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There’s a cost to not innovating and the public sector risks paying full price

09 Jan 2019

Article by Rimini Street general manager APAC, Andrew Powell.

The public sector, by necessity, has always been constrained when it comes to spending on innovation. Budgets are often tighter and even if they’re not, the public purse is under constant scrutiny from taxpayers and citizens.

Regardless, most organisations are moving towards some form of digitisation, and government agencies need to keep pace with the rate of innovation for the sake of taxpayers – and there is a significant downside risk to not innovating.

Rimini Street recently commissioned research from Vanson Bourne into “The State of IT Innovation” which surveyed decision makers across the globe, including in Australia and New Zealand and across both the private and public sector. It found that, on average, all respondents wanted to increase their innovation spend by 15.89 per cent but their organisations planned an increase of 10.94 per cent.

But diving deeper into the findings, public sector respondents wanted an increase of 14.38 per cent, yet their organisations planned to increase it by just 8.52 per cent.

Further, the Vanson Bourne research found that organisations – both public and private – in the A/NZ region plan to spend the second-least amount on IT innovation in the next 12 months, beating only Israel in surveyed regions across the globe. Further, A/NZ organisations plan to increase their IT innovation spend by just 6.31 per cent in the 12 months following the survey, well below the global average of 10.94 per cent.

There may be reasons for public sector agencies in particular to be somewhat reluctant with IT innovation spend, such as recent headline-grabbing IT issues: for instance, My Health Record has come under fire from a sceptical public due to concerns around privacy and data security.

But these headlines should not deter agencies from innovation, because the pros to upgrading and innovating far outweigh the cons, perceived or otherwise.

Let’s take cybersecurity as a prime example. In 2017 alone, cybercriminals shut down millions of computers across the globe through the WannaCry and Petya cyberattacks, taking down the UK’s National Health Service (NHS) and Ukraine’s electricity networks in the process.

These attacks are only going to continue in some form or another, that’s why the Australian Government continues to invest in its Australian Cyber Security Centre, with a new office recently opened and a new threat and advice website created. There is a tangible benefit to being able to respond to cyber threats, but also a benefit to providing constituents with the peace-of-mind that comes with knowing their government is investing in the issue.

Or what about improving our grids? With energy availability now firmly on the Federal agenda, agencies need to find ways to address the need for energy availability – and it’s hard to do so without spending on innovation. South Australia’s proposed $100 million battery scheme, in which the government will subsidise the cost of buying a home energy storage system for up to 40,000 South Australian households, is a prime example of a government thinking forward and investing in the future to deliver an outcome for its constituents.

There are countless examples of Australian government agencies innovating successfully: The Australian Tax Office’s Single Touch Payroll reporting system promises to streamline reporting for companies and taxpayers across the country, and Australia Post’s SMS alerts system is arguably among the best services within parcel delivery anywhere in the world, ahead of many private sector services.

You might ask what the risk is in delaying innovation spend until solutions are well-established – but innovation is moving at a frenetic pace and no agency can afford to be seen as archaic. Further, there is real risk in not keeping up.

In 2016, the world was stunned to learn that the nuclear program in the U.S. was still being run on floppy disks. And one of the chief reasons hackers were able to exploit the NHS in the United Kingdom was because the service was still running the vulnerability-heavy Windows XP in 2017.

So how can agencies, which must always be conscious of how the public purse is used, find the budget to spend on innovation?

They could start by finding ways to do more than spending to keep the lights on – an issue the private and public sector share. The Vanson Bourne research revealed that 89 per cent of organisations across the globe agree they should spend more on innovation, but 77 per cent believe they are spending too much just on keeping their systems up and running.

Government organisations should start there. They need to find ways to minimise the costs of upgrades, support and maintenance among other operational expenditures, and ensure the public purse is spent instead on driving their agenda forward and delivering outcomes.

Additionally, the A/NZ region is an outlier from the rest of the world in understanding the true benefits of innovation spend – and that, too, can be a hindrance to getting initiatives off the ground in the first place.

In a world which is adapting to a digital way of doing business, just 36 per cent of A/NZ respondents believe it will lead to greater competitiveness. The rest of the world is much more positive, at 45 per cent.

There is no easy fix, particularly when it comes to not only spending the public dollar but justifying that spend.

But agencies would go a long way towards doing so by finding cost efficiencies within their systems where possible, and better educating taxpayers on the benefits of innovative new services and ensuring no stone is left unturned in getting the best version of that service ready to go.

Innovation is moving at what seems like an impossible pace to keep up with – but the public sector cannot afford to fall too far behind on delivering better services and outcomes for taxpayers.

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