Dumped by Tax, Kaz and EDS take it on the chin

James Riley
Wednesday, 18 November 2009 10:35

IT Policy - Government Tech Policy

Despite being dropped from the Australian Tax Office shortlist to provide outsourced end-user services, HP Enterprise Services and Kaz are likely to still enjoy a prosperous post-Gershon period within the federal government, according to consultants Ovum.

The Tax Office has winnowed its shortlist for possible end-user service providers down to three – CSC, Lockheed Martin and Unisys – with these vendors now expected to participate in more detailed negotiations with the ATO. A final supplier will be named by the middle of next year.

Ovum's principal analyst for IT Services and Sourcing Jens Butler told iTWire the shortlist announcement is the latest step on the long road from the ATO's whole of Government outsourcing contract with EDS signed in the late 1990s to its selective sourcing policies of today.

Ovum believes HP Enterprise Services (formerly EDS) and Kaz (now Fujitsu) will have opportunities to expand their footprint across the Commonwealth as other large contracts are unbundled into a larger number of smaller contract opportunities.

"There will be a number of post-Gershon opportunities available, and it will allow the two organisations to reassess and focus their energies on opportunities that may better fit their existing capabilities," Ovum said.

Regardless, being culled from the end-user deal is a blow to both companies, especially the HP Enterprise Services operation, which is currently in the middle of rolling out 25,000 desktops across Tax – of which the more lucrative services contract for those desktops will now be handled by one of its competitors CSC, Lockheed Martin or Unisys.

The Tax Office has been one EDS' largest customers globally after it won the ATO outsourcing deal in 1999 under then-Finance Minister John Fahey. The original deal was worth $500 million – but subsequent renewals and contract additions meant the deal has been worth more than $3 billion.

Ovum says the ATO's decision to drop Kaz is a particular blow for its new own, Fujitsu, which acquired the company in large part to improve its performance in the Federal Government market.

"If this is seen as a first test of the acquisition, it would rank as a less than positive result," Ovum says.