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Public agencies have been locking in hundreds of millions of dollars of contracts for big IT upgrades even as the government pledges to cut contractor spending.
The big winners so far are giant American corporations, cashing in on a push towards cloud computing coming from the government.
The deals create tension around Labour leader Chris Hipkin's election pledge last week to cut spending on contractors and consultants by $165m next year.
"The reduction in this spending is just that, a reduction - it's not a cut to zero," Labour's finance spokesperson Grant Robertson told RNZ on Monday.
"Ministries and departments will make their own decisions about how they manage that."
The new big tech contracts, signed or upcoming, covered health, water, welfare and a judicial IT project called "the most significant change in courts' history", similar to a beleaguered project in the UK.
The deals were in line with a more aggressive government policy since May for agencies to use private off-site cloud services, rather than store information themselves.
The judicial deal worth about $170m is with DXC of Virginia, that already has a master contract over facial recognition services with Internal Affairs. Internal Affairs itself had issued half-a-dozen Three Waters tenders since late July, most of them requiring use of Microsoft products.
The cornerstone Three Waters contract - worth $107m, which underpins a half-billion-dollar system - has been won by Infor, a US cloud company bought out in 2020 by Koch Industries, linked to the controversial US conservative fundraisers the Koch brothers, David, who died in 2019, and Charles.
Amazon and Microsoft have won out in a tag-team project to put New Zealanders' sensitive health data on the cloud, in a project already into its second phase at Te Whatu Ora, which has also awarded its national data platform build to global consultancy Accenture. Acumen BI is among the local firms picking up work around the fringes from Accenture.
The Ministry of Social Development has a tender pending for a mass systems upgrade and IRD, a year on from its massive $1.5b tech overhaul, embarked in June on major cloud spending - only to say on Monday it had put this on hold "for now".
The National Party has lambasted the government over contractor spending, and said it would cut it by $400m a year, from over $1 billion now.
The $165m cut promised by Chris Hipkins last week has not so far been trained on any targets.
Robertson said ministries had been asked to identify areas to cut, and "that work is underway".
The Public Service Commission said what mattered was that the overall operating spend on contractors and consultants dropped to under 11 percent as a proportion of total workforce spend, by next financial year, after spiking upwards last year. (A change in Treasury rules in 2022 means some projects that would previously have been reported as capital expenditure will now be reported as operating expenditure.)
"Individual agencies may be higher or lower than that 11 percent target from year to year, depending on the nature of investment going on each year," the commission said on Monday.
This might provide an incentive for some of these agencies to hurry to get in first, and lock in big IT spending now; and where those contracts go offshore, the pressure could go on domestic contracts in order to find the cuts the government wants.
A local cloud computing firm warned against the "hype" around the "hyper-scale" cloud companies, that fostered the risk the government and companies might pay over the odds.
"People get caught up in the hype of the cloud - people look at it cos its sexy and cool, but look at the cost-benefit," cautioned the country manager of ASI Solutions, Lloyd Vickery.
The advanced tools the hyper-scalers offered were useful, but could be accessed via local firms offering the basic services at a keener price, he said.
"We definitely find that when given the opportunity, our servers are half the price of a hyper-scaler provider. Nine times out of 10 there are local companies that can provide a better solution."
But the government's position "at the moment feels more like it's, 'Go buy it from a hyper-scaler,'" and it should clarify that agencies could buy local, Vickery said.
His colleague Sandy Antipas was more blunt in an online post saying he could provide Te Whatu Ora with data services for a quarter of the $106m contingency allowed for on a data build.
"Using today's market, $25m will be more than enough. Knowing what's involved for large enterprise can be complex but it doesn't have to be," Antipas said.
IT projects can be fraught, no matter how big the contractor. In the UK, its equivalent of New Zealand's new Te Au Reka court digitisation programme was way behind time and two times over budget at $2b, with "myriad problems" that have raised questions in Parliament as to whether its rollout risks undermining public confidence in the justice system.
Here, secretary for justice Andrew Kibblewhite told MPs last week New Zealand would hopefully learn from examples like the UK's.
"Probably at large it hasn't gone well for them," he said. "It's had big overruns, it's taken longer, it's caused a lot of angst and grief there."
The court reforms follow health reforms that have triggered multiple major IT projects. Te Whatu Ora is not part of the core public service, so not subject to the government's directive to cut contractor spending in the same way as the core public service is.
Similarly, the water supply reforms are a windfall for foreign data firms.
Internal Affairs is part of the core. Its handful of recent tenders include one to provide services to each of the 10 new water service entities, typical in stating that Microsoft's cloud computing platform Azure will be at the core of it.
The government's cloud-first policy is worded in such a way to give preference to hyper-scalers like Microsoft that are moving to build data centres in New Zealand.
Contractors made up 13.4 percent of public service workforce spend when Labour took office, shrank to 10.4 percent in 2020 then ballooned to 14.6 percent.
The government made its decade-old cloud-first policy even more aggressive in May.
