Despite the inherent complexities of trying to get work with government organisations, some local IT providers still see government contracts as the proverbial pot of gold.
Many more, however, have toiled for years and have not even glimpsed the rainbow - let alone the gold - and turned their backs on government business for good.
One such local IT executive describes trying to get a foothold in the shifting sands of government business as 'the most infuriating experience I've ever had'.
You would never guess that by reading through government papers on the topic. Canberra-based IT consultant Longley Stapleton says that throughout all levels of government there is 'a generally stated preference for small to medium Australian business suppliers; despite this, however, the significant IT contracts are still let to large companies'.
David Wigley, managing director of Canberra-based integrator Open Systems Australia, says government could certainly smarten up its act in supporting the local IT industry.
'Multinational companies get government business over Australian companies because basically they're perceived [by government] to be a lesser risk than a smaller Australian entity.'
Open Systems does about 60 percent of its business through government and Wigley does not believe multinationals have anything to offer above and beyond the local IT industry.
'Outsourcing was the biggest opportunity Australian IT businesses ever had and what did the Government do? They threw it away and gave it to the American multinationals instead of dishing it out to Australian companies that could have taken it, grown and become major players in the international arena.'
It was a missed opportunity, he says. 'In the original round of outsourcing, if they'd split it up in to smaller units, more Australian companies could have had a chance at bidding successfully against the American multinationals. But they didn't - they grouped it up in to all sorts of big chunks, which were indigestible to most players in the Australian IT industry, and the only people who were going to get that were the Americans.'
Wigley says the Government was basically conned by slick, fast-moving multinationals and naïve in its assessment of what the effects were going to be on local smaller players.
Shadow IT Minister Senator Kate Lundy says when the Humphrey Review ditched the whole-of-government IT outsourcing initiative, the Federal Government set up an SME working group to identify the barriers to entry for small businesses.
Lundy says the efforts of this working group were largely frustrated. For example, she says, 'they were not even able to get statistics from the Government as to how much work was actually going to multinationals or going to local companies'.
What the working group did do, however, was articulate what everyone in the local IT industry was experiencing and the barriers to entry for smaller companies (see our breakout box on page 20).
No privileges
Optima Technology Solutions is a hardware and systems support company with 60 percent of its revenue derived from government and education sectors. Optima's managing director Cornel Ung says there are no 'privileges' given to local companies. 'Being a local company gives you no advantages. You have to compete openly with the multinationals,' he says.
On many levels, SMEs having to compete with multinationals is absurd. One Australian IT company - now making some headway with sales to governments here and overseas - only just survived years of knock-backs from government contracts and wanted anonymity for its comments.
'You can have the best products in the world, Australian-made products, products that have won awards all over the world, and yet still can't get the Australian government to use them. It's crazy.'
A spokeswoman for Daryl Williams, Minister for Communications, Information Technology and the Arts, says when Australian Government agencies purchase ICT goods and services they are required to achieve 'value for money' in the use of taxpayers' funds.
'Government procurement requirements also include measures to ensure Australian firms have 'appropriate opportunities to compete for business' and that at least 10 percent of purchases must be sourced from SMEs.
'Additionally for major ICT procurements of over $20 million, agencies must ensure minimum SME participation rates are achieved - 20 percent for software, 10 percent for hardware,' she says.
Many see this as vastly inadequate to promote an even playing field for local ICT companies - particularly small ones.
Vendors/government cutting out indirect channel
One of the barriers for local IT providers is direct vendor-government deals; cutting out the indirect channel.
Wigley says that is nothing new; governments have always tried to deal more directly with vendors. 'I believe most multinationals are seen as the safe option and that's basically why they get the business.
'But ... they're not necessarily the safe option at all. As its turns out, outsourcing has been an extremely expensive exercise for the Government and I'd dare say financially they'd have done a hell of a lot better if they'd outsourced in a smaller and more sensible fashion to local companies with particular skills in particular areas,' he says.
Minister Williams' spokeswoman says: 'Decisions on Government ICT procurement are made by each agency in accordance with the Australian Government's procurement framework.
'This framework specifies that the core principle governing procurement is achievement of value for money. The Government expects that agencies may deal more directly with vendors where this helps them achieve better value for money, leading to better use of taxpayers' money.'
'Better value for money' needs to include more than just bald dollar terms if SMEs are to get a fair hearing, however.
Andrew Richardson managing director of KAZ Technology Services, says local IT players need to show off why they are worthy of consideration.
'If you're not adding value don't expect to be included just for the sake of it. If you're a product shifter who's historically charged a few percent margin for handling product, then that's increasingly considered a low value add, and you shouldn't expect to have a seat at the table as a right. If the services you're offering are inherently value-adding, then the Government is very good at giving you a seat at the table,' he says.
One of the more serious inhibitors to getting government contracts, however, is tied up in insurance and liability. Richardson says the Government is moving more towards insisting on unlimited liability for direct and consequential damages in contracts. 'This clearly tilts the playing field towards very large providers who are more able to either take that risk or offlay that risk cost effectively,' he says.
He uses the example of a million-dollar project to develop a small system for a government department.
'Historically there'd be sensible caps on the extent of damages and consequential damages would be excluded. There'd be a strong onus on the provider to get it right.
'But increasingly the Federal Government's position is no matter how big the contract, unlimited liability is now mandatory. You might win a million-dollar project in a critical area, with theoretically hundreds of millions of dollars of damages.'
Clearly, to insure against that level of risk is more difficult f
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