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Notes for Remarks by Gaylen Duncan, President and CEO, Information Technology Association of Canada
To GOL 2003 Conference
February 25, 2003 – Ottawa
Good morning, everyone. I've been asked to talk about "Practical Solutions for GOL". 'Practical' is hardly the word I would use to ignite a stimulating discussion about the transformational possibilities of government on-line. It conjures up images of grey cardigans, K-cars and bicycle clips. In the interest of trying to keep your attention for at least a few minutes, I'd like to re-christen this presentation – "GOL – The Next Generation". What I'd like to talk about this morning is not the tried and true strategies for on-line service delivery, but the new ideas that changing the state of play in GOL around the world. I want to bring you a sense of what the far frontier looks like. And if I do this right, I think you'll see that I can also fulfill my original mandate. The solutions I want to talk to you about are creative, revolutionary and – as jurisdictions around the globe are demonstrating – immensely practical as well.
ITAC, as the voice of the information technology industry, has been a staunch champion of GOL for nearly a decade now. We believe that Canada has the capacity to be a global leader in government on-line. We believe that by seizing this leadership, Canada can achieve a number of favourable outcomes. First and foremost, we improve the delivery of service to Canadians. Second, government positions itself as a credible role model for other sectors more tentative about the adoption of electronic business. Third, it fosters innovation and strengthens our potential for exports. Brian O'Higgins was here yesterday. He can tell you that one of the reasons Entrust is doing so well in markets like China is because they have such a strong reference client in the Government of Canada.
GOL is much more than an attractive source of revenue to the IT industry. It is a strategic driver for wider public policy. In 2001, ITAC made seven recommendations about how to expand the nation's capacity for innovation. One of them was to invest strategically in broadband and GOL. We said that "GOL positions government not only as a conscientious provider of state-of-the-art services to its citizens through a dispersed, secure distribution channel. It also, by example, establishes the government as a force that leads us all toward a higher standard of innovation."
In essence, what we're saying is that there's a lot at stake in getting GOL right. I believe that getting it right will require a fine balance between practical and visionary approaches.
Getting GOL right is a pre-occupation for the Government-On-Line Advisory Panel – composed of 22 representations from business and academe. We reported to Minister Robillard last December on three key practical issues: governance, scope and communications relative to GOL. We also had seven recommendations to make to Minister Robillard:
- First, we called on the government to re-think its current operations and to develop an integrated service delivery network that is truly user-centric.
- Second, we stressed the need for a horizontal multi-channel, multi-service delivery network operating across programs, departments and jurisdictions.
- Third, we called for appropriate leadership and governance to ensure that GOL initiatives are appropriately considered, championed and lead.
- Fourth, we called for the appropriate resources to sustain horizontal service delivery on a permanent basis.
- Fifth, we recommended a funded communications program to promote GOL and drive the take-up rate. We also incidentally called for a long overdue name change for GOL.
- Sixth, we would like to sustain outreach to other orders of government, civil society and the private sector to refine the scope of the GOL service improvement initiative.
- And, finally, our seventh recommendation was to establish measures for engaging citizens, reviewing policies, aligning technology with the business of government and deepening the service offerings.
The panel has another year to go in its mandate. We'll monitor government progress on these suggestions. (Though the response to our fourth recommendation so far is not encouraging, I was very disappointed that GOL wasn't even mentioned last week in Mr. Manley's budget, in spite of all the talk about innovation.) We have also outlined our work for the next twelve months. We'll be working on metrics, sustainability and citizen engagement among other things.
My fellow panel members share a fierce commitment to ensure that the strong potential that we envision from GOL is realized. None of us wants to see Canadian leadership in this area falter.
Right now, we can be proud of the fact that the rest of the world can look to Canada for leadership in GOL. Accenture publishes an annual report on the progress governments around the world are making in area of electronic service delivery. The report scores and ranks jurisdictions and so far Canada has done very well in Accenture's assessment. For two years in a row, we have ranked first in terms of our overall electronic service maturity. Accenture explained its scoring this way "… the Canadian Government displayed strong leadership, an unwavering focus on the critical elements of a whole-of-government approach and a commitment to innovation driven by citizens' and business' needs." The report highlights familiar electronic government initiatives such as Netfile, Canada's Electronic Labour Exchange and Canada Post.ca among its examples of GOL "Best Practice". You can certainly get a warm glow of patriotic pride reading the Accenture reports. And its wonderful that our accomplishments can be recognized like this. But the task of the panel, the task of ITAC and the task of any one who believes that Canada can be a persistent leader among innovative nations is to challenge complacency.
Like everything to do with information technology, the landscape in GOL is constantly changing. Four countries, which Accenture describes as visionary challengers, doubled their 2001 scores in the 2002 report and placed among the top twelve. These were Germany, Ireland, Hong Kong and France. And then there's another group of countries just beginning to build their e-government platforms who are showing promising achievements. These include Mexico, South African and Malaysia. The field is highly competitive. Canada has a strong and early lead. We must ensure that it stays out front.
How do we do this? Through a combination of visionary leadership, bold experimentation and the careful attention to practical matters that could ensure the progress towards sustainable leadership. I'll come back to the practical matters in a moment. But I want to spend some time discussing what form bold experimentation in GOL might take.
The first area I'd like to explore is shared services. Shared services describes a relatively new organizational architecture in which common support functions for a number of departments or divisions within an organization are combined and then undertaken by one or more specialist centres. The concept is simple: bring together functions that are frequently duplicated across departments and offer these services through a shared services hub that operates as a free-standing business.
Shared services began to spring up in the early 1990s as large, decentralized companies combined some basic organizational processes such as payroll, purchasing and accounts payable in one centre and then sold back these services at cost to their individual units. This architecture has proven effective in the private sector.
IBM, for example, facing record losses in the early 1990s, considered splitting its divisions into separate independent businesses. Despite the mounting pressure, however, IBM new Chairman and CEO, Lou Gerstner, wanted to keep the company whole. To meet the demand for cost-cutting measures and yet enhance customer service, a shared service centre was set up for managing working capital. Each sales office had previously handled this function. In the first two years of operation, the shared service organization saved $3 billion (USD).
In Canada, Rogers has achieved comparable gains. Rogers has a number of diverse businesses with over five million customers who often deal with several of the companies. Each business used to have its own systems, computing and IT infrastructure and organization. Rogers decided to implement a common computing infrastructure for web services, networks, data centres and desktops. It is operated by a Shared Services unit. Standards are established by a CIO council and new technology decisions are worked out in advance. The decision of the council binds all companies. Customer facing software provides a common face to all Rogers customers, with web service providing a single point of service. The CIO of Rogers has overall accountability for the IT plan. Divisional CIO's support individual businesses and report jointly to the CIO and their divisional CEO. This shared service approach to IMIT has reduced costs and allowed Rogers to implement new technology more quickly. It also streamlines the supply chain and improves customer service.
The shared services concept has gained more popularity with the growing sophistication of desktop and networking technology, which made it possible for companies to link remote business units within a central information system without physically moving staff. The advent of enterprise resource planning software applications, which allowed companies to better plan and streamline their business processes, has also accelerated the trend toward shared services.
Now the Internet with its open standards is enabling the creation of virtual shared services. Organizations can consolidate functions and systems at multiple sites without physically combining systems or staff.
Business has seen the benefits of experiments with shared services so it's not surprising that many of us in the vendor community want to see governments enjoy them as well. First and foremost, shared services often capitalize on integration opportunities and eliminate duplications and redundancies. This, of course, can lead to considerable cost savings. The Gartner Group, for example, estimates that an organization can recover 20 to 30 percent of costs by implementing shared services.
As the Rogers example illustrates, shared services also encourage the adoption of common infrastructure platforms and new technologies that can redefine the way organizations, including government organizations, conduct business. For example, new technology standards, notably XML, allow different systems to communicate meaningful information more easily with each other, opening up new possibilities for greater synergy among different government departments.
Equally important, the shared services approach frees up strategic management resources to focus on customers or citizens. At the same time, it provides critical mass to the consolidated activities, enabling these vital activities to be guided by more focused and experienced management. As Schulman, Dunleavy, Harmer and Lusk explain in their book Shared Services: Adding Value to the Business Units, "Shared services, when performed correctly …. Allow each business unit to focus on the strategic part of its operations, putting more energy into performing strategic tasks."
I'm happy to say that some of the most promising experiments with shared services have occurred close to home. Over the past four years, the Government of Ontario has become recognized worldwide as a public sector leader in implementing the shared services concept. In 1998, in response to a constraint strategy to harvest $300 million (CDN) in business support savings, the Government of Ontario decided to consolidate its payments, payroll and strategic procurement functions. It migrated 1,300 employees from 22 different Ministries into one Shared Services Bureau, operating under a single new management accountability.
This shared services bureau provides 20 lines of business support services to ministries and agencies across the Ontario Public Service. These include financial processing, purchasing, payroll management and processing, benefit administration, training and general administrative services, such as translation and collections. Ontario is now reshaping business strategy by focusing on e-services and employee portals over a web-enabled backbone. It is providing multiple delivery channels and delivering an increasing number of services customized to the needs of stakeholders.
Of course, the initial move in this new direction was not without pain. It represented a fundamental cultural shift toward enterprise-wide thinking, and created the need to re-engineer many fundamental business processes. But now, Shared Services Bureau CEO, Sharon Cohen says, "it's unthinkable to go back to the way the Government of Ontario once operated." Although the pressure to prove the value proposition always remains, she believes that the shared services bureau has dramatically moved the yardsticks in terms of performance.
Early adopters of the shared service concept can be found in Ottawa, too. For example, I understand that Agriculture Canada performs accounting services for itself and several other related departments and agencies on a shared service architecture. I believe there will be more examples to report soon. Far beyond the business benefits, though, there's good public policy rational for looking at the shared service model. Shared Service industries have driven significant job growth in countries like Ireland and India. In recent years, the Irish economy has grown nine percent annually. The shared services centres of many multinational companies located there have contributed to this phenomenal growth. Clearly bold experiments can pay off in terms of both enterprise and economic windfalls.
ITAC believes that a more widespread deployment of the shared service architecture in Canada's GOL strategy will allow the creation of common platforms and consolidated data. This combination, if managed, sensitively with regard to privacy concerns, will deliver better service to Canadians and better efficiencies to governments.
Another opportunity for bold experiment that governments might want to explore is outsourcing. Outsourcing is more than simply letting out a contract. Accenture defines it as "Contracting with a private sector firm to take responsibility for a function or process for which the government remains accountable." Outsourcing models run the gamut of government service delivery. The Royal New Zealand Navy outsources all its training operations. The State of Arizona outsources tax collection. When the FBI needs a background investigation performed, it calls on a contractor. The London Borough of Brent and the City of Chicago get their meter maids from an outsourced contractor. And, here in Ontario, some aspects of juvenile corrections are outsourced. Accenture estimates that by the end of the 1990s governments had transferred more than $1 trillion in assets to the control of private sector contractors. The market in outsourcing to the U.S. government alone is expected to double from 2000 to 2005.
What's driving this growth? Big governments, like big businesses, are getting lumbered by their own size. Many have paused to re-examine their core functions and re-engineer themselves back to a position where they can execute them with greater agility. I can imagine the U.S. Department of the Navy going through this process. Its job is to provide a defence and deterrence force that delivers the power of U.S. foreign policy on the high seas. And I think we'd all agree that they're pretty good at it. But that core competency doesn't make the U.S. Navy best-in- class in the construction of buildings, shipyards and other facilities on land. So they outsource that function.
Outsourcing allows governments to concentrate on their central core functions and competencies by seeking best of breed partners to perform non-core functions to a high standard of excellence.
This is a courageous move. It's difficult for any of us to admit that someone might be able to perform a function we're accountable for better than we can. Harder still for governments. Yet the Government of South Australia was prepared to try it.
In the early 1990s, it was struggling with the double-edged dilemma that all governments face of how to meet the growing demand for public services while reducing costs.
It recognized that improving the efficiency of its information technology systems was crucial to meeting this challenge. At the same time, however, developing a robust domestic IT industry by attracting investment and encouraging export development had become a public policy priority.
In 1994, the Government of South Australia announced that it was seeking a partner to overhaul the state's entire IT infrastructure, by owning, managing, and continually improving the infrastructure and operating systems used by almost 80 separate agencies. This partner would also be required to invest significant resources to help develop the state's IT industry. In 1995, the Government of South Australia awarded the world's first "whole-of-government" outsourcing contract to EDS.
The goal of this nine-year contract was to integrate the communications systems, platforms services and IT operations at about 1,000 government sites across the State. By year three, the EDS team had consolidated, rationalized and upgraded the State's entire infrastructure. For the first time, the State had consistent technology architecture capable of running the latest operating software and of providing the latest services to citizens.
By the fourth year of the agreement, EDS had also exceeded its economic development targets in all areas – including job creation and spending with local industries. In 1999, the South Australian Centre for Economic Studies found that EDS' operations in the State had already contributed more than $225 million (AU) to the domestic economy.
The Government of South Australia estimated that it will save a total of $100 (AU) million over the life of the contract. More importantly, it is now able to provide better, more reliable service to the public – in many cases, at lower cost. Today, the Government is entering the world of electronic government, delivering agency services to the citizens of South Australia over the Internet.
I was hoping that by today I'd be able to tell you about another outsourcing announcement closer to home, but the deal has not been finalized yet. I can tell you though that the Province of Saskatchewan has confronted the same administrative challenges and much the same public policy objectives as the Government of South Australia. The government wants to concentrate on delivery of service and it also wants to inject economic stimulation and diversification into the province. So it, too, has currently under consideration an outsourcing solution for its information technology management.
Saskatchewan has been very smart about its contracting position. It recognizes that contracts of this size should bring wider benefits provincially – benefits like jobs, foreign investment, and a concentrated focus on research and development. It has envisioned all these factors in its negotiations with the contractor.
Nevertheless, the move is seen as controversial. There is concern about the government jobs being displaced to the contractor. So, in the best democratic tradition, it is being examined, discussed and debated with the intent to ensure that it is a good deal for the province. My view is that Saskatchewan is wise to consider outsourcing. And my hope is that the citizens of Saskatchewan will understand this wisdom. In one agreement, I believe, the province can do more to advance Saskatchewan's capacity for innovation than through any other measures.
Of course bold experiments in shared services and in whole-of-government outsourcing need the proper conditions in which to succeed. Primary among them is the requirement for trust and a strong relationship between the client and the vendor community. And that relationship must be built on the foundation of some clearly understood rules of engagement.
I'm happy to say that great progress has been made in this area under the leadership of Public Works and Government Services Canada. The ITAC community is very proud of the level of dialogue that we've established particularly on key issues such as the terms and conditions of federal public sector procurement.
Our conversations, for example, have highlighted fairly challenging problems with limitation of liability. We've worked closely with PWGSC to bring the need to clarify and reform terms of first and third party liability in government contracts. The dry details of contract law, liability and risk assessment may seem far removed from the visionary stuff like state-of-the-art pathfinder projects. But the reality is you can't have one without the other. Unless vendors have a clear sense of the limits of their liability, and unless government can manage its liability risk in a manner consistent with contract law in business, liability issues can present a serious barrier to the evolution of GOL.
I salute PWGSC for recognizing this and for working so hard to get liability issues and other "terms and conditions" problems resolved. This relationship is critically important to the members of ITAC. I'm delighted that it is such an open and productive one. I believe that the ongoing dialogue between Treasury Board, PWGSC and ITAC's public sector business committee enables the strong partnerships that help make visionary initiatives possible.
I believe that there is tremendous opportunity to ensure Canada's ongoing and persistent leadership in the exploration of government on-line. We've got the connectivity. We've got the technological know-how. We've got the visionary leadership to conceive the great solutions that will transform the relationship between Canadians and their governments. And we have the partnerships to build those solutions. We're virtually unstoppable.
The benefit of a robust, progressive view of GOL extends beyond the orbit of government services. A visionary GOL strategy will drive job creation, export opportunities, foreign investment and wealth for Canada. Leading the rest of the world in GOL is an important accomplishment for Canada. It pays off. It's a position worth protecting.
Contributions and Submissions Welcome
Contact John Duncan 1-306-789-3063