• The SAP S/4HANA baseline will theoretically allow Defence to use a number of plug-in modules to address its wide and varied ICT needs.
    The SAP S/4HANA baseline will theoretically allow Defence to use a number of plug-in modules to address its wide and varied ICT needs. Defence

Updated 29 July 16:25 with new SAP figures

After we broke the news last week that MILIS is on track to fall over without serious intervention, Defence announced that IBM had been selected to do the initial design phase of the billion dollar Enterprise Resource Planning (ERP) program.

The first phase of the ERP program of work will look at the finance system in Defence which is due to go live next year. As ADM has previously reported, the system will be based on SAP under a whole-of-government arrangement.

It must be noted that SAP is the base system, with each department customising it for their own use with the help of industry partners such as IBM, Accenture and others.

SAP products are used by over 437,000 people in 180 countries, with the German company the most valuable corporation the nation has, turning over 24.7 billion Euro in 2018 with over 98,000 employees globally. This is also a company that has bought an average of 10 ICT firms every year for the past decade to grow its reach and capabilities. Its products are industry standard for a number of applications such as ERPs.

The SAP S/4HANA baseline will theoretically allow Defence to use a number of plug-in modules to address the wide and varied needs of the organisation, across its various agencies and sites both in Australia and abroad. Given the legacy nature of many of Defence’s systems, the migration and transition path will have to be well mapped to maintain the day to day running of the organisation. 

ERP milestones

The Defence ERP program has been running now for some time, with the program first coming up on ADM’s radar in 2016 with a tender release and industry briefing.

ADM understands that the program had been scoped for internally within CIOG for at least two years before that point. Defence’s ICT agency had also engaged the services of both KPMG and EY to look at how run the program in 2018 after multiple approaches to market.

In updating the delegates at MilCIS last year, Chief Information Officer Steve Pearson was confident that the timelines for ERP could be met.

ADM can report that the timelines and delivery methodology have indeed changed from its initial form as the program falters.

For a program that began in 2014 it seems strange that only now has an 18-month $95.5 million contract for initial design been released. During this period, CIOG has seen three Chief Information Officers and three to four ERP directors come and go.  

IBM gets the nod

IBM and Accenture had been vying for the Systems Integrator role for the better part of three years, with the program seemingly in paralysis after second pass approval until this latest announcement.

“The platform will initially enhance the Department’s logistics, land maintenance and engineering capabilities, replacing a wide range of existing end of life systems,” according to a statement from IBM on the announcement.

“It will provide Defence personnel with an integrated platform to significantly improve productivity and effectiveness in their operations, ensuring the right equipment is in the right place, at the right time.

“IBM was selected due to its extensive global experience working with Defence agencies across the world on similar implementations. IBM plans to work with delivery partners including COSOL, Dalmation 6, DASC, DXC, Ernst & Young (Plaut), Fujitsu, Infosys, KBR, Noetic, Southern Cross, Synchrony Global, TAMS, XKG and Veritec.”

The agreement comes one year on from IBM’s whole-of-government announcement that sees the company engaging with the federal government under five-year $1 billion agreement across multiple mega agencies such as Health, Human Services and Immigration.

“This is a testament to our 40-year partnership with the Australian Government, and more than two decades of working with the Department of Defence,” David La Rose, Managing Director IBM Australia and NZ, said.

“Making the best-informed decision is key for the Department of Defence,” Damien Bueno, President and Managing Director, SAP Australia and NZ said. “With SAP S/4HANA, Defence can leverage embedded intelligence and deliver real-time insight to critical business operations. As the foundation of an organisation-wide transformation, SAP S/4HANA will help optimise the value of important defence investments and resources, in addition to underpinning future innovation.”

ADM also notes at this point that the recent design contract announcement falls under the $100 million ICT contract cap from the Digital Transformation Agency.

It must also be noted that the ANAO will be looking at CIOG and their multi-billion dollar program of work for the first time in coming months. 

ADM Comment: In searching for best practice examples of SAP-based ERP roll outs, the field is not great for a number of reasons. When an ICT system works, it goes unnoticed in many ways, as it should be. But when it goes wrong, everybody hears about it with large scale programs making headlines, usually for the eye watering dollar values involved.

When I asked my network about ERP program roll outs that had gone well, in any industry of any size, the horror stories rolled in.

My personal favourite was an SAP system: when it was rolled out to a medium sized company, it lost nine months’ worth of orders when it went live (with no back up) and then went on to win an award for best practice.

There are good news stories though, with large scale organisations such as Coca-Cola Amatil and BHP with their SAP1 work.

With the Internet of Things becoming reality, the reliability and security of military systems is more key than ever. I think it would also be fair to say that the vast majority of users just want a system that works, no matter where they are or what device they’re on that they don’t have to work around in order to get their job done. This seemingly simple requirement remains unattainable for most organisations; Defence is not alone in their battles with their ICT environment.

ADM is very keen to see what the ANAO report into CIOG program highlights in due course. We’ll let you know more as we do.

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