Auckland council’s top executives deny the announcement it will need to spend an estimated $500 million on IT systems in the next 10 years, amounts to a budget blowout.
Auckland council CEO Doug McKay, CFO Andrew McKenzie and CIO Mike Foley met with Computerworld to explain the rationale for the $500 million spend, which councillors first learned about in a public meeting last month.
McKay says that the previous eight local councils spent $90 million a year on ICT. The estimate of $500 million over the next 10 years means that this cost would be reduced to $50 million a year.
“We haven’t had one system failure yet,” says McKay. “This isn’t INCIS. We are well on top of everything here and we know what we are trying to achieve,” he says.
Auckland Council now runs nine systems, in effect – the legacy eight plus the new one. Consolidating the systems is a highly complex task, says Foley.
For example, the Council has 297 different asset management systems, nine GIS systems and more than 2500 applications.
The top-five ICT initiatives are rationalising rating and regulatory systems; reducing bureaucracy for customer interactions and improving service levels; improving asset performance; mitigating the risk of the Civic datacentre and consolidating datacentres; and desktop standardisation.
The datacentre in the bottom of the Civic building has asbestos in it and it has to be moved, says Foley. The Council also keeps data in a number of different places and needs to consolidate to two datacentres, he says.
Auckland Transition Agency said last year that the total cost of ICT would be $124 million, but that was only for the transition period, says Auckland Council CEO Doug McKay.
“For some reason that got reported as a blowout versus the $124 million, but that’s [comparing] apples and oranges – they aren’t the same numbers,” says McKay.
“The Minister said there would be $124 million spent... to complete the transition phase,” says McKay.
The final bill for the SAP ERP system is $54 million, says McKay.
Computerworld reported in September last year that senior IT executives within the Council were concerned about the cost, especially the cost of consultants on the project. However, McKay says ATA met its budget — $54 million for the SAP system and $70 million budgeted for 2011/2012, which comes to $124 million.
CW: If the ATA knew about this additional cost, why keep quiet about it?
McKay: The ATA’s brief wasn’t to talk about anything beyond year one. They were talking about the transition phase.
“It would be irresponsible of us to go to councillors and not give them a signal there is going to be some expenditure into the future,” says CFO Andrew McKenzie. “We are now an organisation in operation. We’ve gone past transition.”
“We have arrived at exactly the place you’d expect and you’d be naïve to have thought we wouldn’t end up where we are now. I don’t know why it is a big deal.”
Why has there been so much controversy around the ERP implementation and the ICT costs?
Foley: Some of it is misinformation. Some people only had some of the information. Some of the ‘experts’ were involved in some of the processes, but they didn’t have all the information.
McKay: Maybe poor communication. Just to spring $500 million out there without putting it in context. We didn’t communicate all that [that it is an estimate over 10 years]. So I blame us, really.
How much of the $500 million is going to SAP and consultants?
McKenzie: We haven’t made a decision yet on where that spend is going to happen or what systems are the right systems. And there is no way we would ever disclose that anyway, that would put us on the back foot with our vendors.
The $54 million SAP system has been compared to the $2 million SAP system that Auckland Regional Transport Authority (ARTA) built for Auckland Transport Agency. This system was built by copying systems used at the Auckland Regional Council and ARTA.
There was no “fit-for-purpose” system the Auckland Council could have copied in the way Transport did, says McKenzie.
Did the technical committee (the local council CIOs) recommend leveraging an existing system?
Foley: No. I met with them on a weekly basis. We had a debate around the options. The external view through a number of parties was that it was best to set a new [system] up. We couldn’t take, say, the Waitakere system and copy it across because the processes were completely different. It didn’t have the scale, flexibility and all the modules that we needed.
Copying an existing system would work but “it would take a hell of a long time to do it, and we wouldn’t have met the timeframes we had to meet”, says Foley.
None of the CIOs from the councils that were using SAP were on the steering group for the SAP implementation.
Did you have council SAP implementation expertise on the steering group?
Foley: No, I didn’t need it. I had the relevant people involved in the programme – the programme manager, who has done a number of SAP implementations; myself, I’ve done four SAP implementations; the delivery partners; relevant business owners and Doug McKay.
“I can see why you wouldn’t put people from the councils [on the steering group] because they all think their system is the best, so it is not very objective, to be honest,” adds McKay.
For $500 million, could Auckland Council have bought its own ERP company or built a system in-house that could have then been sold to other councils?
Foley: There was not one provider that could have given the solution we wanted across the board. Would we want to create our own system? Probably not, because the cost... is more than buying a package off the shelf.
McKay: You would never run [a council] with a bespoke system that you developed from scratch. That would be crazy. Who is going to turn up when things go wrong and help you sort it? Basic human services are at risk.