Budget highlights expected digital savings

Public sector transformation has become a catchcry for greater efficiencies, but actual estimates of the savings it will produce have been few and far between. Yet figures in the Turnbull government’s 2016–17 Budget put teeth into early ambitions as it leans on its Digital Transformation Agenda to earn its keep.

Figures in the Budget’s expense measures suggest that the collective savings from public sector transformation and the ‘efficiency dividend’ — a euphemism for the do-more-with-fewer-resources imperatives championed by the incoming Abbott government in 2013 — will produce $1.4 billion in net savings over the three years to 2020.

The savings include $275.9m in expense reductions and a $22.7m reduction in capital expenditure during fiscal year 2017–18, increasing to $564.5m and $50.1m by fiscal year 2019–20. The portion of this expected to come from the efforts of the government’s Digital Transformation Office (DTO) was not specified, and a Department of Finance spokesperson was unable to clarify how much of the benefit was expected to come from digital transformation.

With digital transformation picking up across the public sector, however, the figures shed light on questions about just how big a benefit transformation is expected to produce.

Measures will reallocate $500m of the savings to “specific initiatives to assist agencies to manage their transformation to a more modern public sector”, the Budget papers say. The funding will be used for ICT-related measures, such as $45.1m over four years to fund the “core operational component” of the myGov government portal and $5.4m for a joint team — comprising representatives from the DHS, DTO, Department of the Treasury and Department of the Prime Minister and Cabinet — to “identify future developments to meet user needs”.

This funding complements previously announced MYEFO initiatives, such as a $61.9m data-analytics upgrade for the ATO — expected to generate $222m in additional revenue over the forward estimates — and $18.8m for digital procurement reform under the auspices of the DTO and the government’s National Innovation and Science Agenda.

The word ‘transformation’ appeared 63 times in last year’s Budget Paper No. 2, with modest investments and savings peppered through the Budget. By contrast, this year’s Budget Paper No. 2 mentions the word only 10 times — suggesting that the coming fiscal year is being seen as more of a time for realisation of earlier transformation initiatives.

This change is in line with the progress of transformation efforts in private and public sectors, according to Jim Duncan, group vice president at Verizon Enterprise Solutions, who told GTR that transformation-minded organisations are “taking a step back and having a revolutionary look at their business practices. This is the true digital transformation.”

“It’s not just digital transformation,” he added, “it is business transformation. Technology is the underpinning foundation, but this is a major change in the customer engagement model. We are seeing the government recognising the need to be agile. It has been interesting trying to understand how government and enterprise are trying to grapple with these new ways of doing business.”

Challenges ahead

The federal government’s statement of expectations from transformation is in line with recognition that its aggressive agenda is positioning the government high on the global transformation leaderboard.

The recent 2016 Connectivity Benchmark Report by application integration vendor MuleSoft — a company that facilitates the creation of API-driven platforms that simplify the functional re-usability that is a core component of digital transformation — surveyed 802 IT decision-makers globally and found that 73% of Australian organisations are executing on digital transformation strategies while 43% had reported “significant progress”.

Despite this seeming progress, however, Australia’s efforts were seen as relatively disorganised, with the highest level of misalignment between business priorities and IT investments (cited as 60%, compared with 45% globally), as well as a lack of executive support.

These obstacles meant that just 15% of Australian respondents were very confident that they will meet their transformation goals in 2016 — and only one in 10 were very confident that they have all the resources they need to achieve those goals.

The MuleSoft study also explored the types of business processes that were subject to transformation and found most engagement with development of web-based applications and services (80%), going paperless and integrating digital technologies (77%) and adopting a new, disruptive technology such as the Internet of Things (72%).

Some 44% named improvement of existing business processes as their top digital initiative, although making this happen may prove harder for Australian organisations than those in other countries — 52% of Australian organisations said their transformation efforts involved integrating more than 50 applications, compared with 32% in the US and Hong Kong.

Echoing the government’s expectations of its transformation initiatives to start delivering financial benefits soon, Australian businesses are feeling pressure to deliver line-of-business transformation projects faster than ever — 45% said they were expected to deliver such initiatives within six to 12 months this year. Some 12% said they had just three months to complete their work — up from 5% facing such short deadlines a year ago.

Despite increasing pressure to deliver, Duncan said government and enterprise transformation initiatives alike needed to be implemented as ongoing efforts, not just short-term wins.

“If you’re going to drive transformation, you’ve really got to be in that ideation phase,” he explained, “because implementing a solution and then walking away is not a model that works well in a digitally transforming world.

“At the end of the day, citizens are consumers, and they think about the services that they consume in a way that’s driven by what they do in their daily life. They expect government to be able to deliver services in a similar fashion.”

Pictured: Prime Minister Malcolm Turnbull.