Agencies’ outsourcing during 2004–05
Overall, 49 agencies (60%) reported finalising new outsourcing contracts or contract extensions in regard to at least one aspect of an ICT or HR function or service during 2004–05. Figure 12.1 shows the level of outsourcing activity in the last three years. Finalising or extending an outsourcing contract in relation to at least one aspect of ICT services occurred in 44% of agencies in 2004–05, consistent with 47% of agencies in 2003–04. However, there was a substantial increase in 2004–05 in the proportion of agencies that entered or extended an outsourcing contract in relation to at least one aspect of HR services (38% in 2004–05 compared with 20% in 2003–04). Given the limited trend data available, it is difficult to determine whether this increase is cyclical representing many agencies renewing and/or extending their outsourcing contracts for HR services in 2004–05.
Figure 12.1: Agencies’ outsourcing activity, 2002–03 to 2004–05
Source: Agency survey
Outsourcing of ICT services
Thirty-six agencies (44%) reported outsourcing at least one aspect of ICT services (other than strategic planning for ICT) during 2004–05 (62% of large, 46% of medium and 31% of small agencies).
Of those agencies that reported finalising new contracts or contract extensions for outsourced ICT services during 2004–05, 8% indicated that they wholly outsourced ICT. The majority (92%), however, indicated that they partially outsourced ICT services.
Eight agencies (10%) reported outsourcing at least one aspect of strategic planning for ICT during 2004–05.
This year’s survey also asked agencies to report on insourcing that had occurred during the year. Nine agencies indicated that they had insourced some aspect of ICT. The main reasons for insourcing included reducing costs and improving service delivery.
Resources used to administer ICT contracts
The agency survey asked agencies to estimate the proportion of annual resources dedicated to ICT contract management in 2004–05 as a percentage of the total cost of all outsourced ICT contracts. Agencies were asked to include human resources costs and other administrative costs in their estimates. More than half (58%) of the 60 agencies with at least one aspect of ICT services currently outsourced reported spending less than 2.5% of the total value of ICT outsourced services on managing related contracts.
This year the difference between relevant small, medium and large agencies in the proportion of annual resources they dedicated to contract management was less evident. However, as can be seen in Figure 12.2, relevant small agencies were still more likely than relevant medium and large agencies to have dedicated more than 5% of resources to contract management and less likely to have dedicated less than 2.5% of resources to contract management.
Figure 12.2: Proportion of annual resources dedicated to contract management of ICT contracts— relevant agencies, 2004–05
Source: Agency survey
A comparison of this year’s data with last year’s shows that overall a smaller proportion of agencies dedicated resources equivalent to more than 10% of the total contract amount to the management of ICT contracts during 2004–05 (3% of relevant agencies) than during 2003–04 (14%). Table 12.1 shows that much of the change occurred in small agencies. The proportion of relevant small agencies that spent more than 10% on contract management fell markedly to 0% in 2004–05 from 20% in 2003–04.
The proportion of relevant medium agencies that spent more than 10% on contract management also fell to 5% in 2004–05 (14% in 2003–04).
Table 12.1: Proportion of annual resources dedicated to contract management of ICT contracts by size—relevant agencies, 2002–03 to 2004–05
| Small agencies (%) | Medium agencies (%) | Large agencies (%) | |||||||
| Proportion of annual resources | 2002–03 | 2003–04 | 2004–05 | 2002–03 | 2003–04 | 2004–05 | 2002–03 | 2003–04 | 2004–05 |
| < 2.5% | 50 | 40 | 50 | 63 | 45 | 58 | 58 | 65 | 71 |
| 2.5–4.9% | 27 | 16 | 21 | 17 | 32 | 26 | 32 | 12 | 12 |
| 5–9.9% | 13 | 24 | 29 | 13 | 9 | 11 | 11 | 18 | 12 |
| > 10% | 10 | 20 | 0 | 8 | 14 | 5 | 0 | 6 | 6 |
Source: Agency survey
Outsourcing of human resources services
This year 31 agencies (38%) reported that they had finalised new outsourcing contracts or contract extensions in regard to some aspect of HR services4 during 2004–05 (46% of small, 38% of medium and 24% of large agencies). This was almost double the number of agencies in 2003–04 (17 agencies) that reported that they had outsourced some aspect of HR services. As previously mentioned, it is difficult at this stage to determine whether this year’s result represents an increase in the number of agencies opting to outsource some aspect of their HR services or whether it represents a cyclical pattern.
All of the agencies that reported finalising contracts or contract extensions for HR services during 2004–05 indicated that they partially outsourced HR services.
Only one agency indicated that it had insourced some aspect of HR services. This agency indicated that insourcing occurred due to poor contractor performance and a change in the agency’s requirements.
4 HR services were defined in the agency survey as including payroll services, recruitment, training and development and agreement making.
