Australian government agencies struggle to allocate cloud costs – Finance – Strategy – Cloud

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Some of Australia’s top 20 federal government agencies, which account for more than 80% of all government spending, are struggling to allocate cloud costs and fund experimental or “iterative” work.

A digital magazine [pdf]commissioned by the previous government, shows that outdated funding models, coupled with insufficient funding beyond normal running costs, are limiting government digital ambitions.

The government wants to be a “global digital leader” by 2025 and idolizes Google, Amazon and Netflix in digital scrutiny, examining what they do and what could be strategically applicable to all.

However, much of the review’s findings point to some more fundamental challenges that stand in the way of these ambitions and will need to be addressed more immediately.

A common theme is funding.

A key finding is that “only one in 20” of participating agencies “agreed that funding was sufficient to implement major change programs, decommission or transform legacy systems.”

Small and medium-sized agencies, in particular, have spent a large portion of their IT budget on typical costs, “indicating that these cohorts need additional support to fund priority transformational digital and ICT projects.”

Larger agencies typically had larger IT budgets, but were often unhappy with what they were getting from vendors.

“Large agencies are less satisfied with the performance of their large ICT contracts (i.e. over A$50 million in annual contract spend),” the study found.

The funding agencies received was often “inconsistent” and could be pledged and then withdrawn, making it difficult for agencies “to plan for the future of platforms and systems.”

“Funding is regularly reduced and often deprioritized in planning for new capacity,” the review found.

“Funding is often provided on an ad hoc basis and not consistently accounted for in capital funding requests at an appropriate level.”

The review warned that the funding problem had no silver bullet, perhaps explaining why the report was released only after the election and not before.

“A single intervention to bring about change in these areas will be insufficient to bring the Australian government to global digital leadership,” the review found.

One in three agencies “did not believe [vendor] the contracts allowed them to be flexible in delivering new digital and ICT capabilities.

An unknown number – “some” – also said that “their internal budget processes are incompatible with modern approaches to financing digital investments, including releasing funds in faster and more frequent cycles.”

“Current budget processes are not conducive to ‘fail fast’ implementation and delivery approaches,” the review found.

“This reduces the ability of agencies to engage in experimentation, agile delivery, and continuous, iterative improvement.”

The government, through the Digital Transformation Agency (DTA), has said it wants agencies to be “able to unlock smaller funding allocations more quickly, encouraging faster and more iterative development of digital solutions and services”.

While slow funding models and inflexible vendor agreements have hampered progress, so has the ability of some agencies to allocate budgets for cloud-related workloads.

“Agencies indicated additional complexity in determining an appropriate allocation of capital and operating funding, particularly given the introduction of cloud and infrastructure-as-a-service solutions with operating cost bases” , revealed the review.

The flip side is that “50% of agencies said they found value in the whole-of-government approach to cloud adoption, whole-of-government cloud platforms, and [2014] cloud-first policy”.

This highlights another gap identified by the review: a lack of knowledge sharing and reuse across agencies.

The varying cloud-related fortunes of some versus others suggest that there is valuable experience in costing and budget allocation that could be more widely shared.

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