Griffin on Tech: Yet another eye-watering mega merger IT bill comes in
The bill to merge the IT systems of the country’s 16 polytechnics, which now operate as one education super-entity, Te Pūkenga, has been totted up - $285.9 million over four years.
Te Pūkenga’s management outlined its IT spending needs as part of a request for additional funding totaling $422.6 million over four years, Pattrick Smellie at BusinessDesk reported this week. We only know the details of this because the business case was accidentally published online before being taken down. Oops!
It’s another big IT investment for a contentious mega-merger project, the other key ones being Three Waters and the reform of the health sector. It has been hard going for Te Pūkenga with the departure of its CEO and significant deficits forecast.
Education is also in a state of flux, with a move to more workplace training, remote learning and the disruptive effect of technologies like ChatGPT creating a lot of risk and uncertainty in a sector still recovering from Covid's impacts.
Padding for cost escalation
The Te Pūkenga IT spend spans everything from hardware, software and cloud infrastructure to data analytics, core enterprise systems and “multimode learning delivery”.
A 25% contingency for cost escalations has been included and the business case openly discusses the implications of a 50% cost blowout. That reflects the current reality of inflation, but also the well-documented fact that public IT projects tend to go beyond budget and take longer than expected.
Treasury last year forecast the IT-related costs of the new computer systems for Three Waters at $659 million - $75 million in capital expenditure and $582 million in operational expenditure. Budget 2022 set aside $100 million to develop a nationwide IT system for Health New Zealand, but that is just the tip of the iceberg. Around $1.3 billion will be spent over the next decade developing a national unified ticketing system for public transport.
There’s nothing wrong with digital transformation and modernising IT systems that are important to delivering healthcare, education and water services. Billions in public IT spending over the next few years could be used to build world-class digital services that meet our needs longterm. But the way these projects have come together and the lack of political consensus around the need for public sector mega-mergers doesn’t bode well for the IT components of them either.
Derailed by politics?
If Jacinda Ardern’s government’s transformative political agenda ran into trouble because it tried to do too much, too quickly, what about the tech programmes associated with them? Yes, there is risk involved with all of these projects, given we are in election year and the opposition wants to unwind some of them. The health reforms in particular are so complex and multi-faceted that it will take masterful execution to pull them off.
But our tech industry has the capability and innovative thinking to make the most of these IT investments.
If we are smart about it, we can achieve IT procurement efficiencies across these projects, apply open-source technologies and use the significant cloud infrastructure that is coming on-stream locally. We can rely less on the big four consultancies and draw more on the considerable health and ed-tech capability in our experienced tech companies.
That's the challenge. Billions are on the line. It's our IT sector's moment to shine - if politicians and government bureaucrats let it.
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