Government set to outsource IT activities

November 5, 1998

The Government is set to start outsourcing the application maintenance of its existing information technology (IT) systems in 1999-2000 with the aim of outsourcing over two-thirds of all new IT projects by 2001.

This was stated by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, when addressing the luncheon meeting of the Hong Kong Management Association today (Thursday).

Mr Kwong said development and maintenance of Government computer systems was currently performed in-house by the Information Technology Services Department.

But he pointed out that Government's annual spending on IT had been on a continuous upward trend for the past six years, and stood at $1,870 million in 1997-98. This continuous rise in demand for IT services is so great that the in-house staff are simply no longer able to meet it adequately and in a timely manner, he said.

"This phenomenon is not unique just to Government and the only practical solution, which is becoming increasingly popular, is outsourcing," he said, adding that global spending on IT outsourcing is expected to exceed $671 billion by 2000, compared with $379 billion in 1996.

However, Mr Kwong told the gathering that enlarging Government's delivery capacity for IT applications and services was not the only objective behind the outsourcing strategy.

"What is more important is that with this strategy, we hope to be able to create a market of sufficient size to encourage the further development of the local IT industry and to attract more investment in it," he added.

In outsourcing IT projects, Mr Kwong said the Government would focus on a number of issues, namely the need to manage risk at an appropriate level, have quick wins to demonstrate the benefits, select priority projects for outsourcing, establish the right IT management framework for outsourcing, and formulate a programme for outsourcing IT activities.

To achieve this strategy, the Government will adopt a partnership approach with the private sector rather than the traditional "client" and "contractor" relationship.

He explained, "This means that we would try to agree with the suppliers how the work might best be done - in the interests of both the users and suppliers.

"We will exploit the strengths of both our own IT professionals and the wider IT services community to approach issues jointly, resolve problems together and achieve success mutually."

He said the Government would give suppliers the flexibility to do what they do well and would not try to place unnecessary controls or restrictions on how they should do thing.

Instead of focusing on inputs, he added, the Government would turn its attention to outputs and would establish jointly agreed service standards as output deliverables under contract.

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