$55m Govt IT contract in for a trim

The Justice Ministry is renegotiating its $55 million information technology outsourcing contract with Telecom's Gen-i in a bid to cut costs.

A ministry spokesman says there's a risk a reduction in IT services could cause "unacceptable disruptions to staff", but this would be addressed in the review.

The cost-saving measure is among a number of government initiatives to reduce spending on information technology.

Brett O'Riley, chief executive of IT vendor association NZICT, says the Government is looking to make savings in procurement, and it is likely Internal Affairs will be charged with negotiating an "all-of-government" computer hardware contract in an effort to cut costs.

But Prime Minister John Key says the Government is becoming a big IT spender.

"Right across government departments we recognise a big IT deficit and we're going to be working through IT to deliver greater efficiencies so the Government can grow its capacity without growing its expense base," he says.

The Government has committed to its $1.5 billion ultrafast broadband initiative and has just approved a major revamp of the student loan system, he says.

The overhaul of the student loan system is part of a $30m project to simplify the management of loan repayments and will allow borrowers to access their loan information, change their account details and make repayments online.

The Justice Ministry signed its five-year contract with Gen-i in 2007 and says it could face penalties for changing the terms of the deal.

Any penalties will also be considered as part of the review, the spokesman says.

He would not say which services could go or reveal how much the ministry was looking to save.

Gen-i manages the ministry's desktop computers, data centres, internet networks and provides helpdesk support and phone and mobile services.

The ministry identified the contract as an area of potential saving as part of the Government's line-by-line review of spending.

It also plans to reduce the number of computer servers it runs from 435 to 260 over two years, and says the move could save it about $280,000 a year.

The Economic Development Ministry says the Government spends $71m on new personal computers each year and estimates a government-wide purchasing contract would save 5 per cent to 10 per cent.

Departments are also trimming their discretionary spending, particularly in project work and consulting, Mr O'Riley says.

Graeme McInteer, director of Wellington IT consulting firm Zephyr, says government departments have asked Zephyr to reduce contractor rates as part of the line-by-line spending reviews.

Most departments had sought a reduction of about 10 per cent.

Unisys Asia Pacific general manager Andrew Barkla says many customers are responding to the recession by asking vendors to lower their bills, a practice he does not discourage.

The State Services Commission has meanwhile warned departments against blindly purchasing Microsoft products and says deferring desktop upgrades can save an agency about $2000 for every full-time employee.

- © Fairfax NZ News