50 Quarter Two 2012

Council ITamalgamation

– rate buster or consultant cash-in?

Feature

51Quarter Two 2012

“A sceptic might argue you can achieve

more efficiencies by having better

trained, more well-informed customer

services staff rather than through

the implementation of IT, but you

still need the means to make them better-informed in the first

place,” says Murray Foster, CIO at Thames Coromandel District

Council (TCDC). “Almost 100 per cent of our data is electronic,

all of our processes are electronic. There isn’t a way to be better

informed without using systems to find it.”

Foster is a technology convert in a smaller council, but

understands that good IT does not necessarily result in better

service, nor reduced costs. “I’d like to say that by using technol-

ogy effectively you can be more efficient and keep rates down

but I don’t think there’s a group manager around who’d say,

‘Because of IT we’ve been able to reduce rates.’”

What ratepayers get for their dollar might come down to

personal experience. Good customer service may come from

someone bright on the other end of the phone, not necessarily

use of the latest technology. Likewise, outdated business prac-

tices might be to blame for a bad experience rather than poorly

operated IT systems.

Around half of the 1,000 business respondents to an MYOB

Business Monitor survey of perceptions of council services last

year said they were dissatisfied with local government. Bad

customer service and lack of responsiveness to the urgency of

business needs were frequently cited concerns.

The cost of delivering IT systems to support council services

has been in the spotlight since the early stages of the Auckland

Supercity amalgamation. The Royal Commission on Auckland

Governance first recommended a unified local governance

structure and amalgamated councils as recently as 2009.

Government only announced an Auckland Supercity would be

set up in time for the 2010 local body elections.

A high level of ICT duplication in the region was noted in the

Commission’s report, which continued: “The Commission does

not contemplate the Auckland Council’s ICT infrastructure will

be built from scratch. The objective will be to ensure smooth

transfer of the eight current councils’ ICT systems to the

Auckland Council and to plan the migration of the numerous

duplicated council business systems to a single ICT infrastruc-

ture platform.”

Cost comparisonsFollowing murmurings of an IT budget blowout and a price

hike to more than NZ$500 million, Auckland ratepayers as well

as those involved in the transition process are asking questions

about the necessity of a brand new IT system and about senior

management governance.

Auckland CIO Mike Foley was once headhunted by Deloitte.

He became CIO of Watercare before being appointed informa-

tion services manager of Auckland Council in 2010. Recently

he’s been under fire for not insisting on a more rigorous evalu-

ation of the legacy councils’ systems. But Foley is adamant

new IT systems will improve ratepayers’ ability to interact with

Auckland Council through multiple channels. “We’re looking at

online processing of resource consents, dog licences, online

payments, more interaction through the call centre if you need

it.”

SAP implementation specialist Deloitte provides consultancy

services to Auckland Council. Since the New Zealand Herald

obtained a confidential Deloitte proposal showing it charging

daily net rates of between $1200 for an analyst and $3400 for

a senior manager, the minister of local government has been

asked before Parliament if he has confidence in the Council’s

financial management.

An IS Capital Plan presented to Auckland Council in May

2011 shows a correction in its forecasted “Enterprise Capability

Development” investment of around $230 million in the years

between 2011 and 2015. But Auckland Council chief financial

As debate rages on both sides of the Tasman over Council rate rises exceeding inflation, Auckland’s Super Council is spending hundreds of millions amalgamating IT services hoping to improve customer service and efficiency while reducing costs. iStart investigates what Councils are doing with technology to improve service and asks if amalgamation is the answer. Chris Bell spoke with a range of councils and vendors supplying the sector and found that both IT and amalgamation are touchy subjects...

››

52 Quarter Two 2012

officer Andrew McKenzie says this considerable variance is

attributable to the eight legacy councils halting their investing

in systems. “When we came in, the proposed investment levels

were well under $20 million a year for the eight councils, about

$2.5 million each, so they weren’t realistic. We’ve just done a

long-term plan and we’ve flattened out our investment profile.

We’re still refining it at the moment but it won’t be as peaked as

we’ve suggested for 2012-2014.”

Beyond the pain barrierMalcolm Fraser is CEO of the Future Cities Institute, a non-

profit organisation focused on empowering citizens. “If central

government says it’s going to amalgamate a city because

there’s too much duplication and they don’t communicate that

there will be a period of pain, they’re setting the wrong expecta-

tion.”

It seems Aucklanders are going to need a high pain thresh-

old. Bernard Orsman reported in the Herald in May last year

that the cost of building a new SAP computer system over the

next eight years would be NZ$506 million. Already spent dur-

ing the transition was $54 million to set up the bare minimum

for day-to-day functions, including payroll, email, telephone and

recruitment, which the Council’s 16 December strategy and

finance meeting agenda says was within budget.

Comments on the Public Address blog after Russell Brown

published a post titled ‘Someone has to be accountable for

this’ last May were largely connected with the ballooning cost

of systems and a lack of transparency about decision-making.

“If it transpires that [the Auckland Transition Agency (ATA)

the local government minister, Department of Internal Affairs,

Feature // Council IT

“ Where we have to, we bring in a specialist because we don’t merge systems every day. When you’re trying to merge eight into one, you have to bring in the people who understand them. ” Mike Foley, CIO, Auckland Council

“ I don’t think they’re going to realise the potential of Auckland Supercity until the next generation – you’re talking 20 or 30 years down the track. ” Mike Wanden, CIO, Otorohanga District Council; president, ALGIM

Auckland Council: Behind the scenesSince ‘Day One’, 1 November 2010, the following applications have been merged and are live:

• Email• SAP (core finance functions, asset

register, procurement, HR, payroll)• Hyperion (budgetary planning – monthly,

yearly, 10-year plans)• Telephony (common platform across most

legacy councils)• Website (currently an overlay – legacy

websites are still operating where online payments were in place)

53Quarter Two 2012

Cabinet and the Prime Minister] knew that the costs would be

far in excess of what we were told, then there is only one way

of characterising what happened,” Brown concludes: “We were

lied to.”

Auckland City CEO Doug McKay admitted to “poor commu-

nication” on the part of the Council in a Computerworld article

in June last year. But he told iStart media portrayals of the

Council signing off on a $500 million IT spend are inaccurate.

“In practice it’s nothing like that. It’s broken down into all these

individual projects. I’ve met with a number of our critics over

the past few weeks and I’ve got a better idea of where they’re

coming from. But in a lot of cases they’re out of date on their

information, they’re still poring over the ATA investment cases.

In many of these situations we’ve moved on.”

The Auckland Council senior executives remain unable to

provide a total cost for the new system because, they say, they

have yet to decide to what extent SAP will be used. “We’re see-

ing how much extra we want to put onto [SAP] as opposed to

other technologies,” McKenzie says.

Starting from scratchFormer Auckland Regional Council (ARC) CIO John Holley

questions the SAP project’s governance. He’d like to know

why Auckland Council didn’t follow best practice by having its

vendor migrate data onto the existing systems at a fixed price.

The admittedly much smaller council-controlled organisation

Auckland Transport did just that when it ‘cloned’ the existing

Auckland Regional Transport Authority (ARTA) SAP system

for $2.2 million. Transport started its implementation after the

Council’s and had it fully operational in time for the Council’s

‘day one’, 1 November 2010, including functions yet to be fully

deployed at the Council.

Foley counters that since Auckland Transport only had

to replicate the functions of the legacy Auckland Regional

Transport Authority from 1 November 2010, its migration was

simpler. “We were merging eight separate businesses into a

new entity. It was felt better to put it under the umbrella of the

overall programme and do the data migration within that pro-

gramme.”

CFO McKenzie adds that Transport also didn’t have so many

financial applications: “We have five different systems and a

multiplicity of brands.”

Questions remain over why ATA chose a new SAP install for

Auckland over one built on an existing implementation as had

originally been planned. Holley says the Council’s December

agenda document – in which it states a fresh installation was

“a better fit for the scale and longer term needs of Auckland

Council” – is full of misdirection and inaccuracies. Among these,

says Holley, is a worrying knowledge gap about ARC’s ERP sys-

tem. “At the ARC and ARTA we had SAP asset management. It

had two components: plant maintenance and a module called

real estate.” The strategy and finance agenda document claims

“ARC’s system did not include the real estate solution” when in

fact it was incorporated in asset management.

Foley, on the other hand, remains convinced the existing

ACC and ARC SAP systems were unsuitable. “They were way

behind in terms of support and the versions they sat on and

didn’t have some of the modules we needed. So we’d have

had to do significant upgrades. Starting from scratch gave us

a more robust platform. It gave us the version compatibility

“ If central government says it’s going to amalgam-ate a city because there’s too much duplication and they don’t communicate that there will be a period of pain, they’re setting the wrong expectation. ” Malcolm Fraser, CEO, Future Cities Institute

››

54 Quarter Two 2012

Feature // Council IT

that we wanted so we don’t now have to do another significant

upgrade for another 12 or 18 months, which is a huge task to

undertake. You always want to go back to a vanilla implementa-

tion, which is where we started from. The other systems had

some kind of customisation buried somewhere and the major-

ity wouldn’t have worked.”

Holley defends ATA’s selection of SAP, as well as that of

Deloitte as implementation partner. However, he maintains

there was no consultation with the council CIOs on the imple-

mentation approach. “After Deloitte was selected it was effec-

tively given free reign with the ERP implementation steering

group, which had no real SAP implementation experience, no

CIO representation and no one from the councils with experi-

ence in dealing with SAP implementations and external con-

sultants. This meant the key advisor to the steering group was

Deloitte.”

The Council document contradicts this: “The decisions,

assumptions, costs and implementation approach were tested

and validated by a numbers of parties throughout the life of

the project including … chief information officers of the legacy

Auckland local government organisations.”

McKay has said it was preferable not to have legacy council

CIOs on the steering group because they lacked objectivity but

Holley contends anyone with significant council experience of

implementing SAP would have recommended a clone of an

existing environment. “The consultants, with the most to gain

from a green-fields implementation, were taken at their word

that none of the environments was suitable.”

Foley says Auckland Council follows accepted project man-

agement standards and all large investments have to be ratified

by councillors. “There are two internal checkpoints for every

project: an IS governance review that makes sure it technically

fits with what we want, and then it goes up to the executive pri-

oritisation group to ratify the solution and in terms of the invest-

ment and whether the business case stacks up. Once we get

into an inflight project there are the usual committee meetings

around scope, budget, quality, timelines and milestones.”

McKay is also sensitive about governance, given his CEO

responsibilities. “We have to put up a 10-year plan for our IT

investment, which we’ve done, but we don’t consider that

an approved budget. Every single project within that overall

10-year timeframe, we put them all in front of the politicians,

either for an approval or an FYI. They’ll have somewhere

between 80 and 100 opportunities over that 10 years to make

comment on any of those investment proposals.”

Sour grapes?Richard Hunter is director of Origen, a vendor whose prod-

uct was squeezed out during the amalgamation. Origen’s ERP

suite Ozone was installed at Franklin District Council. Hunter is

disappointed ATA didn’t evaluate any of the Auckland councils’

legacy software. “No one ever came to see Origen or Ozone.

The decision-making was based on prejudice and not robust

evaluation. None of them was ever evaluated, a cost-benefit

analysis looked at or a strategic fit for the longer-term view.”

A neutral observer might dismiss these as the sour grapes of

a vendor whose products weren’t chosen but Hunter dismisses

that. “Irrespective of the system it’s the process I’m talking

“ What ratepayers want is evidence that we’re not spending money we don’t need to spend. ” Julian Moore, director of organisational services,

Wellington City Council

55Quarter Two 2012

about. They’d never select Ozone – it’s a New Zealand product.

I’m not talking about what’s happened to Origen. I’m talking

about the entire process and decision-making.”

Mike Wanden is both CIO of Otorohanga District Council and

president of the Association of Local Government Information

Managers (ALGIM). Wanden saw Foley’s presentation at

ALGIM’s annual conference last year. Foley is on the ALGIM

executive. For the CIO of a small council like Otorohanga,

Wanden says, it’s hard to comprehend the IT task faced by

Auckland. “I don’t think they’re going to realise the potential of

Auckland Supercity until the next generation – you’re talking

20 or thirty years down the track before any benefits will be

realised.”

Origen’s Hunter was also at the ALGIM conference for Foley’s

presentation. “Everyone just listened to this guy talk and their

jaws dropped – they’d never heard anything like it. He was

coming out with some very big generalisations and rationalisa-

tions.”

What about my rates bill?Auckland Council’s current programme of work is part of a

wider organisational transformation to assess which applica-

tions are best suited for council-specific functions such as

managing consents, field services, licensing, property records,

websites, document management. The legacy Papakura and

Franklin rates systems are currently being migrated to the old

Auckland City Council rates system, Pathway. In October, says

Foley, the Council will probably migrate the regulatory sys-

tems, but this will only be an interim fix. In the longer term the

Council will need to evaluate a permanent replacement.

Foley says the Council has yet to select suppliers for licens-

ing, compliance, regulatory and rates functions. However, iStart

understands from one industry source that the decision to

implement SAP’s regulatory modules has already been made,

although the Council will still issue a request for proposal later

in the year.

Ratepayers around the country may be wondering whose

interests their council serves. Foster from the TCDC says the

fact IT is still considered a “black art” by the public increases

the difficulty of communicating IT project costs. “I’d like to say

that by using technology effectively you can be more efficient

and keep rates down but I don’t think there’s a group manager

around who’d say, ‘Because of IT we’ve been able to reduce

rates.’”

Auckland Council’s CEO says the fact its new systems will

make the Supercity a more efficient council will ultimately cut

costs, but rate increases are beyond the control of council

executives: “Politicians make the rating decisions, we make the

cost and savings decisions,” says Mackay. “We saved $81 mil-

lion in our first eight months – not all of it was related to IT but

a lot of it was enabled by new processes and systems – and

that couldn’t have been achieved under the legacy councils. It

was the equivalent of 6 per cent of rates we didn’t have to ask

the people of Auckland for – 1 per cent of rates is about $14-16

million.”

McKenzie says ratepayers ought to view IT costs relative to

total Council spending. “In the technology area you’re talking

about a $0.5 billion investment and about $300 million of that

is in new IT infrastructure and systems. Across Council we’ll

spend about $13.5 billion on transport, wastewater, storm water,

new buildings, libraries, and of that $13.5 billion around $9 billion

is on buying new assets. In spite of that massive investment in

the city, we’ve got rates increases of 3.6-4.9 per cent over the

next 10 years.”

Passing the ‘Dom Post test’Citizens want to see their council operating efficiently to

reduce rates, says Julian Moore, director of organisational ser-

vices at Wellington City Council (WCC). “What ratepayers want

is evidence that we’re not spending money we don’t need to

spend.”

So who’s accountable for ensuring that? Foster of TCDC’s

take on that is straightforward: “The guy who signs the cheque.”

Moore sees it as a standard chain of command with the

CIO accountable to the CEO who’s accountable to the mayor

and councillors. “I’d be accountable for the effectiveness and

efficiency of our IT operation but these things are not just IT

decisions – the decisions you make around systems need to be

driven by business.”

Hunter of Origen is sceptical ratepayers will notice benefits

from Auckland City’s new system. “They keep talking about

improved customer service but I don’t really see any value in it

at all. It’s got more consistent but it’s not actually lifting the bar

in any way.”

Moore of WCC says his council places the interests of rate-

payers above those of suppliers. “Most people on councils want

to be sure they can defend their procurement. That can lead

to us having undue process around it. In Wellington we call it

the Dominion Post test – any decision you make, you have to

defend it to the public.”

It’s always challenging for councils to justify expenditure to

ratepayers. Foster of TCDC reckons the public sector should hire

more CIOs who’ve worked for suppliers. “It’s always good to go

and work for a vendor and have some P&L responsibility – that

sharpens your focus.” Ratepayers are more likely to appreciate

sharpened focus if the picture makes sense. That calls for a more

business-like attitude on all sides of the debate.