Despite a period of early hesitation, there’s now widespread recognition from government agencies – federal, state and local – that cloud services are essential for a digital economy. Although a review of the Australian public service last year found we are lagging behind comparable governments, the experiences of the last 18 months have compounded the appetite for digital services delivery.

As a result, analysts now expect Australian government technology spend to exceed $15.5 billion in 2022, noting “key national technology capabilities, whole-of-government cloud and [software-as-a-service] procurement agreements and digital skills have progressed at a federal level within Australia”.

However, just like their private sector counterparts, Australian public sector organisations are likely to see 30 to 40 per cent of their planned cloud spend – in the order of $300,000 to $1 million per month for larger departments – be wasted.

While increased digitalisation is critical, it’s not without risk. As government turns to cloud to increase agility, reduce technology ownership costs, and accelerate how quickly new services are offered to the public sector and Australians, cost overrun becomes common – and is often undiscovered.

It’s a harsh truth, but most struggle to track and manage their technology investment effectively, and subsequently have an even harder time linking spend to societal outcomes.

There remains a lack of visibility caused by juggling legacy technologies, legacy outsourced environments and legacy vendor relationships with the rush to digitalise through newer, cloud-based solutions. Without visibility, not only do tax-payer dollars go to waste, but it’s almost impossible to track value-add, including the impact on our public service and therefore Australians.

To mitigate cost blow-outs and ensure money spent from the public purse returns the value initially intended, conversations around cloud – and technology investments in general – must be focused on cost optimisation and backed by tangible investment.

While it might not seem an ‘ideal’ time to invest in this level of change management, particularly in turbulent economic conditions and operational hurdles, the sooner government starts introducing cost optimisation with business management disciplines for cloud spend, the sooner it will gain the granular visibility needed to mitigate waste. After all, getting a handle on all costs pertaining to cloud and digital assets will only get more complex as IT spend increases.

New tactics, not just apps, needed to clear the fog

While Australia is regarded as a mature adopter and user of technologies, many government agencies are up to their third version of cloud after previous efforts failed – often scrapped due to fast-changing priorities, or because they can run more than 25 per cent over budget, rendering them inviable.

There are several symptoms which have caused this. A predominant issue is the habit of seeing technology as only a means of creating efficiency, rather than an enabler of new ways to operate in an increasingly digital economy, as highlighted by Lesley Seebeck, Honorary Professor at the Australian National University.

Then, when it comes to assessing return on investment (ROI), challenges are presented by self-assessment models whereby agencies rely on spreadsheets that don’t provide consistent standards on how data is classified, nor take into account crucial factors such as diverse sets of user groups. These processes become ‘tick-and-flick’ exercises as they aren’t suited to effectively track the amount spent on increasingly complex technology environments, causing major initiatives to struggle.

On the flip side, there’s also a habit of hiring consultancies to complete the process, and many of those third parties rely on spreadsheets themselves. While appointing specialists looks credible, it still doesn’t deliver ongoing capability, and instead represents a point-in-time, defensive exercise that adds little value.

What can the overrun be attributed to?

The root of the problem is that government agencies are still trying to solve behavioural and operational hurdles – including historic habits for buying technology – with technical solutions, and through outdated budgeting models.

When it comes to technology decisions, there’s an over-reliance on allocating large budgets upfront to buy new technology tools every three to five years in hopes those new assets will fix all problems, rather than addressing cultural change over an extended period of time across government agencies at all levels.

Technology – monitoring tools and the like – plays a key part in measuring spend, but understanding total ownership costs means analysing far more than a few monthly bills. 

That requires government agencies to re-evaluate how they develop their cloud capability in the first place. The critical starting points is an internal analysis of the people, processes and tools needed – whether it’s to support operations, security, or deliver a specific project.

More than basic reporting, cost optimisation takes regular cadence upgrades, and the application of processes-to-cost models, as well as understanding the extensive data sets available that underpin all of this.

It’s just as important to establish a broader internal capability to ensure that agencies are considering more than just IT project deliverables and managing associated day-to-day outcomes, but also factor in business management, as well as budgeting and forecasting. It’s a blend of business, finance, and technology.

This practice, often referred to as FinOps in industry, allows departments to start at a small scale, based around their current needs, and expand based on anticipated future requirements. 

Once financial mechanisms are in place to manage, monitor and report on the value of cloud investments and technology projects, government agencies will avoid haemorrhaging inordinate sums of money, and be in a position to sustain digital operations while understanding where their operations are succeeding and the full extent of the value they are generating from their expenditures.

Click here to access resources on cloud cost optimisation as well as strategies to improve visibility and control over these investments.

Ben Allard is Vice President and General Manager for Asia-Pacific at Apptio, based in Brisbane.