AGIMO – Data Centre as a Service – Industry Briefing 2 May 2012
Introduction by John Sheridan
Welcome ladies and gentlemen to our presentation today on data centre as a service. This is a
range of things that we often do in terms of industry briefs but it’s the first time that we’ve done
one that’s been webcast live and in which we’ll be taking questions from not only the audience
but our audience online. For those of you listening online, the hash tag we’re going to use for
this purpose is hash tag AUSGOVIT, and we’ll be welcoming your questions probably about half
way through the hour we should be ready to take questions then. There’s also the possibility of
emailing questions and delivering them in other ways through the blog. We’ll be answering all
the questions that we receive this way on our blog if we don’t get to them all today. We’ll finish
today at 5 o’clock but there is the opportunity to ask more questions and get them answered. We
think this is important because we want to make sure we consult fully on this new way of doing
business for government.
There’s been much in the online press recently about AGIMO’s work in doing strategy of various
sorts. Two of the strategies that affect the work that we’ve been doing are those in the data centre
area and of course in the cloud area.
Now these two strategies were issued bias some considerable time apart and it would be
reasonable to think where’s the direct connection between the two strategies. First of all let’s just
briefly discuss what the data centre strategy is about.
The data centre strategy is about avoiding costs over the next 10 to 15 years. So Sir Peter
Gershon in his review done in 2008 worked out that there was a possibility of avoiding about a
billion dollars worth of costs in data centres for government over the next 10 to 15 years. That
doesn’t mean we won’t spend money on data centres. At the time we were spending about
$870M a year on average for our data centre business. And we do anticipate that those levels of
spending are going to continue into the future. But what we see is a means of making sure we’re
not spending anything that we don’t need to.
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Now for those of you who don’t deal closely with the budget ramifications of government, I’ll
just briefly explain that costs avoided are money that you don’t approach government for.
They’re not savings in the sense that they’re reduced from an agency’s budget, or taken from the
agency in anyway, it’s the ability for the agency to do something without having to go to
government for extra money. And that’s what this strategy aims at, the data centre strategy is
aimed at.
Now since then of course the rise of the cloud arrangements, mean that it’s quite possible for
people to pursue data centre savings or data centre cost avoidance in a way that doesn’t require
them just to get the best possible data centre facilities, because that was the focus of most of the
data centre strategy.
What the cloud enables us to do is to take advantage of other savings opportunities that don’t
require us to build or lease or otherwise procure facilities for the long term. These are very much
complementary strategies. They don’t run against each other. We don’t actually see much
competition directly between the them. What we see is these two arrangements allowing us to
develop a better arrangement and a more efficient spending of government money over the next
10 to 15 years as we look at how we bring IT into the usage in the mid 21st Century.
Now we do anticipate that we’ll need to get more, or continue to get the level of cooperation
across agencies that we’ve seen demonstrated in a range of coordinated procurement activities.
Some of you would know that in the data centre facilities area, the leases we’ve signed up have
been a consortia of agencies, not just a single agency. So we get the benefits of the aggregating
of government demand and the economies of scale that that allows to get better prices and better
arrangements for our work. Now we expect that the data centre as a service project will do the
same sorts of things.
Let’s turn to it now. You would probably know that there are 111 FMA Act agencies. Of those
111, more than 50 spent less than $2M a year on IT. Now the risk of repeating myself for some
of you who heard me speak yesterday, you need to understand what that means.
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There are probably four people in that IT shop. One looks after the email message arrangements,
one looks after applications, one looks after procurement and one is notionally the CIO. And
that’s all there is. And they spend a lot of their time doing things that are common across
agencies, not things that are specific about their agency.
And what we want to do in the data centre as a service arrangement is continue to contribute to
the work that we’ve been doing to reduce the amount of common repetitive work that agencies
need to do, particularly in the area of procurement. You would know that going to market to
procure things, particularly things that are covered procurements more than $80,000 a year, is a
long and often involved process. I’m not saying that it’s not effective. It get’s value for money
but it gets it in a way that puts a lot of effort onto smaller agencies because they each have to go
around doing something about this.
Now our work in procurement policy and ICT services panels, has started to address this by
reducing the number of panels across the FMA Act agencies, ensuring that each portfolio has a
maximum of three panels, and that each of those panels have piggy back clauses that allow them
to be used to get the best benefit across a range of agencies. Eventually we anticipate that not all
agencies will want to have their own panels.
Now in the data centre as a service area what we’re trying to do is also address the more than
70% of ICT services contracts that are less than $80,000. A lot of the work that one sees can be
done in the cloud now, allows us to look at smaller levels of contracts. Most of the time these
arrangements, less than $80,000, are not covered procurements in the context of the
“Commonwealth Procurement Guidelines”, but are instead subject to agency chief executive
instructions. The agency might require three quotes, three written quotes to be done for a
particular service.
Now at the moment, as I’m sure many of you would know, if you’re not known to the agency
involved, the chances of getting a quote, asked to be asked to quote, aren’t particularly high.
Particularly in areas where there is new technology involved. Somehow you’ve got to get to the
attention of the people who are making these RFQ
decisions if you like, so you can be asked in
the first place. And if you are asked, you need to be able to prove your reputation, you need to be
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able to demonstrate often from scratch that you can do the things that are asked. You don’t
necessarily have the advantages, particularly if you’re a new firm, that some more established
firms have.
What we’re trying to do in the data centre as a service work is change that
arrangement to increase competition, to address these areas of commonality, to provide a better
approach to the market and a better market based response arrangement so that we can encourage
new growth, we can increase competition and we can reduce the transaction costs for both
agencies and vendors in providing these services.
Now we started doing this work sometime ago in 2011, and as you would expect conducted a
range of activities, firstly with agencies to determine what it was that they wanted. We didn’t set
out to put in a mandated arrangement to force people onto a particular panel. Because we know
that in the absence of firm data about demand, and particularly when there’s a plurality of
suppliers, it’s very difficult to mandate what it is that people are going to do and ensure that the
people on the panel, the vendors on the panel get the work that justifies them responding to the
tender arrangement in the first place.
There’s also a lot of work to do when there’s a lot of possible vendors, in getting a shortlisted
panel arrangement because of the need to assess in great detail the offers made by those vendors.
So it was clear to us that we needed to do something new in this area.
We also spoke to industry on more than one occasion. We conducted an industry briefing, we
invited a range of companies to present to a sort of cross agency panel of our procurement and
other experts in this area, and we learnt a lot about what was being offered in the market. And
you can see some of the points there on the slide.
It was interesting to see that the challenges of dealing with government, of dealing with
government procurement rules did still affect a range of vendors. And the idea that we would
somehow reduce that burden was an important part in deciding how we’d go forward.
So we came up with the current approach that many of you I trust would have seen discussed on
the blog and in other ways since we put it up. I’ll just touch for a moment on the notion of
consulting on the blog and what it means to us. Some of you would know that this is one of the
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posts that data centre as a service post, is one that’s got a lot of comments from a range of people.
And we very much welcome those comments so that we can have the discussion in a way that I
believe isn’t particularly confronting, that can explore points particularly in this early stage and
help develop our thoughts. Before we had the opportunity to use the blog for these arrangements
we were stuck with a problem of probity. The probity requirements in a nutshell essentially said
you can tell everybody everything or nobody anything. And since we had no means to tell
everybody everything, we ended up telling nobody anything, and we gave industry briefs that
frankly were, I would suggest, not particularly useful. We often started the brief by saying
nothing you hear has any bearing on what’s actually in the paperwork, and one got the feeling
that people were only coming to see their old friends to those industry briefs.
What we’ve got instead is the possibility of getting comment from industry and indeed from
other stakeholders in a way that allows you to declare who you work for, say what company it is,
talk about your company’s points, or indeed do so anonymously if you would prefer, make the
points.
We’ve offered the opportunity, and indeed you will have seen that we’ve done that, to allow
people to email in, to get comic questions asked and sort of we’ll self ask the questions as a
consequence of those emails, and provide commentary on the questions that have been asked for
us. We think this is an important part of using Gov 2 tools to engage with out stakeholders. And
I’d like to thank the people who have done that to date on the blog, because it’s been very useful
for us. Some people in particular have gone to a great extent to identify problems with individual
clauses that they saw, and make suggestions about adjusting them, and that’s been very useful in
helping me form my own ideas about what might work in this regard.
Now let me just touch on a couple of important things about the approach. One of the questions
we have had has been, why did you limit it to $80,000? Well I think we know that in the cloud
setup at the moment you can actually buy a lot of computing for $80,000. But the real reason is
to reduce the risk, and thus reduce the amount of effort people have to go, the transactions costs
of doing business on this particularly multi-use list.
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Another question is, why would you have a multi-use list rather than a panel? And the answer
here is also that it reduces the amount of work that has to be done to get onto the arrangement in
the first place. And I’m going to touch on some more of that details shortly.
Now it still falls within the overall Commonwealth Procurement Guidelines or Rules as there be
from the 1st of July I think, the need to get value for money, that delegates must get value for
money remains. But what doesn’t occur is we haven’t gone through this covered tender process
in order to make sure that everybody who gets on a panel was in fact prequalified. What we’ve
done instead is arrange what I would see as something of a lower hurdle. Now this hurdle will
require us to check a few obvious things. We’ll need to know that you’re a real company if you
apply, and we’ll probably use a service like Dunn and Bradstreet in order to do that. We’ll also
need to make sure that 10 applications aren’t actually from the same master company and they’re
creating sort of false competition between them. And again those company checks will help us
do that.
We’ll need to make sure that you’ve got some references, or something that can be used to
establish your qualifications to do work in this particular area. We think at the moment that sort
of two references will be the way that we’ll do that, but I’m open to ideas about how better we
could do that. And particularly regarding ideas about how we would get new entrance into the
market here who might not have those references.
There’s an interesting question, by the way, about whether, given the nature of government
procurement, the first job someone gets in the data centre as a service area should be working for
government, but that’s something that we’ll be able to take into account.
The other arrangement, and I think it’s the important one that I want to get across here, is that
we’re not just doing the normal multi-use listings, we’re also putting in place or intend to put in
place a head agreement or a deed that vendors will sign up to as a condition of being on the panel.
Now what that’s designed to do is to take out of the, if you like, the normal contract negotiations
that are required in order to get a service, all the discussion about the things that everybody has to
do anyway. Equal opportunity arrangements, workplace health and safety arrangements, those
sorts of things, and get them signed up.
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It’s our intention that, once following the consultation we’ve had today and in previous weeks,
once we get that head agreement right, it won’t be negotiated by companies with us. Companies
will sign the head agreement or they won’t. And if they don’t sign the head agreement then they
won’t be able to offer services under this multi-use list arrangement. They’ll still be able to offer
services in other areas and go through normal tendering procedures in order to do that and
negotiate away to their heart’s contents with agencies as regards that, but this particular
mechanism won’t be open to people who don’t sign the head agreement.
Again that’s why we’re keeping it under $80,000, because the amount at risk for the
commonwealth isn’t particularly high.
Obviously we also know that for $80,000 the
commonwealth will most often be paying in arrears as regards this. That means that the amount
of money at risk for the commonwealth is relatively limited.
Now I’m sure all of you know the cost of lawyers in order to get things through the courts. And
we know that frankly, and I’m sure this isn’t a secret, that we’re unlikely to want to drag
someone into court to recover a payment of less than $80,000. It will take us longer to do that
than will be worthwhile. What we want instead is a range of ways to put things in place so that
we can address this in a better way. We think that to do this in the first instance, we might have a
compulsory arbitration clause that says the parties agree to use arbitration in the first instance,
sorry not in the first instance, in the penultimate instance if you like, if you can’t resolve things
other ways to use arbitration, independent arbitration to resolve matters. And the reason that we
want to do that is to, so we all agree that we’re not going to go to court about these things.
Now I’m sure you know that we can’t actually mandate not going to court in those
circumstances, but my advisors tell me that if we set this arrangement up, the people who run
courts will take a dim view of people who didn’t go through the arbitration arrangements first.
And we think that will help address disputes that always arise in contracts over time.
Now the list itself, we’re planning to put it in place for two years. I’ve got funding to cover the
first year of this at this stage, and I’ve got a means of exploring funding to cover the second year.
But what I don’t want to do is put in place an enduring arrangement that no one uses. If it turns
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out that this doesn’t work, we’re prepared to say well okay it hasn’t been an enormous burden for
vendors to get onto it. It’s not like they had to go through an enormous RFT process. We
haven’t charged them an enormous fee in order to that, and I’ll just come back to that in a second.
We haven’t charged them an enormous fee, so if it doesn’t work and people aren’t getting
business, then we’ll be able to, if you like, wrap the thing up and say well we tried to do
something different, it didn’t work, we’re going back to other ways of doing things. Now I hope
that that doesn’t happen. I think this is a strong possibility of addressing these sorts of ideas quite
well, but there’s always the possibility.
Now I briefly I just wanted to touch on fees and what we’re doing about them for a moment. We
talked, and you’ll have seen me discuss on the blog if you’ve read it, the notion that we should
have some form of joining fee. Why would we do that? As often happens when you see in these
sorts of things, if it’s free to enter something, people will enter it because it doesn’t cost them
very much to do so. And often, a great example of this I think is when you have a function that
you book, this one’s been quite well attended, but we’ve had others where we’ve booked a whole
range of industry people to come, we’ve catered for them, we’ve made all those arrangements
and they haven’t shown up because there was something else to do. We understand that but
because they don’t have any skin in the game, they haven’t made any particular commitment,
there’s an issue about how we do.
So we’re thinking what if we put what is essentially a nominal fee to get your application
processed to get on the panel, ah the multi-use list, Freudian slip. The idea being of course that it
might literally be $200 less than that, but because you actually have to commit something to take
part in the process, you’re going to be less inclined to do it on the spur of the moment.
Now I know that there are very large companies who might want offer these services for whom
this is actually an embuggerance and it will have to go on their expense accounts rather than
actually be done any other way. And I understand that that’s a difficulty, but what I think this
does, is help us address this problem of getting a flood of applications which we have to put
resources into processing, only to find out that they never actually get any work, it’s just been
done on spec.
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We think also that we’ll get some benefits out of a panel, ah multi-use, can’t stop it you see, a
multi-use list approach like this. The first of those is we’ll be able to allow new entrants to come
onto the multi-use list regularly.
I’m thinking perhaps there’s a possibility of doing it
continuously but I’m not particularly wedded to that, but certainly the notion of doing it at least
every six months will mean that new companies or companies who are entering this market for
the first time, will have an opportunity to get on the list quickly and not have to wait, as we often
see in panel arrangements, for a refresh after three years or something like that. So I think this
will be an important way of changing what it is that we do. And this flexibility will help both us
and vendors.
Now there are a range of other things, many of those I’ve covered at the moment, oh sorry
already are on the slides.
Let’s talk for a moment about the sort of services that might be offered. We’ve called it data
centre as a service because that was a useful, all encompassing term. Many of you would have
seen that we’ve been using the terms described in our cloud strategy infrastructure as a service
etc, in order to describe those sorts of services. And I know that some people think that that
means we’re only buying cloud arrangements through this multi-use list. That isn’t the idea for a
couple of reasons.
Firstly I think many things describe this clouds by vendors, none here I’m sure, none of you here
I’m sure, but many things described as cloud by vendors are actually just different sorts of
outsourcing arrangements in existing data sense.
And there’s nothing wrong with taken
advantage of those arrangements in place. No one running a data centre today I would suggest,
wouldn’t be running it on the most advanced virtualisation arrangements they could put in place.
No one wouldn’t be putting in place all the sorts of technologies that are described in the cloud
world, in order to get the most effective arrangements they have. But it might not be delivered,
particularly as pay as you go, or some of the other things that describe a cloud approach. And
that’s perfectly alright. Because we’re not necessarily looking for that, what we’re looking for is
a way of describing services. And the reason we’re describing services, and I’ll show you in a
moment, is to make sure that we don’t have to have long and involved discussions at contract
time about what’s being provided. We don’t want to set for you an over specification of what it
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is that will be provided. We want instead to ask vendors to tell us what they’re providing so that
essentially agencies can make a choice from a menu of possible providers, seeing was they
provide, seeing what that’s priced like and make their decisions about who to ask for quotes.
That way rather than putting out a very large specification. And we put it out in a way that says
now we want it eight hours a day, five days a week and you’re company actually only does seven
and a half hours a day, five days a week, so you’ve got to change your arrangements in order to
do that. We want to avoid that sort of situation.
I’ve talked about other stuff on that slide already. The sort of services we’re talking about are
described here. I would point out that this isn’t set up to be an arrangement to get around
coordinated procurement panels, those sorts of things.
It’s, as I said, to compliment those coordinate procurement arrangements. It’s not meant to
replace the data centre facilities panel, the long leases in the data centre facilities panel are there
for a reason. This is to address relatively short term arrangements.
I said at the outset, we’re talking about a one year term as a maximum. Why? Because again it
reduces risk. I’ve also addressed on the blog the notion that these contracts themselves wouldn’t
be subject to extensions. The idea of course is because they’re below $80,000, it won’t trouble
agencies to write the same contract again using the templated forms we see being in place to do
this, if that’s the choice of the delegate. But the delegate will be able to make those choices
without having to go to a complex tender arrangement. And without having the situation where
they can be accused of extending a contract each time. So our idea is that that’s what you’ll be
able to do using the multi-use list.
We anticipate that we will establish, as I said, a menu like system for agencies to use. I’ll show
you a matrix in a moment that covers that. In fact, what I’ll do is I’ll move to that now.
This is an example of the matrix. Now the number of rows in this matrix will depend on the
number of capabilities that vendors what to offer. And indeed we see this being flexible because
we think vendors will want to offer new services as they come to market that we’ll be able to add
to the menu. One of the respondents to our blog suggested that perhaps we could also have
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somewhere on our online public facing pages the notion that agencies would say we’d like this
sort of service, so people could explore providing those services. And I think that’s a really good
idea.
As I said the columns in this matrix are simply examples of what could happen. So we have a
minimum number of units you might provide. The minimum number of virtual servers you as a
vendor would provide. The maximum number of virtual service that you can provide. I talked
about here the time required to increase, to meet increased demand. Do you need 10 minutes
notice? Do you need a month’s notice? Similarly the time to turn the procedure off. Do you
need 10 minutes notice? Do you need a month’s notice? These aren’t pejorative things. They
aren’t designed to be things that would rule you out of supply. What they’re designed to do is to
allow you to, in this matrix, in your own way, describe the services that you’re providing so that
agencies can choose from them simply. So that you can get onto that list of people considered
for quotes rather than have agencies deal only with the people they know.
Uptime. Are you promising five nines of reliability, four nines, three nines, two nines. If I’m
running a webpage that talks about, making it up as I go here, traffic conditions on Canberra
Avenue between 9:00 and 11:00 in the morning, I don’t need it to be running 99.999% of the
time. I might only need it for a shorter time. So if I can choose a service that does that, I’ll be
able to get a more efficient use of my money. And that’s the idea of allowing you to declare what
it is that you provide.
Similarly we anticipate the notion of helpdesk support available. Is it available eight five, is it
available two twenty, is it available 24/7 365. You’ll be able to show that and to put a price
against that arrangement so people can choose what it is that they want in order to do that.
We’ve also talked about location, and I think this is important. People have said it should all be
in Australia, other people said it shouldn’t matter where it is as long as it’s secure. I’m quite
relaxed about that. The idea is that people, customers should be able to make an obvious choice
about what they want. If they have a requirement because they’re dealing with stuff that’s in
confidence, or data that has specific privacy arrangements then they might want to choose
arrangements that are in Australia.
If they’re not, they mightn’t care.
Many of you that
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data.gov.au which is part of my responsibilities, the backend of that, the data, is actually in an
overseas cloud. That doesn’t worry us at all.
And that’s the sort of thing that we see being declared here. What we want is for it not to be a
surprise for the customers about what it is that they’re buying.
We’ll be requiring people to describe what security requirements they meet. Now one of those
requirements might be none, I’m not sure that anybody would actually take an offering up that
had no security, but we’ll be asking that to be described and we’ll be looking at ways that can do
that obviously so that it’s not a burden for vendors.
We might be able to, and I don’t think these exist all that much at the moment, but we might in
the future be able to have people show particular accreditation or standards that they meet in
order to describe their services.
And obviously if you’re meeting a particularly high standard, your service will be one suggested
more reliable and people will be prepared to pay more for it. If you’re not offering such a service
then it’s a case of not just the normal buyer beware, because the buyer will be aware of what’s
going on here and they’ll be able to make those sorts of choices. They’ll pay less because it’s a
cheaper service but they’ll understand why they’re paying less, what they’re getting for their
money.
We’ve had a bit of discussion about how we would do pricing and whether we would make it
public or not. My mind isn’t made up about this at the moment. Certainly, and this should come
as no shock to you, certainly the idea that the maximum price that you’ll charge for this service
will be available to commonwealth agencies, is pretty obvious. But we do anticipate that the idea
of going out for quotes will allow people to offer cheaper prices when they say well actually that
was my price for 10 servers but now they want 1,000 I’m prepared to lower the unit price because
I’m getting economies of scale myself. And we can see those sorts of things working in.
As I said there’s an interesting argument about whether we should make the prices completely
public. In the UK they appear to be doing that, I’m not sure whether that’s the maximum or the
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set price, but they appear to be doing that. In the USGSA arrangements some people do have
prices set, often that’s the price for one and all prices below that can be negotiated. But there’s a
range of possibilities there and I’m looking for feedback about that.
This is my graph that I did sometime ago on my whiteboard to talk about demand and to talk
about elasticity and scalability. The idea behind this is to of course demonstrate that there might
be a line below which your service can’t go. The minimum you might provide, as I said, might
be 10 servers and you’ll provide them as the base load, people will pay for that, that’ll be if you
like your sign on fee for the agency involved, something along those lines.
And as demand increases they’ll pay more but as it drops off they’ll drop down to the base load
again. This isn’t rocket science by any means, it’s the sort of basis that cloud services are starting
to be offered on I think in a range of areas. We anticipate describing the services in the matrix
and then allowing you to fill it out in a way that will facilitate this sort of understanding.
Now I’ve touched already on the sorts of risk that are involved here. The sorts of risks that
agencies will take, be prepared to take. The important thing is they will know what risks they’re
exposed to and they’ll be able to make their value for money decisions based on those.
What will we do? Described here. I don’t anticipate it being a particularly heavy touch, but
we’ll certainly want to do some controlling to make sure we’re getting the value. The head
agreement arrangement will be signed with a [33:56.8] so we’ll want to control that head
agreement setup.
Now I’ve touched on some of these questions already. We’ve had questions about whether the
service needs to be in a data centre facility that’s been chosen as part of our data centre facilities
panel. The answer to that is no it doesn’t. Although that might offer some advantages, but no it
doesn’t. I’ve touched on pricing now. We’ve touched on standards as to where they’re available.
We anticipate over time that as standards come into play people will be able to show that they’re
compliant with those standards and that will add to the value of their offering.
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We’ll talk about, we anticipate talking about the prices that are included in such an offering from
a vendor. Is there an initial setup price? Or is it just completely you order it and then you pay for
what you use? Is there a cost to get out of it? Those sorts of things are likely to happen.
Finally before we go to questions I’ll just show you where we are in the schedule of things. I
anticipate that we’ll close the blog for comment by the end of this week. This is actually, it’s not
that I’m not interested in questions after that, it will allow us to go to the next stage.
The next stage I anticipate probably will be the formal stage will be to go out for, I think we’re
calling them, applications for inclusion on the multi-use list in about the middle of the year. But I
do think we’ll publish before then a final version of both the sourcing approach and the head
agreement, the contract arrangements, just to get the last sort of comments from people probably
for a shorter period of time.
We anticipate that people will be able to respond in the first instance by the end of August and we
hope to have the panel in place no later – I said it again didn’t I? – the multi-use list in place no
later than the fourth quarter of this year.
Now I’ll leave on the screen for a moment, there are a range of references that you can see about
these things, you can find them on our blog, indeed you can find them using your favourite
search engine very quickly. But if there are questions about those we can pick them up.
Okay, that’s the end of my formal presentation, I’m now happy to take questions. The way we’ll
do that, we’ll probably take questions in the room, a couple of those, if you put up your hand one
of our assistants here will bring you a microphone, you can ask your question. I don’t mind
whether you identify yourself or not. We’ll take a couple of questions in the room and then
probably go online to see if there are questions there and then alternate between the two.
So, questions. Down the front there please.
Question:
Thank you Mr Sheridan. You seem to be focusing on the smaller agencies, the 50
or so that you’ve described. Do you have any data on the types of services they are
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interesting in and how much they might spend in the first year of the multi-user list
operations?
Answer:
We published previously, what I describe as a spider web diagram that was the
result of asking agencies what sort of data centre as a service services they want. I
don’t have it readily to hand but it’s on our blog and you can find it. We don’t have
a view as to how much people might spend in this area at this time. And indeed, as I
said at the outset or during the presentation, that’s one of the reasons why a
multi-use list is more effective in this case than a panel, because people can’t,
vendors, and I understand why, aren’t in the position of being able to anticipate
demand. It’s not clear what that will be. And as a consequence I don’t think it
would be right to ask them to commit large resources in an RFT process when the
demand isn’t clear.
Question:
I John Derek a Lake Macquarie Telecom. You mentioned, as you may well control
the MUL process. In terms of work orders that come under that, how are you sort of
seeing, like will they end up being lodged with yourselves or like how will that sort
of process, how do you see that happening?
Answer:
This is one of the things where I think we need to incrementally improve the process
over time. Let me paint you my ideal picture.
The ideal picture was that there would be very little human interaction in this. An
agency who wanted to use the arrangement would go onto a website, they would
pick the characteristics, they would tick the filters at the top of the spreadsheet, they
would get a list of companies that met those characteristics that they want. If they
didn’t have enough characteristics, they’d be asked essentially by the system, have
you got enough people on this? Or there are too many and they’ll be able to then
adjust that list by picking more strict criteria or picking less strict criteria in order to
increase what they want.
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They’d then push a button and, having done that, the quote would go out to the
company automatically in an email. I guess in the fullness of time in some sort of
web delivered service.
Companies that were asked to quote would be able to do so in a templated form,
again online. That would come back in. It would go to agencies. Agencies would
be able to make their choice. Essentially there’s not much to negotiate around that.
They’d make their choice. They’d push the button. The contract form which isn’t
the head agreement, the contract formed, filled out with the characteristics that the
vendor had offered and the agency had accepted, in this initial choice period not
because of any extra negotiation would occur. And the delivery date would be set.
The service would begin.
Now as I explained, that’s my vision of how this will go, and if we were doing it
that way we would be able to monitor what was going on without any intervention.
And it’s not that I intend or wish to intervene in what agencies are doing at all, we
just need to understand a couple of things.
First of all, is the arrangement actually being used, because that determines whether
we would keep doing it or not.
Secondly, into the future, not the future in the first year, but in future years we will
have to recover some costs for this. The costs will be relatively austere I think, but
we’ll have to recover some costs eventually. And we’ll do that through agencies
paying to use the system, a small fee paying to use the system if there are enough
users on it. And we see that going on.
So our idea around this is to get that arrangement set up so the transaction costs and
the support costs are as low as possible.
But the last thing that I want to do is go to an enormous amount of work to set up
that arrangement now and have no one use it. That wouldn’t be smart. So we’ll go,
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I think, with relatively, in 2012 what are relatively mundane ways of emailing out
the form with the quotations on them, providing the sort of selection mechanism for
agencies, having a little more that’s handraulic in it in order to do those things as we
build up and determine whether the service is actually useful for agencies and how
they’ll want to go about using it.
Now you might take a question from the web. Will AGIMO provide guidance to
agencies to update their CEIs to align and support data centre as a service? No I
don’t think we will because I don’t think there’ll be a need to do that. The critical
rule here is to stay at the moment under the covered procurement ceiling of $80,000.
And whatever agencies do under that arrangement, I don’t think will matter because
that will essentially affect how many companies they seek quotes from. And that’s
really where we want to go in that regard. So I don’t see that there’s a need to
modify CEIs.
Other questions? Up in the corner there.
Question:
Martin Welsby, thanks. John, for the non cloud services, I can understand why
AGIMO would be keen to cap to $80,000 or 12 months. But for cloud type services
where providers typically put on a cost and a contract duration of a month and it’s
an easy in – easy out kind of approach, do you see there is the flexibility to offer
some other kind of capping arrangement, not 80K per annum or not a 12 month?
Because as cloud services develop, agencies may or may not choose to move
between them in a much shorter or longer term. It’s a more flexible approach.
Answer:
A decision under the “Commonwealth Procurement Rules” to spend more than
$80,000, to commit to spending more than $80,000 requires in the first place an
open tender arrangement. That’s the rule. So if you’re going to commit, and we’ll
take the cloud arrangement that exists now. I think that you would accept that it’s
true to say that movement between cloud providers is relatively difficult at the
moment. There aren’t a set of standards, it’s challenging in order to do that. There
are arrangements that you’d have to go through to set up.
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So as a consequence, going to the cloud for a month, if it’s a service that you need
for a long term, is actually a decision to go to the cloud for that long term. And if
that’s 15 months of 20,000 a year, ah 20,000 a month that’s 30,000.
If it’s
15 months of 100,000 a month then clearly that’s going to be over the ceiling for
covered procurement and you’ll have to go to tender.
This doesn’t stop anyone going to tender for a cloud service. All it says is to do it
this simple, low touch way it needs to be below $80,000.
Question:
Sorry just following up on that question, it’s David Masters from HP. In my
experience of the operation of other MULs they have allowed procurement above
the threshold if you go and get three quotes or at least follow some sort of approach
to market. Is that something you could see happening in this MUL as well?
Answer:
No, not at the moment. But let me explain again why. In other MULs you don’t
sign a head agreement that reduces risk in those circumstances. You normally run
the normal tendering risks. You’re allowed to use an MUL, a normal multi-use list
to select tender, that’s not the new word is it, to select tender, in other words to
tender to a short list of people. You’re allowed to use it for that but you’re not
allowed to use it for direct tender, because it hasn’t gone to RFT. But it does avoid
the notion of going to open tender.
Now the difference is that we’re actually going to allow people under $80,000,
using their agency CEIs to purchase using a pre-formatted arrangement.
Now in the future what might happen. Say if this is the world’s best thing in
coordinated procurement since, I don’t know the Microsoft VSA, as a consequence
we might see that there’s demand for costs or services above $80,000 or for longer
periods.
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Now if that demand exists we might be able to establish what I think of as a Tier2
data centre as a service arrangement. In which the vendors would be assessed in the
more traditional RFT sense. They would sign a tighter head agreement. There’d
obviously be in those circumstances progressive payments and things like that. The
risk for the commonwealth would increase. But there’s the possibility of doing
something like that.
But what I want to do here quite clearly is approach this in an incremental way to
ensure that by doing so we don’t spend months, years, thinking up the worlds most
comprehensive arrangement and going out to market and doing those things. I want
to have these arrangements in contract, or able to be in contract by the fourth quarter
of this year. Now we know how long it takes to do major coordinated procurement
agreements for the whole of government and many of you have experienced that. I
want to cut those transaction costs down and address this particular thing straight
up.
And that’s an interesting to touch on why it’s about small agencies, it’s because
that’s the sort of thing that will help them most as well. I don’t think Defence needs
my help in order to sign up cloud contracting arrangements. I don’t think DHS
needs my help in order to that. But my understanding is that the smaller agencies
would appreciate assistance in this regard.
I’ve got a web question first I’ll take please.
Question:
Will you be developing a MUL for contracts?
Answer:
Well I just answered that.
Question:
What will you do if no one used the MUL after two years?
Answer:
Well if no one uses it at all I might get a new job. Essentially the first year as I said,
at least the first year is available within our current funding for data centre strategy.
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The outer year might be available we’ll just have to see. In terms of how much
things cost. If no one uses it we’ll close it down. I mean it’s as simple as that.
Question:
Robert Howard from IBM.
I’m just trying to get an understanding of what’s
envisaged under this. For example if an individual consultant was providing a
modelling service and was bringing their PC and was using modelling software or
project management software or Excel, do you anticipate that a service of that kind
and they’re running it on their PCs so they’re providing a technology service or
whatever. Would you envisage that that kind of consultancy would be allowed
under this MUL?
Answer:
No but I’m glad that you asked that question, because if this approach works we’ll
use it for the ICT services multi-use list that we’re currently going about replacing.
There are two ICT multi-use lists at the moment. One is the contractor multi-use list
and one is just called the ICT services multi-use list. We’re going to combine those
two arrangements.
We’re going to use a very similar contract to the one that’s in for less than $80,000
that’s in this proposed data centre as a service setup. We’re going to use, if you
like, a similar matrix. I anticipate that the matrix will have more rows and less
columns than data centre as a service, because essentially people, the variation
between consultants or contractors is larger, and the things that they can
differentiate their service on is probably a little less. Because many of the people, as
you describe, some of them will have particular qualifications, that will be easy to
quantify, but others will be relying more on their reputation and things that they can
argue about added value.
So I see a similar arrangement occurring and indeed we might put that out about the
middle of the year on our current schedule, if the data centre as a service approach
works. Because as I said it’s going to reuse many of the components. And I think
that will address that sort of issue.
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Others?
Question:
[50:06.3] Is this limited to the smaller agencies?
Answer:
No. Not at all. If it turns out that it’s good for larger agencies, they can use it. It’s
not mandatory and I’m happy that they might want to use it if it turns out to be a
good idea. But I’m prepared to sort of take a risk and see how that goes. There
won’t be any setup at all that describes the size of the agency who can use it.
Another question on the web I think.
Question:
Cloud services are not always mutually exclusive. How will data centre as a service
reflect vendor compatibility so agencies can mix and match services?
Answer:
I think that’s an interesting question.
The challenge will be initially having
companies describe their services in a way that these choices can be made. If you
think what occurs at the moment, there is a tendency to bundle services up, but I
don’t think they’re the sorts of services that would be offered through this sort of
multi-use list setup. I think they’re more likely to be the sort of services that would
be offered as part of the tender. But we’ll have to look to see that as demand is
explained to us.
Any other questions? No?
John Sheridan
Okay, thank you very much for your attention today, I do appreciate you coming here, I
appreciate the audience on the web as well how ever many of you there are. If you’ve got
questions later on the blog will still be open for a while longer, a couple of more days so that you
can ask those questions. You can also email them in to ask us that way and there are a range of
other ways you can do it as well.
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As I said, the next thing you’re likely to see is the results of this consultation reflected in some
final or penultimate drafts of these documents and then an approach to the market about the
middle of the year.
Thanks very much.