Government SAP deal will cut IT procurement costs

23 October 2017

The Australian federal government has introduced a whole-of-government licensing arrangement with global software giant SAP.

Under the deal, which comes into effect immediately for all existing and new SAP contracts, all government agencies purchasing SAP products or services will follow a single licensing pathway. It aims to cut costs in public IT procurement. 

Angus Taylor, assistant minister for digital transformation, said the agreement would simplify IT procurement and leverage savings across departments where similar systems are used.

“The SAP agreement will deliver savings through reduced duplication and administrative burden for departments,” he said. 

“Government is driving hard to reduce costs so that it can invest in innovative new solutions. We know that a co-ordinated approach to ICT procurement works.” 

The deal has been introduced following months of negotiations that are similarly occurring with fellow major suppliers IBM and Oracle

The three suppliers have earned $2.5bn from contracts with the government since 2005, according to government figures.

SAP’s technology is at the heart of many critical Commonwealth systems, including the new billion-dollar welfare payments systems replacement at the Department of Human Services

Analysis of contracts posted on the Austender website show that $36.1m was spent on SAP products and services during the last financial year. Around $141m was also spent on SAP during 2015-16, largely thanks to the Department of Defence’s Enterprise Resource Planning Systems overhaul. 

The federal government has been working on the new SAP arrangement since the 2015-16 budget as part of a wider effort to reduce cost and increase the efficiency of IT procurement. 

The drive is forecast to save $13.7m between 2015-16 and 2019-20.

Taylor added that the new agreement is not designed to mandate use of SAP above vendors and said the government is still committed to using more SME IT vendors, with around 30% of IT spend going to smaller firms last year. 

“We’ve done work to consult across government and with a number of major IT vendors to make sure we have fair and transparent arrangements in place,” he said.

The federal government recently announced it would cap IT contracts at $100m as part of an effort to reduce its yearly IT spend by 10% over the next four years. 

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