According to Alfred Ng, Assistant CIO at the Office of the Government CIO (OGCIO), there are a number of factors that have contributed to the take-up of outsourcing in the former British colony. “There are three main reasons. The first one is simply to enlarge our delivery capacity. Second to that is the need to accelerate our pace of system delivery, and then finally the third reason is to foster the development of the IT industry.”
Over the years, the OGCIO and its predecessor agencies have been outsourcing a number of different forms of IT activity to the private sector - including one-off application development, ongoing systems maintenance, and even some non-core IT-related business functions.
“We have limited resources, and we have a lot of ITprojects to accomplish, so we need to outsource our projects, so as to enlarge our delivery capacity,” Ng says, elaborating on the first reason.
Similarly, through outsourcing the government “can get extra resources” to streamline theIT project process so as to accelerate the system delivery.
Ng goes on to elaborate the third reason that it is to foster the IT industry “in Hong Kong as well as the neighbouring countries”.
Raising the level of execution
Hong Kong’s Office of the Government Chief Information Officer was established in 2004 in accordance to government’s vision to improve service delivery and rationalize the management of the government’s IT projects.
Headed by a Government Chief Information Officer, the OGCIO was formed by merging the functions of the former Information technology Services Department and the IT-related divisions of the Communications and Technology Branch of the Commerce, Industry and Technology Bureau.
An important role of the OGCIO is to centralise all pan-government IT initiatives aimed at raising the productivity of Hong Kong’s public sector.
Through outsourcing initiatives, OGCIO seeks to leverage on the private sector’s expertise and best practices for practising more cost effective solutions and management services to the government.
Prior to a project being outsourced, certain cost analysis for the delivery of the outsourced project needs to be accomplished.
“For this, because outsourcing is our preferred option, once the baseline costs of doing something in house are known there is no question why we should not outsource,” shares Ng. “And for each IT project, we will do assessment of the cost as well as the benefits.”
When it comes to benefits, the authorities look for tangible as well as intangible benefits: “Tangible benefits are obviously accountable, in terms of savings of staff, savings of money,” Ng explains. “Whereas intangible benefits are things like better service, better quality, better delivery time. So for every project, we do a case assessment and confirm prior to the decision to outsource.”
Currently, around 90 per cent of the OGCIO IT projects are done through outsourcing. In terms of contract value, this amounts to around 95 per cent.
It pays to be selective
Provided the massive amount of IT outsourcing companies out there competing for a share of the pie, the selection for suitable partners has become tricky. Normally a tender process is launched for each project, and a comprehensive set of criteria needs to be put in place to streamline this process.
“For the selection of contractors, we have two the principal criteria: one is the price, the other is the quality,” shares Ng.
Price factor is obvious, particularly for governments who have to be prudent in expenditure since they are spending taxpayer’s money.
“For quality, we look into different quality aspects; and these aspects might be different for different projects,” elaborates Ng. “In general, we consider company capabilities and experience, and references, the outsourcing qualification and experience of the proposed personnel, past performance in previous projects, and also whether the company or companies have some innovative technology. These are the general items that we look into as criteria for the proposal.”
While launching a bidding process, OGCIO follows the World Trade Organisation’s Government Procurement Agreement (GPA),a special multilateral regime that applies to government procurement of WTO member states. The GPA establishes an agreed framework of rights and obligations among its parties with respect to their national laws, regulations, procedures and practices in the area of government procurement.
“We will issue an open tender to all registered bidders, also put up our requirements on the government procurement website, so every company involved will get noticed,” explains Ng.
OGCIO maintains a list of 22 technology contractors. These contractors are classified into four different categories in accordance to different kinds of services they provide. The four categories are:
• Pre-implementation & project management services
• On-going delivery services
• Full system development life cycle services
• Information security services.
Those who are listed will get notified for the new government tenders. The list of contractors is reviewed and updated every 42months.
In the beginning of this year, OGCIO awarded the host and management of Hong Kong government’s Central Computing Centre, which consists of ten IT infrastructure systems from seven government departments. This project is the first major data centre project outsourced by Hong Kong government.
After the tender is awarded, the implementation of the project by external partner(s) needs to be constantly monitored to ensure the quality of the project. Even when the implementation phase is accomplished, a certain level of services and updates need to be maintained.
“First of all we have to specify our service requirements, making sure there is no misunderstanding or misinterpretation after we have awarded the contract,” explains Ng. “During the entire process we will obviously review contractors and put in place the mechanisms to ensure the appropriate ongoing management of that contract.”
“I think in our case, a number of things that other government agencies can make reference to, because in our case, we take a ‘business utility’ type of approach,” Ng continues.
Ng explains that the Hong Kong authorities have developed a firm understanding of the requirements of the private sector, with a view to ensuring that the delivery of contracted services is supported by robust parameters.
Whether for technical delivery, or relating to payments, the government has had to learn how to engage with external parties over the course of its outsourcing projects – and true to the territory’s reputation as a business-friendly haven, Hong Kong is now very responsive to market needs in the preparation and management of outsourcing contracts, whilst at the same time safeguarding the public interest: “I think these arrangements are most important, and something that other governments can make reference to.”
The other side of outsourcing
Since the implementation of the outsourced projects is carried out by external parties, the impact to internal staff needs to be monitored and managed. In addition, effective communications and information flow within the organisation need to be maintained.
“I think we all know that outsourcing brings about big changes. For example, in our data centre outsourcing project, it did bring some change to the personnel,” Ng shares. “After outsourcing contract, we have to inform our staff to win and maintain their support for the process.”
In some cases the Hong Kong government has established specific training schemes seeking to target the needs of employees affected by a transition to an outsourced environment – and there is support for the needs of prospective outsource partners as well, in order to ensure that all elements of the process are managed in accordance with the highest HR standards. In this way the Hong Kong administration has been able to streamline its operational structure without undue resistance from civil servant staff themselves.
Commenting on whether the scheme is working well, Ng says, “Yes, we have a number of staff applying to join the scheme. I think most government departments are doing similar things, in different areas. Different countries have different characteristics,” Ng comments. “But there are some common things that we apply.”
Open to ideas
From what Ng says, a key ingredient in the successful expansion of the territory’s IToutsourcing programme has been the willingness of the OGCIO to engage openly with all involved stakeholders– whether individual government agencies, government employees, and interested parties in the private sector. In a sense the relatively small size of OGCIO in relation to the primary delivery departments has helped establish a culture that remains open to feedback.
“I think generally we are doing well,” adds Ng. “What we need is a good forum for us to share information and experience. This is something where Public Sector Technology &Management is a good channel for people to know each other, for different governments to share experiences,” he rather kindly concludes.
By Jianggan Li | 18 December 2006
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