OpenGov speaks to Michael Vanderheide, Chief Executive of CenITex, about the turnaround of a previously embattled agency through cultural transformation and a shift in focus to customer needs. Mr. Vanderheide has been heading the agency since 2011. Prior to his current role, he was Executive Director Infrastructure & IT for Victoria Police.

Can you share the history of CenITex and the story of its journey till date?

CenITex was established in 2008 by the Victorian Government as a shared services agency to provide ICT infrastructure and support to government departments and agencies. We focus on infrastructure rather than on business applications, which remain the responsibility of the government departments that we serve.

We provide services to many large government departments including the Departments of Premier & Cabinet, Treasury and Finance, Justice and Regulation, Health and Human Services, Economic Development, Jobs, Transport and Resources, and Environment, Land, Water and Planning.

We have approximately 35,000 customers and an annual turnover of about $160 million in revenue. We operate within the portfolio of Department of Treasury and Finance, but we are governed by a 9-member board, appointed by government and comprised of a mix of independent representatives and customers.

The organisation was established because the government recognised that there had historically been an underinvestment in IT infrastructure. They realised that there could be significant advantages in bringing what was seen at the time as a commodity-type service, into one place. It would mean investing once, rather than investing individually in each department.

Although it’s been a rocky road, CenITex is delivering on its potential. Some of the challenges we experienced were self-imposed. Five years ago for example, we suffered process and controls failures within the organisation that led to fraud being perpetrated. In addition to that, there were fairly serious service delivery issues. Overall, it was much harder than expected to make things work.

But that is behind us.

Since the government’s decision to halt an initiative aimed at outsourcing it services, the organisation has been charging ahead. We have gone from a $37 million loss four years ago to a good, solid surplus. And we expect the surpluses to be sustainable into the future.

Service stability as measured by significant outages has improved. We have seen a nearly 40% drop in outages over the last 5 years.

Our voluntary staff attrition rate peaked at about 19% four years ago. Today it is below 5%. Even more importantly, our customer base is absolutely committed to collaborating closely with us and with each other to drive the best possible outcomes for government.

What were the important drivers for the turnaround?

The large investments of funds and effort in modernising our infrastructure have taken longer than we’d hoped to deliver benefits. But they are paying off now. There is a significant degree of standardisation within the infrastructure space particularly in our Government Shared Platform or GSP environment, that simply didn’t exist before.

We made some very hard decisions around cost reduction, and over a relatively short period of time we went from an organisation of 800 to an organisation of 500. Our staff showed incredible resilience, professionalism and commitment during these periods.

As important as investment and cost reduction were for the organisation, we also had a key change of mind-set. CenITex’s founding mission was to be the best provider of IT shared services but we recognised that this focus was largely internal – it was all about us. We’ve since shifted from there to instead asking what we needed to do to get the possible IT services for our customer base.

The shift in thinking was from having a goal of being the best provider of IT services, to being the best at enabling our customers to get the IT they needed, so that they in turn can deliver what the Victorian community needs. That change in focus for the organisation has served us and our customers really well.

Now that the turnaround has been achieved, what does the future hold?

I would say emphatically that we are still in the process of achieving the turnaround. The next stage for the organisation is to continue the cultural transformation.

In the past, we had been an unapologetically technology-focused business and our systems needed a lot of attention. We were very focused on the technology and on stabilising the environment. We have now achieved stability and strong performance in terms of high availability of network, internet and workplace services.

If we are going to continue to meet our customer requirements however, the focus has to be on the customer, not just on technology. That’s the big cultural and organisational shift we are making at the moment.

To drive this, we are basing support staff physically on our customer sites. We are inviting customers to address our planning forums and staff meetings to talk directly to our people about how the IT services they provide impact services delivered to the Victorian community. We’re using feedback from our customer satisfaction surveys in consultation with our customer base to tailor programs aimed at addressing areas of greatest need. And we are establishing consultative customer based groups to drive our investment priorities in areas like security, architecture and cloud.

Cloud is becoming increasingly important to our customers so we are very actively adopting or putting in place the necessary infrastructure to support their cloud migration. We have to get the necessary building blocks, so that our customers can access whatever they need from the cloud easily. So, we have projects underway around federated identity, secure links to software-as-a-service brokers and cloud-based mail and mobility solutions.

In several areas, the cloud space is still relatively immature. So, we are investing just enough to try to stay ahead of where our customers are. We are doing this in a collaborative environment, with our customers driving what our priorities are for cloud, so that we invest wisely.

Could you tell us about the drivers for your business decisions and revenue model?

Our goal is to deliver a very modest surplus. Unlike the private sector service providers, we are not motivated by profit but rather by a desire to reduce cost, with a view to passing on that cost reduction to our customer base. They can use it to invest in more IT or whatever other priorities they might have outside of the IT space.

All of the programs we initiate within the organisation are funded by our customers, either by direct customer investment through projects or via retained earnings from revenue we have generated in the past.

While talking to ICT professionals in government, we have repeatedly encountered concerns regarding legacy infrastructure. Is that a challenge you are facing?

We will be working with legacy environment for a long time, largely because a lot of key business applications will only run where they are running now. The investment required to move off them is often hard to justify either because the applications continue to meet the needs of the business, or because of other higher priorities.

A challenge for us is that our investment in legacy infrastructure is a sunk cost. As I said earlier, we are witnessing a rapid move by our customer base into the cloud. Through a lot of joint planning and close collaboration with our customer base, the move into cloud-based services will happen at a pace that allows us to manage that migration without a really significant “hump cost” in the middle. I am confident of that.

What is your role in facilitating adoption of new technologies?

We are enablers. Our role is to enable our customers to make the changes the need with the least risk, in the shortest time and in the most cost-effective way possible.

By way of example, we are introducing cloud based Office 365 productivity, collaboration and messaging tools as an alternative option to Notes, which most of our customer base is currently using. To facilitate this, we will invest in the necessary templates, the planning, contract negotiations and resolve legal matters related to privacy and security. We will invest in the co-existence engine that allows us to maintain seamless links with the current environment. And having invested in all of that once, if and when our customers want to make the change, they just have to pay the cost of the transition.

They do not have to re-invest in all the core bits of thinking and infrastructure needed to enable it. That’s the kind of benefit we are going to offer as a shared service organisation to customers, who are looking to become more innovative.

Do you think governments are doing enough to protect data? What more can they do?

It’s a challenge for governments, for everybody in fact. Every step we take is matched by a step from the bad guys trying to get around it.

Within this organisation, we have had a significant uptick in investment in security services. In addition to what we were already spending, our Board has committed $2 million a year over each of the next 3 years on a security uplift program.

We just went live with a 24/7 security operations centre. We have introduced a new service around malware and spam management, which is proving quite successful. Again we are doing that in close collaboration with our customer base, who are setting the priorities for where we invest.

We have forums where we bring together security experts from IT security departments in government to share intelligence and ideas and set those priorities. It is more cost effective to invest once in the services that we are offering rather than everyone trying to do it on their own.

Do you collaborate with other states or other organisations?

Yes, in a couple of different ways. We are party to the same external analyst services as many other organisations are. We also engage fairly closely with other shared service organisations in the government space, not just IT.

The federal government is in the process of enhancing shared services. In the HR and finance areas primarily, we are sharing what we know in terms of what works and what doesn’t. And we continue to learn from those jurisdictions who have a longer history in this space than we do.

We have built a strong foundation as a shared service, but to really succeed we need to continue the transformation and the shift in focus from our technology to our customer and leverage our legacy as our platform to prepare us for the future.