Home > The Body Politic > What was the point of this?

What was the point of this?

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treading water

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Two years ago, National awarded $7 million in grants to local businesses. As then-Science and Innovation Minister Wayne Mapp said,

… research science and technology was the way to create jobs, economic growth and a higher living standard for the country.

“To that end, it is vital that high-tech, exporting companies maintain their competitive edge in global markets.”

Of  a total figure of about $50 million, $7 million was awarded to high-tech companies;

Core Technology: $629,400

Open Cloud: $2,394,920

Xero: $4,040,000

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$7m grants for Wellington tech businesses

Acknowledgment: Fairfax Media – $7m grants for Wellington tech businesses

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So far, so good; National assisting small-medium businesses to build and hopefully hire more staff.  What could possibly go wrong, you ask?

Well, this is the National-led government we’re talking about here…

Fast forward to 2013, and on 1 May, Revenue Minister Peter Dunne announced

… the Government’s biggest ever overhaul of a Government IT system – a $1.5b upgrade of the department’s “First mainframe” computer system.

Mr Dunne admitted the system was “fully stretched” and a 10-year project to upgrade the system was required.

He said he wanted to make sure a Novopay-like situation could be prevented in the roll out.

“It’s fair to say the revenue system is at capacity, and the Government recognises the need for a substantive transformation programme to shape Inland Revenue to best serve New Zealand in the future”.

Acknowledgment: NZ Herald – $1.5b upgrade for IRD’s ‘fully stretched’ computer system

Aside from the extraordinary cost of such a project – $1.5 billion!?!? – which even rightwing blogger, David Farrar has questioned (see:  Drury on IRD computer system) – this would be a prime opportunity for local IT businesses to get stuck in and tender for the project.

Companies like,

Core Technology

Open Cloud

Xero

These companies, remember, have been given $7 million of our taxes to grow their businesses.  The IRD project would be ideal to fulfill those expectations of growth.

Except – and remember, this is National we’re talking about – the criteria for tendering excludes most (if not all) local IT companies,

The information technology industry is crying foul over the criteria set by Government departments to work on multi-million dollar contracts.

A lobby group, backed by the Green Party, says the Inland Revenue Department is making requirements too hard for local companies to meet so contracts are going offshore.

[…]

Local firms say the criteria meant they couldn’t bid for the job.

You have to have $400 million worth of assets for example, it makes it very very difficult for New Zealand ICT companies to get over those bars,” Green Party co-leader Russel Norman claims.

Acknowledgment: TVNZ – IRD under fire for hiring international firm

What New Zealand company holds $400 million worth of assets?

Not many, if any, to quote The Scribe.

Unsurprisingly, the criteria was written by  French multinational Capgemini – one of the world’s largest IT consultancy companies.  The same company,  Capgemini, has also been hired to  “advise” on the tender process which is worrying the  IT industry that it  will be cut out.

This, to put it mildly was met with disgust and derision by local New Zealand IT companies such as Xero CEO, Rod Dury, who wrote a scathing op-ed for the NBR on 2 May,

The New Zealand Government has recently agreed to spend $1.5 billion to redo the New Zealand tax system.

To anyone in IT this is an obscene amount of money to spend on any software project.

From the outside it seems like a slow moving train crash reminiscent of earlier Big Bang projects that always blow out if they are ever delivered.

It reeks of global consulting firms winning the business and then rapidly hiring a bunch of grads and putting them up in hotels for years.

It’s just not smart.”

Acknowledgment: NBR – Dear IRD: how to shave $1b from your $1.5b software spendup

Rod Dury points out,

“A $1.5 billion  injection into local service companies, that are world class, would grow an industry. Government spending of this magnitude should see numerous other benefits.

It’s easy to say nothing but the fact is government officials have no idea what’s reasonable. The companies with the budgets to win these projects are the people officials meet.

To a well meaning amateur $1.5 billion seems a massive amount of money for a relatively moderate volume transaction system.”

Acknowledgment: IBID

Far from being a nay-sayer, he then offers four positive, practical, constructive suggestions how the IRD (and National) should proceed on this issue.

This blogger concurs with Mr Dury.

We’ve  had previous disasters with INCIS (American IBM); Novopay (Australian); and problems with imported locomatives (Chinese) – projects  which could, and should,  have been built here in New Zealand, with money going to local workers and firms.

This is not left-wing fantasy, this is fairly obvious common sense. We can do it; we have the skills; the nous; and the determination.

Aside from generating local  jobs and business growth here in New Zealand,  Xero’s Rod Dury sez we can build a new system for IRD for far cheaper than the $1.5 billion mooted by Peter Dunne and others,

But rather than just criticise here’s some practical suggestions I’d offer to to see if we can save $500 million to $1 billion in spend.

Acknowledgment: IBID

Rod Dury did not mince his words,

This just flies in the face of best practice in the way New Zealand companies have been building world-class software really for the last five or 10 years.”

Acknowledgment: TVNZ – IRD upgrade another potential train wreck – expert

So why isn’t National giving local companies the opportunity to bid fairly for the contract?

Why give grants worth millions of tax-dollars to  local companies if this government is not prepared to subsequently support them with contracts?

What was the point of this?

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Addendum

When I contacted Rod Drury on this issue he responded via Twitter, he replied on 4 May;

Rod Drury ‏@roddrury 4 May

@fmacskasy @clarecurranmp the companies that should be doing it are Intergen, Datacom, Simpl, Optimation. Works class local services biz’s

He actually suggests other companies that could be involved – not his own.

This blogpost was first published on The Daily Blog on 4 May 2013.

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  1. 7 June 2013 at 10:03 am

    If the tax system was simplified dramatically, surely the computer systems required to run it, and probably the number of staff required to administer it would be reduced, saving heaps of money that could be spent on more productive things. I have read that the dreaded transaction tax would be simple to run, and could almost completely replace our current tax regime, while taking in the same amount of money.

  2. 7 June 2013 at 11:06 am

    So true Robyn.

    Bring on the transaction tax.

    As foir this nats rout its gotta go.

  3. di\
    7 June 2013 at 2:13 pm

    $1.5 Billion allows for lots of kickbacks or ‘donations’ to political parties. Simplifying the tax system would preclude ‘donations’ from big accountancy firms and might make ‘tax minimisation’ more difficult for the rich elites. This seems a highly rational choice for a National government. Besides, the sheeple don’t seem to catch on.

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