiii TABLES Table 1: Comparative Assessment of ITO Policy Periods Table 2: Definition of the term outsourcing Table 3: Australian Commonwealth government ITO reports Table 4: Reasons for Outsourcing Table 5: Comparison of Sourcing Models over time Table 6: Key choices in Research Design Table 7: Performance Likert Scale Table 8: Importance Likert Scale Table 9: Architect Phase Activities Impacted by ITO Policy Table 10: Activity 1 Ratings Table 11: Activity 2 Ratings Table 12: Activity 3 Ratings Table 13: Activity 4 Ratings Table 14: Activity 5 Ratings Table 15: Activity 6 Ratings Table 16: Activity 7 Ratings Table 17: Activity 8 Ratings Table 18: Activity 9 Ratings Table 19: Activity 10 Ratings Table 20: Activity 11 Ratings Table 21: Activity 12 Ratings Table 22: Activity 13 Ratings Table 23: Activity 18 Ratings Table 24: Activity 19 Ratings Table 25: Activity 20 Ratings Table 26: Activity 21 Ratings Table 27: Activity 22 Ratings Table 28: Engage Phase Activities Impacted by ITO Policy Table 29: Activity 23 Ratings Table 30: Activity 24 Ratings Table 31: Activity 25 Ratings Table 32: Activity 26 Ratings Table 33: Activity 27 Ratings

11 Page xiv Table 34: Activity 28 Ratings Table 35: Activity 29 Ratings Table 36: Activity 32 Ratings Table 37: Engage Operate Activities Impacted by ITO Policy Table 38: Activity 36 Ratings Table 39: Activity 38 Ratings Table 40: Activity 39 Ratings Table 41: Activity 41 Ratings Table 42: Activity 42 Ratings Table 43: Regenerate Phase 4: Comparative Analysis Table 44: Activity 53 Ratings Table 45: Activity 54 Ratings Table 46: Case Study Impacts Comparative Analysis Table 47: Performance Analysis Summary Table 48: Summary of Activity Importance Table 49: Building Block Importance Over Time Table 50: Lifecycle Model Limitations Table 51: ITO performance instruments and drivers Table 52: Hybrid Future ITO criteria for policy formulation

12 Page xv ACRONYMS AND ABBREVIATIONS ABS AGIMO AIIA ANAO AUSFTA AGTA BAFO BB BPO CEIs CIO CIOC CMO CPGs CTC DAS DLGAS DoF DoFA DoFD EDS EOI FMA GAO GACO GISPB GITC HR ICT Australian Bureau of Statistics Australian Government Information Management Office Australian Information Industry Association Australian National Audit Office Australian-United States Free Trade Agreement Australian Government Telecommunications Agreement Best and Final Offer Building Block Business Process Outsourcing Chief Executive Instructions Chief Information Officer Chief Information Officer Committee Contract Management Office Commonwealth Procurement Guidelines Competitive Tendering and Contracting Department of Administrative Services Department of Local Government and Administrative Services Department of Finance Department of Finance and Administration Department of Finance and Deregulation Electronic Data Systems Expression of Interest Financial Management and Accountability General Accounting Office Government Accountability Office Government Information Services Policy Board Office Government IT and Communications Human Resources Information and Communication Technology

13 Page xvi IMSC Information Management Steering Committee IS Information Systems IT Information Technology ITO Information Technology Outsourcing ITRG Information Technology Review Group ITSIAF IT Sourcing Inter-Agency Forum JCPA Joint Committee of Public Accounts JCPAA Joint Committee of Public Accounts and Audit JPCPA Joint Parliamentary Committee of Public Accounts KPI Key Performance Indicators MAB Management Advisory Board MAC Management Advisory Committee MIAC Management Improvement Advisory Committee NPM New Public Management NA Not Applicable NS Not Scored OAS Office of Asset Sales OASACS Office of Asset Sales and Commercial Support OASITO Office of Asset Sales and IT Outsourcing OECD Organisation for Economic Cooperation and Development OGIT Office of Government IT OGO Office of Government Online PR Public Relations RFQ Request for Quote RFT Request for Tender SFPARC Senate Finance and Public Administration References Committee VFM Value for Money