IBM and Australia’s federal government have signed a billion-dollar five-year whole-of-government procurement deal.
Big Blue’s spinning it as a win because it runs for five years and means that government agencies who don’t already work with IBM now have a way to buy from the company without needing to strike new contracts.
Australia’s government is also spinning it as a win, citing “significant savings over the next five years”.
The deal will also see Australia’s Digital Transformation Agency and IBM run a joint innovation program that’s going to consider all today’s best buzzwords - quantum, blockchain and AI – and how they might catapult Australia towards its goal “to become one of the top-three digital governments in the world by 2025”.
IBM Australia to end on-shore software supportREAD MORE
We asked IBM if the $1bn is more or less than the agencies' already-projected spend with IBM over the five-year period and the company offered a non-answer about access to innovation. Then there’s the fact that the deal includes four agencies - the Departments of Human Services, Home Affairs, Defence and the Australian Taxation Office – that all have long-standing and deep engagements with IBM. With the government claiming savings, that means they’re probably going to spend less over the next five years. Perhaps quite a bit less given the deal is the way other government agencies will buy from Big Blue from now on.
And then there’s the fact that IBM is seriously on the nose in Australian government circles after botching Australia’s census and low-balling a project cost estimate for a gig that later went very pear-shaped indeed (although the client was to blame). A lower-priced deal for business as usual with a bit of innovation chat on the side signals IBM hasn’t been banished. But with every other major vendor always looking to win business with Australia’s government, it’s not as if IBM will be the only one in the DTA’s ear. Microsoft and AWS are already going hard for cloud business in Canberra, the nation’s capital.
IBM also has to negotiate the likely closure of an Australian data centre and Australian governments’ enormous preference for on-shore work at a time the company is moving much of its services capabilities to low-wage countries.
Another thing to consider is that Australia’s Dollar has been sinking of late and is tipped to go lower still. At present every Australian Dollar IBM takes home will be worth 74 cents stateside.
Still, a billion-dollar deal doesn’t come along every day and IBM has plenty of reasons to be chuffed by this one, as it represents a chance to deepen incumbencies in some agencies and create new ones in others. And perhaps even sell them the cloud and AI bits that IBM believes is its future. ®