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Finance and
Performance Committee
17 March 2016
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Information and Communication Technology (ICT)
File No.: CP2016/03862
Purpose
1. To inform the committee of
the findings a review of council’s Information Services (IS) department and
outline a roadmap of future actions that will improve effectiveness and reduce
costs.
Executive
Summary
2. The council’s IS performance
since amalgamation has been the subject of significant scrutiny. During this
time, the council’s IS systems have provided the platform for the largest
rating transition in New Zealand and a large scale desktop upgrade for around
9,000 users. More recently in November 2015, the Group Chief Financial Officer
(GCFO) led the renegotiation of the SAP contract which will deliver savings of
$33 million over the Long-term Plan. However, it is prudent that council
undertakes periodic formal reviews to ensure the council’s IS strategy is fully
optimised and delivered at the most appropriate cost.
3. On 19 November 2015, the
Finance and Performance Committee resolved
“(g) request the Chief Executive to
direct staff to undertake further work to identify and minimise duplicated
common back-office functions and operational costs, including HR,
communications, and ICT across Auckland Council Group by ten per cent to save
$15.2 million annually as estimated in the Ernst & Young report in option
3a (p65).”
4. In response, the GCFO
initiated a review of the council’s IS functions. As a consequence of that work
the GCFO believes that the council’s current IS strategy can be more fully
optimised with a consequential saving of $36.8 million including an on-going
saving of $10.8 million annually. This can be achieved by:
· Prioritising
the number of IS projects underway and stopping underperforming or
non-essential projects.
· Evaluating
the IS functions that could be better performed by third parties.
· Disestablishing
non-critical IS staff functions.
5. The review noted that the
council’s focus is to drive value at the council group level covering the
council and its CCOs. The review recommends the council parent focus on getting
itself ‘fit for purpose’ before extending to the CCOs. This approach has been
confirmed with the CCOs Chief Executives. The immediate work programme consists
of five workstreams, closely aligned with the initiatives that will deliver the
anticipated cost savings.
6. Council will pause
consideration of the establishment of a Group Chief Information Officer (CIO)
and will focus instead on the immediate recruitment (either external or from
within current staff) of a Director of Information and Communication Technology
(ICT) reporting to the GCFO. This role will be on a contract or fixed term
basis of up to 12 months and will drive through the review recommendations.
7. The GCFO will provide the
committee with an overview of the review and the proposed next steps.
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Recommendation/s
That the Finance and
Performance Committee:
a) note the contents of this
Information and Communication Technology report.
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Comments
Context
8. The Auckland Council Group
is a significant user of IS products, software and equipment. IS provides the
backbone for core internal functions which includes rating, billing, finance, procurement,
HR and desktop services. IS is also instrumental in providing services to the
public, including library transactions, property consents information and
licensing and regulatory services. It is therefore essential that Auckland
Council has an effective and robust IS strategy that delivers a fit for purpose
solution at the most appropriate cost.
9. Committee members will be
aware that the council inherited over 5,000 legacy IS systems from the former
councils. The large number of IS systems, of varying conditions and state,
presented a challenge in terms of functionality, relevance and cost to
maintain. Changes to the IS environment were initiated by the Auckland
Transition Agency (ATA) and handed to the newly formed council to complete.
10. The major IS drive since 2010
has been threefold:
· To
maintain the inherited IS systems and integrate them as best as possible into
the council’s new operating environment.
· To
implement NewCore and decommission legacy systems across Finance, Procure to
Pay, Property Management, Rates Billing, Consents and Customer Relationship
Management (CRM).
· To
implement SAP applications across Asset Management, GIS data and reporting that
leverage the core SAP Enterprise Resource Planning (ERP) structure.
11. A schematic of the Auckland
Council Group IS Roadmap is attached at Attachment A.
12. The council’s IS performance
to date has been the subject of significant scrutiny and speculation. Despite
the large challenges of amalgamation there have been no material IS failures.
Further, since amalgamation the IS network has assisted in the complex rates
transition process without error and council has undertaken a large scale
desktop upgrade for all of its users. Financial savings have also been secured,
most notably the renegotiation of the SAP contract in November 2015 that will
deliver savings of $33 million over the Long-Term Plan.
13. Our largest IS project,
NewCore, is progressing to its new delivery parameters following the approved
reset in November 2014. Several NewCore functions will go live across a third
of the region in June 2016 (the Rodney, North Shore and Waitakere areas)
covering customer interactions, licensing, property management and financial
management. Rating will go live in July 2016 following the rates being struck
as part of the 2016/17 Annual Plan process. Consenting and property information
functions will follow in October 2016. NewCore is tracking to its revised
budget and is expected to deliver benefits of $58 million by 2022.
14. Managing the council’s IS is
a complex and challenging task that requires significant financial commitment
of around $80 million to $90 million opex per year. Council now has the
foundation to significantly transform its services. Staff and the public will
begin to experience this from mid 2016 onward.
15. Examples of what Aucklanders
will see in the near future include being able to lodge and track consent
applications from start to finish, easy access to property files, one location
to book community facilities across the region and the ability to pay for
council services and licenses online. For staff, there will opportunities to
simplify our business processes, work more collaboratively and ultimately to
deliver services in a more cost effective way.
16. Despite the progress that has
been achieved to date, it is prudent to reassess the council’s management of
its IS network and test whether the current roadmap is the most appropriate and
cost effective. In late 2015, the GCFO commissioned a review of the council’s
IS functions and asked Ernst Young to provide a dispassionate assessment that
drew upon work they had undertaken as part of the Alternative Sources of
Financing review and their role in providing Independent Quality Assurance
(IQA) to the NewCore project.
17. The review also addresses the
Finance and Performance Committee resolution of 19 November 2015:
“(g) request the Chief Executive to
direct staff to undertake further work to identify and minimise duplicated
common back-office functions and operational costs, including HR,
communications, and ICT across Auckland Council Group by ten per cent to save
$15.2 million annually as estimated in the Ernst & Young report in option
3a (p65).”
Analysis
and New IS Roadmap
18. Following an analysis of the
council’s IS functions and consultation with the GCFO, it is believed that the
council’s IS strategy can be more fully optimised with a consequential saving
of $36.8 million including an on-going saving of $10.8 million annually.
19. This can be achieved by:
· Prioritising
the number of IS projects underway and stopping underperforming (over budget or
behind schedule) or non-essential projects. This could deliver savings of
between $23.1 million to $33.7 million.
· Assessing
the IS functions that could be better performed by third parties. An initial
estimate indicates that savings of $2.1 million could be achieved through
increased efficiencies and reductions in staff numbers if nominated functions
were outsourced.
· Disestablishing
non-critical internal IS staff functions to deliver an estimated $1 million of
savings.
20. The review noted that the
council’s focus is to drive value at the council group level which includes the
CCOs. However EY strongly recommend that the council parent must focus on
getting itself ‘fit for purpose’ before extending the scope to include the
CCOs. This ensures that focus and effort is not diluted. This approach has been
confirmed with the CCOs Chief Executives.
21. As an initial first step, the
council will pause consideration of the establishment of a Group Chief
Information Officer (CIO) and will focus instead on the immediate recruitment
(either external or from within current staff) of a Director of Information and
Communication Technology (ICT) reporting to the GCFO. This role will be on a
contract or fixed term basis of up to 12 months and will drive through the
review recommendations.
22. The immediate work programme
consists of five workstreams, closely aligned with the initiatives that will
deliver the anticipated cost savings:
· Workstream
1 – Reassess Project Priorities. This will lead to more responsible budget
utilisation and allocation of resources.
· Workstream
2 – Improve Project Delivery. This will improve project performance so that
they are delivered on time, on budget and delivering expected value.
· Workstream
3 – Actively Manage Workforce Performance. This will improve delivery
performance and cost optimisation.
· Workstream
4 – Re-align Shape and Size of IS Department. This is to ensure the department
is the right shape, size and cost.
· Workstream
5 – Group Roadmap Phase II. This will standardise the council’s IS platform and
reduce SAP implementation costs.
23. A schematic of the approach
and proposed workstreams is provided at Attachment B.
Implementation
24. The proposed changes will
create a more robust IS structure for the council. With fewer projects we can
focus more on those IS initiatives that are critical to the performance of the
council. The changes will also deliver cost savings.
25. Staff have been informed of
the proposals.
26. A workplan is currently being
developed.
Consideration
Local
Board views and implications
27. The views of local boards
have not been sought for this paper. Improved operational performance and cost
efficiencies achieved through the IS transformation will ultimately benefit
local boards through the delivery of improved operational and financial
outcomes.
Māori
impact statement
28. A Māori impact
assessment has not been undertaken for this report, but Māori outcomes
achieved through council interventions will ultimately benefit as a result of
improved operational and financial outcomes.
Attachments
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No.
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Title
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Page
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aView
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Auckland Council Group IS Roadmap
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9
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bView
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ICT Proposed Workstreams
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11
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Signatories
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Author
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Michael Quinn - Executive Officer
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Authoriser
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Sue Tindal - Group Chief Financial Officer
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