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Privatising Infrastructure by Stealth

Written By: - Date published: 3:07 pm, January 20th, 2011 - 16 comments
Categories: national - Tags: , ,

Government IT projects are easy to take aim at, as they always come out over-budget, late, and with numerous difficulties, whoever implements them.  But National deserve their flak over the ultra-fast broadband roll-out – Joyce hasn’t a clue how to implement what was to them an election slogan, but to the public a badly needed resource.

But there’s another IT project going on under the radar, and one National is prepared to spend more on – $2billion rather than their limit of $1.5billion for broadband.

This one is about privatisation by stealth, or “Infrastructure as a Service” as they like to call it.

It means all your private data will be stored on some corporation’s computers, not the appropriate department.

Oversight of the network and its security will be by the lowest bidder.

The government gets out of the messy business of actually owning anything IT-related and pays someone else to do that for it.  And then pays to access the data or any use of computing power.  It reduces up-front costs on investment by massively increasing year-on-year costs on services.  Like Public-Private-Partnerships, it’s generally about pushing items off balance sheet so the books look better – even if it doesn’t end up making long-term financial sense.

Nine government agencies are currently committing to the change, including Inland Revenue and the Department of Internal Affairs.  So that’s all your tax info and your personal passport / driver’s license etc information being handed over to the private sector.  And all New Zealand’s Archives and National Library, now they’ve lost their independence and been folded into Internal Affairs.

I’ve nothing against cloud-computing, indeed it’s amusing to watch the server/terminal model come back after a couple of decades on the outer.

And National should be praised for actually spending something on infrastructure to boost the economy in recession, and the government’s IT systems are probably somewhere future efficiencies can be gained by investing now.  It may not be the best boost for the NZ economy of course, as most of the bidders will be the big international firms.  The tender, due February 21, has caught the eye of companies such as IBM, Hewlett-Packard, Dell and Cisco.

But the government is going to be one of the first to have “Infrastructure as a Service” – so it is an untested concept that needs a lot of care.  The public sector is a big enough pool that it could easily have its own cloud, looked after and controlled within the public service.  Looked after without a profit motive to cut costs on security and quality.

Because we don’t want to lose our most sensitive data to either unauthorised sources or the ether.

16 comments on “Privatising Infrastructure by Stealth ”

  1. The Baron 1

    Hey Bunji,

    Did you realise that all of those same agencies outsource the purchasing of the stationery to the private sector too? All of those pens and paper so vital for keeping machinery ticking over are built by evil, horrible private enterprises. When oh when will it end?

    Don’t they know that in order to meet The Standard’s increasingly shrill and nonsensical definition of privatisation, that every agency needs to be doing everything itself? Better tell the Department for Conservation that they need to start building their own garden tools, cos they’ve been privatised too.



    • Colonial Viper 1.1


      You should be kinder to yourself; you’ll lower your self esteem if you keep calling yourself this.

      BTW there is a difference between a Ministry buying in a consumable product, and losing control of direct systems oversight.

      Also this privatisation shifts the responsibility for inevitable data theft and misuse one step further away from the Government and the relevant Minister.

      This change opens up a world of hurt for the ordinary citizen.

    • Bunji 1.2

      I have no qualms with them buying the computers from the private sector, which seems to be the dried-grass human you are constructing.

      Would you think it sensible if the government hired a pen every time they needed it, to follow your not-particularly-fabulous analogy more correctly?

      The private sector will own the computers, the data centre, the software, and will maintain the network, computers, security etc. How is that not privatisation?

    • Richard 1.3

      Did you realise that all of those same agencies outsource the purchasing of the stationery to the private sector too? All of those pens and paper so vital for keeping machinery ticking over are built by evil, horrible private enterprises.

      Those agencies don’t outsource storage, archiving, security, and access-control over what is written by those pens on that paper.

      It’s not outsourcing the manufacuture of the IT network under consideration; that is obviously always going to be a job for outside contracts. It is about outsourcing the ownership of the IT network, and therefore losing control over the data.

  2. Draco T Bastard 2

    Rackspace CEO On The Future Of Cloud – video

    Mr. Napier addresses the issue of security in the cloud—but not the normal worry about protecting your data from hackers, but rather the fear, as Amazon’s treatment of Wikileaks demonstrated, that putting your data onto a cloud provider’s service means you no longer control your own data.

    The government losing control of our data is not acceptable.

  3. tc 3

    Utimately outsourcing costs more and many savvy companies are bringing it back inhouse as it’s not cost effective in the long run and customers/users are pissed with the outcomes which is exactly why they’ll do it as they don’t give a F about the customers….you and me.

    Every time you need a new service or require a change (like a GST rate increase)….BAMMO they’ve got you as you’ve effectively monopolised your IT with them which’s an interesting position for a govt that bleats on about ‘choice’ and ‘market forces’.

    Another short term one off gain for someone else to have to fix which’s par for the NACT course.

    This will also drive more skilled kiwis offshore as they will not be required by the outsourcers who have their sweatshops in Bangalore etc already staffed with low cost process monkeys ever ready to dismiss your call as it didn’t comply with the rigid rules supplied by the customer.

  4. infused 4

    Considering I’ve put in RFP responses to some of these, I can tell you you’re full of shit. Most of these are out sourced IT support contracts. IT has been moving this way for years. It’s better value at the end of the day. More IT professionals for fixed costs.

    Data has always been hosted elsewhere. Most govt departments are run in data centres that have nothing to do with govt. Can’t name names.

  5. BLiP 5

    The bulk of the New Zealand government’s data services and information on its citizens is already held on privately owned databanks. Labour has been as cavalier in this regard as National Ltd™, although the latter seems quite happy about proffering more “corporate welfare”.

    If its privatisation by stealth that you are concerned about, I suggest you direct your attention to things like Whanau Ora, education, and housing services for better evidence of National Ltd™’s ambitions in this area.

  6. tc 6

    Depends on what outcome you want infused. More IT professionals doesn’t mean better service and value necessarily.

  7. Cannot think of a clever name 7

    Firstly, apologies a long response

    Several points here:

    – Most if not all of the agencies mentioned already outsource management of their hardware and software platforms to the HPs and IBMs of this world. They do this because they historically had a terrible record of management of systems practically across the board. The Fonterras and Telecoms and their ilk had just as bad a record of managing their own systems operationally and outsource in precisely the same manner. This has been occurring for 20 years or more in many govenrment organisations.

    – Management of large complex environments is a specialised capability with singificant organisational, infrastructural requirements where government organisations struggle to attract the appropriate quality staff as the vendor organisations are often seen as more attractive places to work with greater challenges and variety, which is very important to the typical quality techo. Once again, many commercial organisations also have the same difficulties attracting the required staff. There are already huge contracts in place from government agencies totalling hundreds of millions of dollars to these large vendor organisations.

    – Many organisations, including government, already lease capacity as required and do not purchase. Often it is more cost effective. From a tax perspective all costs can be expensed and they are enabling the supplier to shuffle, manage and re-use the tin and keep costs down rather buying the latest and greatest when there are capacity issues.

    – Private government data is already accessible to specific employees in commercial organisations and has been accessible for tens of years as such access capability is a natural consequence of either implementing, supporting or managing systems. I, personally, have at various times had access to personal government held data via specific IT roles, have not been a government employee at the time and have to swear away my life, sign confidentiallity agreements, destroy any hardcopies of specific data etc and it is made clear to me that any deliberate breach of confidentiality is deemed a major breach of my employment that can result in immediate termination and difficulty getting work in the IT industry again. Considering the level of trust such a role requires that does not seem unreasonable. Having done my fair chunk of security and database work, including audits, the stats are clear. The vast bulk of such breaches are performed by the employees of the organisation and not via any outsourcing or contracting of commercial organisations. This has been true 40 years as outsourcing has been in place for at least that long in various guises.

    – There is a relatively recent trend to utilise a lot more offshore staff in such roles to reduce costs. This can now be reasonably performed as systems can be accessed from anywhere with a fast internet connection. It’s my personal opinion that this reduces the quality of the service, in some cases significantly. In general, the average quality of the equivalent technical staff is not as good out of India or the like compared to NZ, there are communication issues based on language and the internet reduces but does not remove the issues occuring due to geographic remoteness. The adage you get what you pay for still applies. I do have some concerns when the management goes offshore as the deterrent value against security breaches is less for someone offshore but I do percieve this to be marginal and not significant in relation to the security breaches that occur via the employees of any organisation.

    – If you talk to any accountant they tell you to lease what depreciates and only own that which retains or increases value. The two main examples of this are cars and computers. Computers depreciate faster than automobiles as they become out of date so quickly.

    – In any systems the hardware component is typically a relatively small component as hardware has become significantly commotiditised. The management, support etc far outweighs the cost of the tin. The bulk of these services are already outsourced.

    So, what does all this long winded response mean:

    1) it is not privatisation by stealth as much of this already outsourced (or at the very least it is incremental to what already occurs in VERY significant amounts already). It is not privatisation of any items of capital that retains any value as no such beastie exists in computer systems.

    2) Security is not affected by such initiatives as they already accessible to commercial organisations

    • ghostwhowalksnz 7.1

      Ask Air New Zealand how having IBM running their core systems turned out.

      Ask Qantas how outsourcing of maintenance as ‘power by the hour’ for the Rolls Royce engines on the A380 turned out.

      • infused 7.1.1

        So that’s what one issue that actually relates to this? One issue and how much stuff is out sourced in NZ?

    • BLiP 7.2


      [lprent: added a wikipedia link for the young amongst us. ]

  8. Cannot think of a clever name 8

    “Ask Air New Zealand how having IBM running their core systems turned out.”

    Agreed – I’m not one of those who believes outsourcing is the magic silver bullet it is passed off as. Though to be fair I have seen some pretty impressive disaster stories relating to in house managed operations as well – they tend to not to make the press in the same way. Sometimes it works really well, sometimes not and is only as good as the implementation. On balance it is probably better than keeping in house for most large organisations but I wouldn’t bet the house on it.

    The point was back to the premise of the original post about privatisation and control being handed over. These services are already mostly being managed by external parties. This is not new. There is no stealth, there is no privatisation of existing assets or services, it looks like consolidation and (hopefully) some cost savings via bulk buying power.

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