Government Operations Committee on Feb. 6th, 2012

[David Nicholl]

Thank you.

[The Chair, NDP, Pat Martin]

I'm going to suspend the meeting for a minute while we change to our next panel of witnesses.

[The Chair, NDP, Pat Martin]

We will reconvene the meeting of the government operations committee and welcome our next panel of witnesses. We have the Information Technology Association of Canada, represented by Mr. Karna Gupta, president and CEO. Welcome back, Mr. Gupta. It's nice to see you again. We also have Ms. Linda Oliver, the vice-president of ITAC. You are very welcome here.

We look forward to your opening remarks, and then we'll proceed with questions.

Please go ahead, Mr. Gupta.

[Karna Gupta, President and Chief Executive Officer, Information Technology Association of Canada]

Thank you, Mr. Chair.

Thank you, honourable members.

With me is Linda Oliver, as you've mentioned.

What I'm going to do is walk you through ITAC's position relative to the shared services that have been set up.

ITAC, as you know, speaks for the Canadian information and communication technology companies across the country. We represent both large and small companies across the country. About 65% of our members are small and medium-sized companies, but we do produce approximately $140 billion in revenue through this sector. Seventy per cent of our members are SMEs. We have a strong representation from all sectors and geographies.

The decision to consolidate and move to enterprise-wide management of IT services we believe is a good decision. We support it. We think it will lead to a significant amount of savings and modernization within the government.

Many of our members have gone through a similar transformation, some on a very large global scale, very similar to the size that you're looking at within the federal government. You heard from the previous speaker that organizations like IBM and HP are poster children for it. They have generated a significant amount of efficiency and competitiveness in going through the transformation.

For example, the public data always show us HP as the poster child. They have cut 85 data centres to 6, as you know, and they have reduced the overall applications going out from 6,000 to 1,500. It did triple its bandwidth at half the cost. Annually, they were claiming to be generating about $1 billion in savings.

Personally, I was involved in a large-scale global consolidation post-acquisition when I was running a company out of the U.S. It was involved with multiple geographies, with staff in 65 different countries, and with multiple systems. Going to an enterprise system not only allowed us to save money, but it improved our customer satisfaction tremendously and also our overall competitiveness in the marketplace.

Many of our members helped other organizations through similar processes. Organizations like GM, major Canadian banks, and also the Ontario, Alberta, and B.C. governments have gone through some of these.

We have learned some lessons from all of these examples along the way. We, as the private sector, are here to help the public sector go through this process that has now been launched. What I would like to do now is go through three basic themes that, based on our experience, I can frame for you.

The first one is to collaborate. The private sector and public sector need to collaborate on this early and all along the way. It is often too easy to think that incumbent organizations have all the answers, but it is always better to draw upon the experiences of others. The benefit of experience is huge. We urge the federal government to actively consult the private sector and other organizations on the way forward. It should be done early and it should be done often.

There is a real opportunity here to establish a new way of working with the industry. We need to move from a formal paper process to an open, ongoing dialogue. This is the best way to share information. We, as ITAC, can facilitate much of this with our members. Our members have vast experience and global best practices and are making investments in technology years in advance. Building strategic relationships with businesses, including small and medium-sized enterprises, will best allow government to provide strong services to Canadians.

This does not mean letting go of expertise—far from it. The government needs to be a knowledgeable buyer and manage the performance and results of its suppliers while relying on the best the industry has to offer. It is important for SSC to have the required tools, talent, and resources to create the conditions for success. This transformation is highly complex and time consuming. With proper collaboration, we can balance the risks and rewards and work together for success.

Second, take an outcomes-based approach to launch this project. What this means is that when procuring solutions, Shared Services Canada needs to focus not only on the problems to be solved, but also on the outcomes they would like. That will spell success. Our advice would be to stay away from a prescriptive approach too early.

Again, the key is collaboration and trust between the government and the private sector. We need to be in constant communication to make sure the problems are well understood and the potential solutions and outcomes are all doable within the budget. Opportunities like this type of transformational project are great ways to help develop innovation and economic growth and to keep jobs in Canada.

This outcomes-based approach has amazing results. We have seen it in the private sector. It lets the companies come forward with creative ways to solve problems while at the same time competing on cost. In short, it leads to creative and innovative solutions without necessarily compromising on outcomes.

Third, make it work. This is the hard part. This is where SSC needs to execute on the plan and show results. Based on our experience, one of the most important things here is to have a clear governance structure. Who does what? How will the decisions be made in a timely manner? What is the process to get things done? You have to get this clear, right from the very beginning, and have a good change management process along the way.

You also have to look at the culture of the organization. In this case, I've heard, there are 43 departments. To us, in the private sector, this is almost like merging 43 different companies at the same time. With all the different ways of doing things, it is important that the culture of the employees and the value propositions are clearly articulated by the management to the base. SSC must be allowed to build a team for success.

Finally, there is the implementation plan itself: how long should it take to get this thing done, to go from here to there? In our industry, there are generally best practices for projects of this nature, and typically they run from three to five years. It is not one mammoth project; it is multiple small and medium-sized projects.

The process is to allow for the adoption of innovation along the way. Let's not lock in the technology choices very early at the start. It is a long horizon and you need to be able to choose technology as you move along the course. Sustainability for technology is important.

We would like to work with Shared Services Canada to find innovative ways of accelerating our consultation and procurement processes. We've already provided some recommendations to SSC on various items to increase our collaboration and speed to market and to ensure a win-win result.

In closing, I'd like to thank you again for this opportunity. ITAC is ready to help in any way we can, especially in facilitating a dialogue with our members to make this transformational project come to reality.

I'd also like to extend my personal thanks to SSC's current senior leadership. They have reached out to us for consultation and we are very pleased to have had the opportunity to provide them with some input.

I'd be happy to take any questions at this point.

Thank you, Mr. Chair.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Gupta.

We'll just jump right into it, then, with Alexandre Boulerice for the NDP.

Five minutes, Alexandre.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

Mr. Gupta and Ms. Oliver, thank you for being here today. We appreciate it.

My first question sort of follows on the heels of Mr. Nicholl's testimony. He told us that a large part of the savings realized by integrating technological services in Ontario was due to the fact that external consultants, whose services are expensive, were not being used as much. So these people saved money and managed to build expertise internally by doing the work themselves.

Do you think that's justified? Do you think it's a good direction to go in? Do you support this kind of vision?

[Karna Gupta]

I would not comment on Ontario's specific case. To answer your question a little more generically, I think, it would be what kind of competency you have within the government, in the organization that's being consolidated. If you do not have the requisite skills to run a project of this magnitude and this complexity, then you would need to go to the people who have done it in the past and have the necessary experience. In our view from the private sector, it is critical that you put the right team in place who can see through these kinds of benefits.

Having said that, if you do have internal skills, it makes it a lot easier to move forward, because they know all of the internal systems. You're looking at very large organizations coming together and delivering something very significant. There are a lot of things internally within government that for an external party would take a long time to learn and understand. That's where the savings could be generated: if you have the requisite skills internally.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

In your opinion, should the external resources of private companies make it possible to do the work? If not, should they be used to help train employees of Shared Services Canada and pass on expertise to them, so that they can then be self-sufficient?

[Karna Gupta]

I would go against my own recommendation and be a little more prescriptive on this answer. If you don't have the skills, go hire the people who do have these skills and spend the money to do it right. That would be my recommendation to SSC.

But when you have this large an organization, I'm almost certain that you have these necessary skills, and you'd be able to save a significant amount of money there.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Let's talk about something else. In your opinion, what factors influence the delay in implementing a model like the one that Shared Services has for information technologies? Also, what are the typical situations in which cost overruns occur? What traps need to be avoided to prevent cost overruns in this type of sizeable operation?

[Karna Gupta]

That's a very good question. Thank you.

In my personal experience when we did this in the company I was involved with, the biggest issue we struggled with was trying to create one massive project versus breaking it into multiple projects. So you could not track the progress and you could not see the benefits at each stage of the way. If you keep it as one very large project, it's very hard to have an exact start date and end date and to have the benefits as planned by the project managers coming through to the senior leadership.

Our approach from an experience point of view was to break up the large project into multiple projects and hold accountable the people who are doing it for delivering the benefits they put out along the way. Otherwise, you're not going to see it.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Are you afraid that Shared Services Canada is becoming a kind of monstrous megaproject that will get out of the government's control? Would it be better to split up the project?

[Karna Gupta]

I do not know what the project structure is in Shared Services. I know that there are three things they're looking at, but I don't know what the approach is. I don't think they're there yet, at least from the information I have, in regard to what kind of project they have, how they're breaking up each of the items, whether it's the e-mail network or data centre, and, for each one of them, how it's broken up into multiple projects. But if they're broken up, then the benefits are much more readily understood.

[The Chair, NDP, Pat Martin]

That's it for time, Alexandre. Thank you.

For the Conservatives, Peter Braid.

Peter, five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you, Mr. Gupta and Ms. Oliver, for being here this afternoon and sharing your experience and your perspective.

One of my preoccupations is the support of innovation. I wanted to follow that theme a little bit. Do you see this Shared Services Canada initiative as an opportunity to support and spur innovation in Canada and, as well, to showcase Canadian technology? Are there opportunities to do that? If so, could you elaborate?

[Karna Gupta]

I do believe that whenever a project of this nature is undertaken by government, it does allow a huge opportunity for Canadian companies to showcase their technology, and to almost make government one of the first customers to showcase what they're building. That needs to be done within the construct of the business objective. That's where I laid out two themes.

One is that we need to have a clear view on the outcome, on what you're trying to achieve. Two, do not prescribe the technology choice too early, because you're not tapping into the innovation that might be there two years down the road.

From a process point of view, it is management that has to decide if there is a framework to do that. But in terms of answering your question directly, it's a tremendous opportunity for young Canadian companies to showcase their technology. I absolutely believe so.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

To pick up on that, do you see a particular opportunity for Canadian SMEs involved in technology?

[Karna Gupta]

Yes, I do believe the SMEs do a lot of the applications, a lot of the work. Some of the applications could be very relevant to the types of services you're going to be delivering to the population, and in any sector, because as a country we are moving towards a digital society. Everything you and I consume and dispense is done digitally.

In terms of developing applications, some of them—even I don't know today—might be there two years from now, and some of the SMEs could be anywhere in Canada. Not being prescriptive based on the tools that you have today allows you to spur on that innovation. If at the onset it is laid out that this will allow for SMEs to showcase certain technologies, you spur on that additional development. But it's always driven by one overriding circumstance: does it deliver to you the outcome you're looking for? It is not at the cost of the outcome.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

That's great.

Now, speaking of the direction that technology is going in and that Canada is going in, one thing we're hearing about a lot more often is this notion of cloud computing. I'm just curious, would these changes that we're proposing to make with Shared Services Canada then position the government to take advantage of steps in the direction of cloud computing if that decision were to be made in the future? Is this a platform that might help towards that?

[Karna Gupta]

Yes, I believe so. Cloud computing is a big issue in today's world in terms of the cost of delivery and efficiencies. Just in that context, it should play a big role within Shared Services decision-making. I'm almost certain.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great.

How much more time do I have?

[The Chair, NDP, Pat Martin]

You have about 90 seconds, Peter.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay. I have time for one last question.

We're hearing from witnesses appearing before our committee that there are, it seems, two key advantages: one is to save costs and the other is to improve service. With respect to that second objective, could you elaborate a little on that, given the experience of many of these other examples we're aware of, such as those of provincial governments and private sector companies?

Elaborate on this opportunity to improve service: how that happens and why that's important.

[Karna Gupta]

Sure. From a private sector point of view, when we embark on anything of this magnitude, there are really two dimensions to it. One is the effectiveness and the other one is efficiency.

The efficiency one is a lot more easily understood because you're centralizing things and your overall cost is going down. From an effectiveness point of view, you're looking at how your customers and how your go-to market improves.

I can tell you without a shadow of a doubt that from a customer satisfaction point of view, if all your customers are dealing with you in the same way—if they're on a similar code structure and if you deal with their problems in the same way and in a timely fashion—your customer satisfaction goes up tremendously. As you know, in the private sector, customer satisfaction is a big piece. That kind of drives your market. So there is a definite link in these projects to deliver that.

[The Chair, NDP, Pat Martin]

Thank you, Peter. That concludes your time.

Thank you, Mr. Gupta.

Denis Blanchette, five minutes, please.