Why bigger isn't better in government IT

Smaller government agencies have long lived in the shadow of bigger government departments. The bigger departments have typically been seen to have the talent, structure, and processes to do the heavy lifting of government, but this is no longer necessarily the case. In a world of mobile apps, cloud solutions, and Agile methodologies, the pendulum has begun to swing in the other direction. Smaller agencies are better placed than ever before to punch well above their weight, but they face some particular challenges that need careful attention.

Small agencies often run on very tight budgets and have little room for IT project failures, as in a small agency failures have a severe effect that is not easily hidden. The big challenge is to construct procurement methodologies and projects that maximise the advantages of being small. It is not sufficient to just offer whole-of-government, one-size-fits-all solutions or methodologies scaled down from large agencies.

A small agency is not just a generic “mini-me” of a large department

There is no such thing as a typical small agency. Each has a unique value proposition that has driven the requirement to create a small agency.

The rhetoric of well-meaning policy initiatives does not always match the reality of small agency business needs. Small agencies can easily become bogged down with complex procurement and project processes originally constructed with big agencies in mind.

A small agency is not necessarily technically inexperienced, nor is it a generic “mini-me” of a larger government department. Small agencies can benefit from the greater buying power of whole-of-government procurement, but the particular solutions covered by the contract may need revision.

IT strategy is favouring smaller, more-tightly defined projects

Today, small agencies have IT strategy on their side as global trends move away from big complex projects in favor of smaller, more agile undertakings in which the risks are easier to manage. Mobile apps are also finding their way into the big corporate world. These formerly niche solutions are increasingly seen as a cost-effective way to deliver mainstream solutions. Such changes play to the strengths of small agencies, but can suffer if driven by procurement processes designed for larger agencies or whole-of-government initiatives that ignore the agile business dynamic that drives a small agency.

In a small agency, it may be possible to replace complex consultations for gathering requirements with simple face-to-face discussions or targeted social networking, and online communities are much easier to build in a small agency. The challenge for smaller agencies is to continually question whether existing bureaucracy is fit for purpose.

Small agencies should reduce their dependence on capex

Capex is fast losing the attraction it once had, particularly for small agencies. Capex was once seen as a measure of intrinsic value and a guard against government cutbacks, but it is increasingly seen as a weight on the corporate shoulders and a disincentive to innovation.

Capex is a measure of the asset value of purchased hardware and bespoke software. As the asset depreciates, money must be set aside to renew the asset at its end of life. Strict accounting rules govern what can be done with capex, and these administrative difficulties have created the false impression that government will keep its hands off the money. However, governments have become increasingly attuned to the potential opportunities.

Capex creates significant difficulties for small agencies as it requires big cash allocations that are out of sync with business needs. It is therefore hard to demonstrate the value of IT to the enterprise both in terms of improved productivity and value for money.

Long asset depreciation periods diminish the agility of small agencies, and create difficulties in realising the efficiencies of scale available to larger government departments.

Today, there are many opex-based options that offer an attractive alternative to asset ownership. These include IT outsourcing, cloud services, and commercial off-the-shelf (COTS) solutions. The marketplace for each of these options has matured to the point where there are government-specific offerings that meet the stringent requirements of the government market.

The challenge for contemporary small agency CIOs is to transition to the role of a broker and integrator of services rather than a developer and owner of assets.

Kevin Noonan is a Research Director in Ovum’s Australian government practice.