Privatise NBN, cut start-up funding and appoint a chief digital officer: Commission of Audit

The National Commission of Audit, a report commissioned by Treasurer Joe Hockey and Finance Minister Mathias Cormann last year, was handed down on Thursday. It cannot be accused of overlooking technology and the impact of digital strategies on the national budget.

It made sweeping recommendations regarding the use and ownership of ICT, most of which, perhaps unsurprisingly, reflect the Coalition’s earlier digital policy and technology policies adopted in the UK.

Commission of Audit author Tony Shepherd uses a Giants wristband to help him lift his findings.Credit: Alex Ellinghausen

NBN sale

The report has recommended the long-term sale of the toddling national broadband network, after the Snowy Hydro, Australia Post and other assets are offloaded.

Disappointed: Rui Rodrigues wanted to see support for innovation in the Commission of Audit.

The eventual privatisation of the NBN has been part of the plan from inception. The Labor government's intention was to offload the network within five years of completion.

With the change in strategy to a mixed-technology rollout as a result of the Coalition coming to power, the projected revenue for the national asset took a hit, prompting questions over its profitability and the legality of its holding company, NBN Co. NBN Co was set up as an ex-budget government enterprise. Traditionally when such entities cease turning a profit, they are sold.

The question is, will the rubber stamping by the Commission of Audit hasten that sale?

Telco analyst Paul Budde doubts it.

“The issue remains exactly the same – very few people would be interested in buying a half-built system.

Although the government may accept the sale recommendation, it would only happen in 10 to 15 years’ time, Budde says.

“You can confirm the in-principle decision to sell it, but it’s impossible [for the government] to be more precise about it. It will depend on the market conditions at the time: where will the rollout be, and will [the technology] be so out of date no one wants to buy it at the time? We don’t know.”

Innovation funding cuts

The report earmarked a number of grants to be abolished, including the Innovation Investment Fund in order to help reduce the $9 billion in Research and Development it spends each year, and scrapping Commercialisation Australia and the Export Market Development Grants scheme, administered by Austrade.

It said new models of grant development and management should be considered. As an example it offered a ‘payment for results’ model which would “involve the government paying only for effective interventions”.

This suggestion appears to contradict what entrepreneurs and innovators know about innovation: that inventors and ideas must given room to fail. That only by being supported to fail often and fail early, more robust solutions may be found.

Making success a condition of funding appears to be counter-intuitive, and may thwart creativity from the start.

Rui Rodrigues, investment manager at Sydney-based Tank Stream Ventures and Tank Stream Labs which has invested in five start-ups and assists 29 others including GoCatch and Braintree, is disappointed with the recommendations.

“It is not a step in the right direction. I completely agree they have to look at how the incentives are being applied. What I didn’t see was some alternatives and some suggestions on how it could be improved,” Rodrigues says.

While he says Commercialisation Australia is not crucial for start-up survival, it has an impact.

“We’re not saying the government needs to hand out free money. But it has a role to play in putting in place investment and measures to stimulate innovation. By making these cuts it’s not doing that."

Alan Taylor, executive chairman of grant recipient Clarity Pharmaceuticals, said that ‘it would be disastrous for the industry” if the CA grants were scrapped.

“For a company like Clarity that has over 10 employees and contractors, we would not exist today if it weren’t for the three CA grants we have been awarded since the company was established in 2010,” Dr Taylor said.

“We are commercialising Australian science and focused on better therapies to treat disorders such as cancer, and supplying our services to Australian companies and overseas companies and generating revenue in Australia. We are a developing a success story on the back of the scheme.”

Big data, big challenges

The commission’s report dedicated a whole section to data. In the technology-driven world we live today, it makes business sense for governments to streamline and make the most out of the vast amount of data they hold on industry, citizens and services.

The report says big data, advanced analytics and greater computing power offer an “opportunity to better understand citizens’ needs and behaviour”.

It recommended the government keep pace with the private sector in its use of data to improve services, and make more government data sets available through an initiative known as open data – where private developers can tap government databases to help build better and more efficient services.

The report noted the UK and US have 10,000 and 200,000 datasets respectively available through such a program. Australian only has 3164 datasets available through Data.gov.au. It said such limited resources are hindering insights into government programs.

For example, it suggested “administrative data could offer evidence about people’s use of income support, linked to health and incarceration data to identify better pathways out of disadvantage”.

The next question privacy advocates are going to ask is: will these efforts to drive data efficiency result in centralised or interlinked databases with the potential to hold defacto profiles on Australians?

Already, the Australian Taxation Office wants to use the Department of Human Services website my.gov.au as a central point for the electronic tax returns. That site is used by 2.5 million Australians to access their Centrelink, Medicare, Child Support, Department of Veteran Affairs, e-health, and NDIS government accounts. By mid-year it will also hold financial information. The Commission sees my.gov.au as central to the online delivery of government services.

Green senator Scott Ludlam is concerned about the potential for misuse of information held in fewer centralised databases.

“I’m very concerned about it, particularly because the security of these [government] websites is appalling."

Senator Ludlam says while the scoping of open data for development of better services was “very healthy” and not to be condemned, the aggregation of people’s information into fewer places is a concern, even if the data is anonymised.

“Having it fragmented is actually a defence against lack of security and privacy. And even if security is quite strong, internally who has access to that information and for what purpose?”, he asked.

“Particularly if we’ve been forced to input financial information and medical information into these sites, they have an obligation to provide [guarantee of] privacy and security.”

Focus on IT, cloud and digital first

The Commission made several recommendations concerning eGovernment, procurement, cloud computing and modernisation of legacy systems.

Kevin Noonan, Ovum applauded the recommendations, especially the appointment of a chief digital officer as per the UK model, and the allocation of IT to a senior minister for oversight.

"A champion of IT, who has a minister to report to gives [technology] some focus," he says.

"If you look at the lead of the UK government in appointing one, it’s really about giving the government's digital-first agenda some theeth."

Jim Longood, research vice president at Gartner, agreed.

"The important thing is to have an officer that investigates where digital can be applied in government, because there's a lot of processing to be done. A chief digital officer is a nice way of pulling a group together to look at how it can be done."

But digital technologies cannot be applied to all government layers and Longwood disagrees with the "digital by default" recommendation.

"Eighty per cent of government services are people-based. It should only apply where it makes sense," he said.

Longwood also says the cloud-first recommendation was "crazy".

The commission noted the federal government has been slow to adopt cloud computing and recommended a ‘cloud-first’ approach particularly for low risk, generic ICT services. It said that in three to five years, “this could progressively reduce ICT costs as cloud computing becomes the default option”.

Longwood says there are no cloud business solutions ready to replace government legacy systems such as Centerlink's.

While those systems desperately need modernisation, "cloud washing" them would cause more problems.

"There are 40 instances of [enterprise resource system] SAP in government. If they were able to rationalise them they wouldn't need to go to cloud."

Such cloud migration costs - mining companies have paid up to $50 million to migrate - would need to be factored into any projected savings.

"In spite of cloud-first, there's very little implementation of it in the US and the UK," Longwood says.

Noonan says overall, the Commission's focus on IT was positive but still missed nominating technology as a lever for innovation.

"It is has a strong focus on the sorts of things we’ve been talking about for some time but the government hasn’t got around to doing.

"Each individually is not surprising. To see them together as a set of recommendations is the part that I found good."

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