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A Creative Way of “Reducing” IT Costs in Government

by Andrea Di Maio  |  February 23, 2009  |  4 Comments

During my recent three week long visit to Australia, I was not surprised to see that practically every single client meeting was either dominated or making reference to the so-called Gershon Review. This is an independent review of the Australian government’s use of ICT performed in 2008 by Peter Gershon, former UK Treasury’s Chief Executive and author of a similar review a few years ago in the UK.

The Australian government accepted all Gershon’s recommendations, one of which requires agencies that spend more that 20 million AUD in IT to cut operational IT spending by 15% over the next two years and agencies with spending between 2 and 20 million AUD to cur 7.5% over the same timeframe. The intent is to decrease business-as-usual spending from 77% to 70% of the total, hence freeing resources for new projects.

I had discussions with several clients about whether they were considering how to value different operational IT activities to be able to reduce those that were less clearly linked to business value. Not surprisingly most are rather trying to squeeze efficiencies irrespective of value, looking at better license management, use of less expensive human resources, and relatively straightforward consolidation and virtualization activities.

However for those who had already managed their operational spending quite effectively, there are not many low hanging fruits available and they have to take more difficult decisions about reducing service levels in certain areas. Portfolio management would look like the right discipline to prioritize operational activities by the value they deliver to the business. Unfortunately, when it is used, it is usually applied to projects (i.e. discretionary spending) and not to operational spending. This is partly due to the lack of maturity in using portfolio management and – more in general – value management, but also to the inherent difficulty of linking enterprise-wide operational activities to the value they deliver to individual parts of the organization.

However I found this one client who is doing exactly that: using the same template and tools they use to prioritize new projects to connect as many operational activity as possible to the value they bring to different parts of the organization. I thought this was a great way to decide what to curtail… but then a sudden thought occurred to me. Was their intention to just be able to prioritize operational spending to identify what to cut, or were they trying to reposition business-as-usual activities as “projects”, in order to simply present operational spending as new or enhanced capabilities and therefore basically circumvent the cuts? When I alluded to this interpretation, the client did not admit, but smiled.

Isn’t this brilliant?

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Category: public-value-of-it  

Tags: cost-cutting  efficiency  gershon  

Andrea Di Maio
Managing VP
19 years at Gartner
33 years IT industry

Andrea Di Maio is a managing vice president for public sector in Gartner Research, covering government and education. His personal research focus is on digital government strategies, open government, the business value of IT, smart cities, and the impact of technology on the future of government Read Full Bio

Thoughts on A Creative Way of “Reducing” IT Costs in Government

  1. Jon Krause says:

    This is an interesting observation and highlights the nature of the ‘game’ in understanding and delivering value. Any distinctions between ‘projects’ and ‘operations’ are imperfect and subjective. Consistent application of any defintion of the distinctions – especially in a large complex system like Federal Gov’t – will be a major challenge. The smart operators will always seek to exploit anomalies in how thew game is framed.
    it will be interesting to see whether such creativity is rewarded, punished or ignored.

  2. John Kost says:

    It is unfortunate that this approach is novel. In fact, it has the makings of a good portfolio management strategy that public sector IT organizations should be doing more routinely. To have a more strategic voice in the business of government, CIOs need to do a better job of linking what they do — including basic IT operations — to the business of government.

    Perhaps AGIMO, and organizations like it in the public sector in other countries, should examine this approach with the goal of holding it up as a potential best practce.

  3. Poh-Ling Lee says:

    It is a pity that the Gershon Review discussions of late have focussed on cost cutting. Is it because of the Global Financial Crisis that everyone is looking only at the money elements of the Review?
    In the media release (
    associated with the completion of the Review, “Sir Peter Gershon said: “My recommendations involve a major program of both administrative reform and cultural change within the Australian Public Service.”
    He further states, “With sustained leadership and drive at Ministerial and top official levels, and by providing the enablers of change with the necessary resources, not only in funding terms, but also skills of the right calibre, the Australian Government through implementing these recommendations can drive significant improvements in its use of ICT.”

    What happened to the discussion and actions on the ‘cultural change’ elements of the Review? Is reduction in running cost the only measure to show improved efficiencies in application of ICT (and by inference, the success of Gershon Report Recommendations)?
    What metrics would be needed to measure the improved skills (alluded in Recommendation #4 – Enhance the management of the APS ICT skills base) and its link to improved efficiencies in the application of ICT?
    Shouldn’t there be more than just cost measures to show improvements in the use of ICT? What if the reduction in running costs actually reflects a move away from the use of ICT? Are there measures to show that there are just as many applications of ICT but at a more efficient operating level?

    It will be interesting to know if any of Andrea’s client meetings talked about the “cultural change” part of the Gershon Review.

  4. […] Peter Gershon is the person who led efficiency reviews in the UK in 2004 and the in Australia, in 2008, triggering a wave of cost-containment and rationalization measures that are deeply […]

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