Questions remain about Novopay deal

23:03, Aug 03 2014

The deal that will see the Government take over the Education Ministry’s troubled Novopay payroll system is a fudge that will leave many dissatisfied.

That’s even though it may be the best outcome for all concerned.

It may have appeared Novopay’s Australian developer Talent2 suffered a spanking. 

Steven Joyce, the Minister Responsible for Novopay, announced Thursday that the privately-owned firm would “pay” the Education Ministry between $18 million and $22m to exit its obligations.

But only $7m of that is in cash, with the rest comprised of “intellectual property” and discounts. 

The Education Ministry will pay $9.6m to Talent2 for the “support and maintenance” of Novopay’s software over the next six years, so in real terms the dollars will continue to flow from taxpayers to the Australian firm, even though that flow has now been stemmed from a tide to a trickle.


The deal will see the establishment of a new Crown-owned company called Novopay that will offer jobs to the 90 Talent2 staff in Wellington and Christchurch that run the payroll system.

It may well have been the best arrangement the Government could reach, but it doesn’t feel like a pound of flesh.

Once Novopay is in government hands on October 17, more answers may be forthcoming as to why the project went so wrong.

Too much has been made of made of the complexity of teachers’ pay. The payroll system may be the largest and one of the more complex in New Zealand, but payroll itself is hardly a tough computational challenge.

District Health Boards don’t seem to have trouble paying doctors and nurses, who also work shifts, do overtime, have complex pay bands and the like. 

Poor training was an issue. The Education Ministry clearly erred in relying too heavily on online training provided to school administrators. 

The business case for Novopay was partly based on trying to reduce the amount of hand-holding previous payroll provider Datacom had been offering schools. There was a degree of wishful thinking about what was realistically achievable in that regard.

But the length of time it has taken to iron-out the kinks in Novopay suggests there is a more fundamental problem.

Novopay is built on a technology called Oracle Forms. Don Christie, co-chairman of information technology industry body NZ Rise, said in March that was a much-overlooked failing as the technology, created in the 1990s, was “never going to be flexible or modern enough for a complex, distributed, process that was due to stay in use past 2020”. 

“You wouldn't get Google or Facebook building their business on that,” he said. Talent2 declined to comment on that claim at the time. 

Joyce says the Government doesn’t have any intention of replacing Novopay within the next six years. “The system is running pretty well and most of the errors are operator errors.

“We are where we are. We signed up to the technology in 2008 and I don’t think anybody in the school system would be thanking us for doing another major change now,” he says.

But it is not hard to find other technologists who reckon Oracle Forms is past its use-by. United States commentator Eric Berg says in his blog that a common complaint with Oracle Forms applications is that they are using “old, outdated user-interfaces, resulting in low-user adoption and poor user-satisfaction”.

“The business logic contained within these apps has been hard-coded, which makes them difficult to update. There is a risk that users are left dissatisfied when changes cannot be made or delivered on time,” he says. 

Novopay’s reported symptoms do seem to match that general diagnosis.

Noel Reid, the chief executive of Auckland payroll firm Advanced Management Systems, suggests the Government should set up an advisory panel of local software providers to work with the new Novopay business “to help ensure the software capabilities are maximised”.

He is not necessarily a disinterested party of course. But with Talent2 sidelined, it should be more practical for the Government to get good technical advice from a variety of providers on the best way forward.