Analysts question Australia government’s IBM deal

Opaque terms

With the latest deal between the government and IBM, everything seemed forgiven and forgotten.

Some technology and procurement analysts have questioned the wisdom of the arrangement, especially as the terms and conditions of the deal remain opaque.

Daniel Samson, professor of management at the University of Melbourne, said such long-term arrangements could make sense if buyers found a high-quality, capable supplier with a substantial track record and the ability to invest in the relationship, noting that IBM had a “somewhat mixed track record”.

Samson stressed that it was important that incentives and options were built into any contract to ensure that the supplier “keeps working hard and on their toes”.

Success, he said, would require proper incentives to have been built into the contract, and also that any milestones and requirements needed to be properly tracked and managed to hold suppliers to account.

Noting that inking the deal was the easy part, Samson said: “It would be really unfortunate if the bulk of the work was done in India – the government should be taking a lead on building local capability, skills and jobs”.

Wissam Raffoul, an advisor with consulting firm IBRS, said it was wrong to give one contract to one supplier for such a long time. “No one claims leadership in all those areas. It would be safer to use a range of vendors,” he said.

Building trust

In the aftermath of the Queensland Health and census debacles, Raffoul said the government would have been wiser to give IBM something smaller to build trust.

“IBM sells very well, but there is a big difference between selling and delivery,” he added.

Independent management consultant Jonathan Dutton of JD Consultancy said he was not privy to the details of the IBM deal, but pointed out that in any long-term contracts, it was important to build communication and trust.

That, he said, flew in the face of government procurement culture which tended to view attempts to “get cosy” with suppliers with deep suspicion.

“I worry that the mindset of government procurement is that process is the saviour and that obviates the need for a relationship,” he said.

Agencies not locked in

Despite the concerns of some analysts and procurement experts, Ovum chief analyst Kevin Noonan believed the arrangement was in fact a good deal for both IBM and the government.

Noonan said it was not the first whole-of-government purchasing deal that has been negotiated, citing a similar arrangement with Microsoft.

He said such deals made better pricing available to all agencies, not just the larger departments, adding that the IBM deal also opens the door to upgrading and modernising.

“Agencies will not be locked in,” he said. “The government is not forced to buy – but given the attractive pricing you’d be silly not to consider.”

But pricing was only part of the deal. “IBM still has to deliver,” Noonan said.