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$91 million for 'new visa processing technology'

Buried in an otherwise excellent report on NZ Tourism (found through this NZHerald article) is the statement:

“Immigration NZ is investing $91 million in new visa processing technology that will enable visitors to apply for their visas online”

That feels ridiculously expensive but, overall, this is very important to NewZealand and we need to make sure it works.

1: It’s expensive

The mind boggles. $91 million is an extraordinary amount of money to spend on any computer system. How unreasonable is $91 million?

  • $91 million is 758,333 hours or 431 person-years of work at an average all-in cost $120 per hour.
  • While $120 per hour is relatively cheap for contracting, at 8 hours a day and 220 days a year this equates to an income of $211,200 per year per person.
  • Perhaps there is a lot of hardware in this budget but $91 million will deliver up to 30,333 pieces of hardware at $3000 each.
  • Maybe there are new operating costs involved (although the business case pointed to savings.) In this case taking $21 million from the budget would bestow $2.1 million a year for 10 years, which is 10 of those expensive $211,200 people per year, or, more reasonably, over 40 people averaging $50,000 per year.

2: It’s well under way

Implementation of Immigration ONLINE (also known as the Immigration Global Management System, or IGMS) started in February 2012 following the cabinet’s approval of the business case in November 2011. The project is on track to complete the majority of functionality by the end of 2015, including online visa applications and processing, the use of electronic documents, automation of simple tasks, access to the system by approved third parties and significant improvements in identity management. Remaining functionality that is not central to a quicker and easier user experience, relating to, for example, retiring legacy systems, will be completed by the end of 2016.

It’s all being being done by Datacom – which as it is a local company means that the money is cycled back into the economy, and diminishes the net cost to New Zealand considerably. One could even argue that there is a multiplier effect which creates a net gain for New Zealand, as not only are Datacom staff spending money in NZ, but the tax (GST, PAYE and income tax) goes back to the government, the owners of Datacom are the government-owned Super Fund and a local family who plough (very smartly) money back into New Zealand through investments.

3: However, it’s worth it.

The project, even at the ridiculous price, is easy to justify if it increases migration and tourism. One presentation I found from Immigration NZ, for example, states that migrants add $1.9 billion to GDP each year. I don’t doubt that, and they also point out that education alone brings $2 billion of export earnings. So getting this right is really important, and the sooner the better.

How is it going? Another presentation, from April 2013, stated that end to end student processing was targeted for first half of 2014. Today it’s still ‘please complete the form“ and prospective students have a very long PDF to print out, and must supply a vast amount of physical evidence like photos, medical and police certificates, their passport and evidence of their ability to pay tuition fees and that they have a place at an educational institution. It’s a nightmare, so simplifying it is well overdue.

In January this year FutureGov reported that the project was on track. Let’s hope so,

Overall: Let’s make sure of this one

The concern with large projects like this is not just the cost, $90.5 million in this case but that the complexity makes them much harder to deliver a usable system that actually makes things easier. Nobody wants another Novopay, and I am sure that the conversations in the corridors of Immigration NZ, government and Datacom are held with that in mind.

This is arguably more important to New Zealand than Novopay (though I would be wise not to argue that one to one with an unpaid teacher.) Even during the worst Novopay periods teachers were still coming to work each day, and good for them. This Immigration system will, amongst other things, help or hinder students from paying  (generally tertiary) teachers at all. It’s also a critical piece of the tourism and immigration puzzle, both important drivers of our economy and society.

So I hope the government, Datacom and immigration stakeholders are well on top of this, and the project continues, on track and without fuss largely underneath the radar.

Lance Wiggs is an independent consultant providing management, strategy, growth and valuation consulting to industrial, media and internet based businesses. He blogs at Lancewiggs.com

Comments and questions
13

Novopay, INCIS, IRD systems ... hardly an impressive list.

Admire your positive attitude Lance and sincerely hope this time there's a happy ending!

Being in IT, this would have to be gold plated and then some....any more than $5m should be independently investigated. Someone is picking up a very big bonus.

NZIS is one of the only government organisations which is completely self funding. I can assure you that if someone is picking up a bonus we, NZ will not be paying for this, instead it will be our overseas guests.

Something like 50% of all large scale software projects fail miserably. Look at the US Obamacare disaster, or the Queensland Health payroll project which cost Queensland $1billion for no working result.

While I'll cross my fingers for this one to go to plan, I certainly wouldn't want to bet any of my own money on it.

Government should start its own Crown IT/software development company and knock that contract rate down by gutting the local IT industry of personnel. It spends enough on IT and that wont change anytime soon.

Read the history of Datacom and review their financial statements.

In my view this is yet another government allowed monopoly reaping high rates of return. ROE for 2013/2012 was 26%/19%. NZ Post used to own 35% then this was transferred to the NZSF ( I suppose because it is a dam good investment, one that makes a lot of money from government contracts), the rest - insider owned.

With their expansion into Aus and Asia (i believe their staff numbers are 1200 in NZ 2200 in Aus and a few hundred? in asia), if you took these operations back in house and consolidated IT systems say under State services Comission, not only would the government reap the returns on investment, they would also not be reliant on an external provider, however this comes with the cost of being politically liable for cock ups, such as Novapay.

I seriously doubt there are competitive tender processes for these sorts of contracts and if there was Datacom unfairly starts far ahead of the pack.

I would propose the government just give Datacom a fair price to sell, knowing full right, if they take away those contracts or work on a true cost + % basis, or atleast undertake a cost/benifit analysis of bringing those services in house, that ROE can flow back to the NZ economy, with 65% of datacom owned by insiders it doesn't mean this profit flows into the economy does it. I earn 10 times the average income in NZ, it does not mean I spend 10 times as much in the economy does it.

There's a shift happening in this country whereby huge wealth transfers are taking place from public funds into private hands, it's been happening for a while but sooner or later adjustments will need to take place.

Referring to Bank of International Settlements - structural adjustments are needed in NZ economy to fund the deficit in order to maintain the ability to fund this gap from off shore sources, which is why NZ are having asset sales. Our social and economic inequality is vastly increasing and no one is truly looking at the overall picture.

The Treasury for one makes it hard to analyse statements because they do not provide segregated data down to detail, this makes it hard to have the government accountable when eg Budgets are blown. There's always excuses on externalities, the treatment of symptoms but not addressing the problems.

Kiwisaver for one is just another tool used for wealth transfer into the private sector, every fund manager getting a piece of profit brought about through legislation. Yet I believe those funds are government guaranteed - I may be wrong on this but for my purposes - and my staffs, we do not do Kiwisaver, it's just another middle man taking a cut of your hard earned dollars. Do you think employer contributions aren't factored into your take home pay, that YOU get in cash in your hand with NO conditions on how you spend YOUR own money?

Also, with National and this whole "we've reduced taxes" argument, it does not hold up - try looking a the numbers from the other direction - from the governments books and take into account company births/deaths/net migrations/etc and sources of taxes, personal vs company, indirect vs direct and look at it on a per tax revenue per unit average per person/ per entity (divided into groups of large, med and small enterprises) and let the data talk for itself.

With budget 2014 coming in May, this budget is going to be a bit different, not because of anything on part of the government, but businessmen like me are getting sick and tired of this capitalistic greed that is truly affecting our country, OUR country, wealth in this country has certainly been swayed into one direction.

Also of concern is increasing bubbles in the economy which the RBNZ is having trouble controlling. Selling state assets work in a competitive, large and open economy - but the fact of the matter is we are a tiny country, a small community by global standards, we have to understand that some policies and research in international markets simply cannot apply to NZ because of a) our geographic distance to resources (natural or otherwise, labour , capital etc) b) our macroeconomic framework - ie our markets are not as fragmented.

Further to this is in regard to Westpac - an Aussie bank, who work for shareholders - have a look at how they restructured their operations in NZ, by passing costs and expense incurred through going red tape by putting a bill through parliament. And then National cabinet member is now sitting on their executive management board...

It's cosy and very profitable in NZ, if you are in the right circles, if you're not, you have to work hard and honestly and even then the days of getting a fair chance for progression based on merit are over.

Our history is getting forgotten, the duty is getting forgetten. This once was a great country but the economic and social inequality brought about in the last few years has changed the landscape a great deal, not necessarily for long term sustainable advantage, we are getting very short minded, increased money supply tends to have that effect.

We continue to build bubbles and continue to bust, self correction is normal in any economy, however lets do self correct like the states or EU, lets learn properly and treat all sectors and levels of the economy (rich, medium class, underpriviliged etc) with the same level of opportunities and same level of "tax responsibility".

The rich in this country have been able to unfairly not pay a fair share of tax through various structures and tax allowances, the time for true transparency is coming... are you prepared?

Remember - the middle class make up the larger % of population, trickle down economics do not work, it's about time everyone realised it and ultimatums were handed out.

***Kiwisaver for one is just another tool used for wealth transfer into the private sector, every fund manager getting a piece of profit brought about through legislation. Yet I believe those funds are NOT government guaranteed

***however lets NOT self correct like the states or EU, lets learn properly and treat all sectors and levels of the economy (rich, medium class, underpriviliged etc) with the same level of opportunities and same level of "tax responsibility".

One of the keys to project success is transparency and communication. With the right exchange of information and the necessary respect for people and the objectives you keep problem solving your way working together to the finish line.

Are we capable of this.

Some of the commentary here would suggest we lack maturity.

In a perfect world maybe, but come on, we live in reality, incentives matter.

You don't need to respect the people you work with to bang out an awesome project or product, we need people who are sharp and to the point, people who can think in a multidimensional way and connect the dots.

The fact is that in society there are followers and there are leaders, strong leaders that know what they are doing and know how to do it, those that follow should not lead, because they will end up being lead by someone else without even realising it. Eg Certain Gov departments at the mercy of their suppliers cost policies.

NZ hasn't had a true leader (in gov) in a long time. Its time to take a more Harvard Business Case approach to certain ways this government is run, it's just so bloody inefficient. If people in private enterprise could redesign things from best practice... we don't need more politicians in parliament, we need people that can do and take action.

Australia has been doing this for some time now. Why not just subcontract Australia's Department of Immigration to process NZ visas online?

Free carry of shares si vous plait !

Aussie Visa appliaction services providers are hopeless, TTS Services. Visit the immigration/Visa office for Australia down in the west plaza building for an example. I'm a proud NZ'er and when representing a key service, like immigration, you'd want to do it properly, make sure you make it easy for people and to leave them with a smile and good memories about this country. Remember - the "customer journey" of a visitor to NZ begins with Visa application right...

I just don't understand why $91m for Visa processing services? Are they going to break this down or what?

They have the back-end systems already, (staff sit at a desk entering in information by hand into a database) - so they want to cut the "have to visit immigration" out of the equation to reduce costs and provide another delivery method - online.

So in effect, they just have to create a web form type website that is SSL because of sensitive data flowing over the network. Remember it's $91m to purchase this system, there has been no mention of the ongoing costs? Even if they had to create an entirely new back end system (the database and everything that comes with it) I am really struggling to think how can this cost $91m.

To put things into some perspective here are some numbers from Trademe - if you think of application cost I would think it's a similar from an IT infrastructure perspective.

For FY2013:
Computer Equipment Assets $15m
Software Capitalised $12.83m (gross carrying amount) $6.5m (net)
Development Costs Capitalised $7.39m (gross carrying amount) $6.5m (net)
Web infrastructure Expenses $3m
Employee Expenses $22m