Government aims for closer IT links in wake of axed deals

The government said it will seek closer relations with information technology service contractors, following the latest in a series of cancellations of outsourced deals worth more than HK$440 million since February last year. The dismissed IT contractors include multinational service providers EDS and IBM, both of which have been threatened with lawsuits by the government. 'We shall be enhancing our regular dialogue with the IT supplier community and support organisations, with a view to improving the mutual recognition of roles and responsibilities in IT contracts,' a spokesman for the Office of the Government Chief Information Officer said. The government, which will outsource an estimated HK$1.8 billion of IT business this year, is reluctant to disclose the full extent of the cancelled contracts. Only after reporters received anonymous tip-offs last week did the Social Welfare Department confirm that a HK$30 million deal with United States-based EDS had been terminated on September 18. That was the same date on which the company committed to complete the contract to supply, deliver, install, run and maintain the Client Information System (CIS) at the department. EDS won the deal on June 1, 2004. In February last year, the Transport Department ended a HK$60 million contract with IBM awarded in 2003. The Transport Information System project represented the core IT infrastructure for the Intelligent Road Network strategy, aimed at providing travellers with the quickest route to their destination. Two months later, IBM had another contract cancelled. It was worth about HK$350 million and was for the design, building and implementation of the financial management and information system for the Treasury Department. The Treasury claimed IBM failed to deliver the first phase of the project as agreed in April last year. Government requirements in some IT services projects 'may not have been set out right from the beginning', said Twiggy Lo, a principal analyst at research firm Gartner. That would mean the service provider needed to comply with additional work, higher overheads and lower profit margins, she added. The Chief Information Officer's office rejected that idea, saying government IT projects are managed under a framework covering business, technical and user aspects of the endeavour. 'Change management is an essential and very important part of the project management framework,' the spokesman said. 'Whether changes are chargeable is determined by the contracted price and scope of the projects.' The Office of the Government Chief Information Officer, headed since February last year by Howard Dickson, is the principal adviser on public sector IT policies, investments and programmes. It assists the Secretary for Commerce, Industry and Technology in formulating such strategies. The Transport Department and Treasury have consulted with the Department of Justice to help determine the legal recourse of their respective cases against IBM. The Social Welfare Department has paid 'a small amount of the contract price' to EDS and it is considering litigation to reclaim that unspecified payment, the department's spokeswoman said. 'Despite the department's close monitoring and repeated discussions with the contractor, the contractor still failed to provide a system that could fulfil the requirements of the contract,' she said. EDS, confirming cancellation of the contract, said the company 'has been responsive to our client's requests at all times'. David Wirt, chief operating officer and vice-president for global delivery service at EDS Asia, said: 'We would still like to resolve any outstanding issues to the mutual satisfaction of both parties. As a major IT service provider in Hong Kong, EDS continues to support the government in a number of other projects.' PCCW Solutions is a beneficiary of the cancelled deals. The IT services unit of telecommunications operator PCCW secured the re-tendered Treasury contracts. The Web-based Treasury project will replace the agency's ageing ledger accounting system and help its move into an accrual accounting set-up to better reflect government revenues and expenditures. PCCW Solutions on August 23 also won the 18-month, HK$103 million Transport Information Project contract. The Social Welfare Department said it will re-tender the CIS project, which is designed to provide a centralised database that enables client information to be shared among frontline social workers to improve case monitoring and service planning, and prevent fraud. 'If everything goes well, the CIS is expected to operate in about two years' time,' the department's spokeswoman said. The government, Hong Kong's largest consumer of IT, has been outsourcing about 95 per cent of its IT projects under a programme started in 1998. The cancelled IT services deals 'will not affect our overall policy and direction of IT outsourcing', the Office of the Government Chief Information Officer said. 'The number of IT service contracts terminated is very small compared to the large numbers of projects being undertaken by government.' The government IT services market in Hong Kong will grow to US$238 million this year from US$223 million last year, according to Gartner. Gartner data shows that IBM and PCCW Solutions were the top two IT outsourcing services providers in Hong Kong last year, with revenue worth US$39 million and US$35 million, respectively.