Firms fear shift in software buying

TOM PULLAR-STRECKER
Last updated 05:00 24/06/2013

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Government procurement changes make it more likely departments will buy overseas payroll and human resources software despite evidence that it is cheaper to buy locally and the problems caused by the Novopay debacle, an Auckland software firm says.

AMS chief executive Noel Reid said he feared government moves to streamline procurement would result in contracts being "bulked up" and handed to overseas giants such as SAP and Oracle.

He raised his concerns as departmental chief executives prepared to gather at a Beehive event this evening for what is understood to be an important meeting on ICT strategy, and amid accusations that some agencies were too readily seeking advice from "overseas experts" before they prepared technology tenders.

AMS employs 40 staff and its software is used to pay about a quarter of the public service, including half of public sector healthcare workers.

Reid said he feared that as the Government sought to streamline procurement by negotiating all-of-government contracts with a reduced number of technology suppliers, it might package up payroll and HR with finance, favouring multinationals such as SAP and Oracle that offered a combined solution. "If the big guys win the financials, they tend to want to take the whole lot," he said.

"There is a lot of merit behind all-of-government purchasing but generally when requirements are ‘bulked up' they tend to buy foreign."

There were other factors at play that tended to favour large overseas suppliers and give them early access to customers before tenders were released, he said.

"Quite understandably [government agencies] like to talk to the big multinationals about world trends and we can't have those sorts of conversations.

"Multinationals could use that as an opportunity to wheel in their best salesmen from all around the world."

Paul Ramsay, a spokesman for NZRise, an industry body that lobbies on behalf of domestic IT firms, agreed pre-tender discussions were an issue.

However, Candace Kinser, chief executive of fellow industry body NZICT, on which multinationals are better represented, said controls on such conversations risked creating a "bureaucratic labyrinth".

She pointed out that some multinationals, such as IBM, were "offshoring" jobs to New Zealand. "We could suffer a much greater impact if they started withdrawing," she said.

All-of-Govt contracts could hit local suppliers

At least half of the IT firms and individual consultants carrying out work for the Government could be "shut out and forced to leave town" if the Government botches plans to establish "all-of-government" consulting contracts, a Wellington company boss says.

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The Business, Innovation and Employment Ministry has issued a "request for information" that heralds significant changes to the way departments buy advice from consultants on matters such as information technology, finance, business matters, health and property and construction.

Paul Ramsay, a spokesman for information technology industry body NZRise, said that could cover consulting contracts worth hundreds of millions of dollars a year. "It is just about everything under the Sun."

The ministry said the Government wanted to put in place arrangements that would help agencies work out what "level of quality" they were getting and whether suppliers were providing value for money.

Options included encouraging agencies to buy only from a panel of pre-approved consultants under centrally negotiated terms, or some other form of "pre-qualification".

One consultancy owner said closed supplier panels were "market killers" and out of odds with an approach being taken in Australia that instead favoured accrediting consultants if they met minimum standards set by the government.

Ramsay said NZRise shared those concerns and was talking to counterparts in other industries that might be affected by the changes. Government efforts to better co-ordinate procurement were positive from a taxpayer's viewpoint, but the question was "not what, but how", he said.

NZRise believed adopting the same procurement practices used to buy "commodity" products such as computers and cars might not make sense when buying services that were "creative and intellectual".

If the Government established supplier panels, they needed to be open, so new businesses could join, he said.

The ministry appeared unsure of its destination and there was an element of "making it up as we go along", he said. "They have to be mindful of what the broader outcome is. It is about delivering cost savings and efficiencies to government which we all support, but they have to make sure it is not detrimental to the industry as a whole."

- BusinessDay.co.nz

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