Renewed CenITex out to sell itself after privatisation averted

Michael Vanderheide 3_opt
CenITex CEO Michael Vanderheide


For a public service leader who’s endured a five year existential crisis, CenITex chief executive Michael Vanderheide is surprisingly upbeat and modest about what it takes to forge new opportunities from the fires of disruption – and bring your staff along with you.

As the head of the Victorian government’s public sector ICT infrastructure shared services provider, he’s more interested in talking-up the exceptional resilience and genuine thirst of his staff to succeed than making ‘big picture’ calls on digital government.

“The staff … have been through a lot in my time here and before,” Vanderheide says.

“The nice thing that has happened is that the organisation has really come from a dark place to a place of serious stability.”

[Government News is the media partner of the Public Sector Innovation Summit 2016 held in Canberra on 22-23 March. For more information on Mr Vanderheide’s presentation and other Australian and international speakers at the event, click here.]

Just a year ago the ultimate fate of CenITex – the equivalent of an internal government IT outsourcer that provides core services like desktops, networks and email to 36,000 Victorian public servants – was deeply uncertain amid a change of government after just one term.

Two years before that, the organisation had been slated for divestment by the Coalition Baillieu / Napthine government after its very creation by the previous Labor Bracks / Brumby made it a high profile target for parts of industry from the get go.

Along the way, a clean out of CenITex’s initial senior management, who became embroiled in procurement and recruitment governance failings described by the Victorian Ombudsman in 2012 as sometimes involving “nepotism and favouritism” and “serious improper conduct”, helped propel the controversy into the realm of political bloodsport – with Vanderheide ultimately sent in to restore operational order.

Today, CenITex is no longer for sale, but it is a fundamentally different beast to the force-fit ICT shared services plays that have been tried, abandoned or just sold off in New South Wales, Western Australia and the Northern Territory.

One of the biggest points of difference is that while CenITex remains a government services organisation, its offerings are now contestable and agencies aren’t required to use them.

Unhappy clients or customers can walk away, putting tangible competitive pressure on the organisation to improve customer service, increase efficiency and price its offerings much more keenly.

That’s a major shift in the dynamics of government shared services because it actively and openly tests for market value rather than just chasing down cost reductions made through forced consolidation.

“There’s no mandate for the use of CenITex or any other shared services in the Victorian  Government,” Vanderheide says, adding that the previous mandate CenITex held wasn’t particularly effective anyway.

What contestability has done is made CenITex as a business focus from the bottom up on becoming a lot better at what it does – quickly and demonstrably – including developing new services.

One of the opportunities CenITex is now chasing is standing-up cloud infrastructure services, essentially hosting, as a value added service for agencies.

Vanderheide says that it made “zero sense” to develop this kind of service when the organisation was being primed for a sell-off, particularly when any likely buyer would probably have their own offering.

The result is that the CenITex is now playing “a bit of catch up in that space” but there also are upsides to arriving late.

“The market is actually that much more mature so we are probably well served by waiting,” Vanderheide says.

He has a point too.

As the likes of Amazon Web Services, Microsoft and several others all vie for individual agency business, as an aggregator within government CenITex is well placed to resell a standardised and pre-vetted product that ticks all the required performance, security and data sovereignty boxes.

One of the first cabs off that rank for CenITex is the Department of Health and Human Services who are looking to start hosting one of their applications in the cloud.

Vanderheide says in the first instance, CenITex has hooked up with Microsoft’s Azure cloud platform.

Yet he’s also candid about his organisation being on a necessarily fast learning curve on needing to understand and serve agencies much faster and better.

“The challenge for the organisation is that our world has changed. We have to be responsive to our customer’s needs,” Vanderheide says.

“Were now in the business of trying to create our own future in collaboration with our customer base and that’s a bigger challenge.”

But it’s the opportunity for cultural change, and – after a very torrid ride – the ability of staff to grab opportunities and deliver excellence and success that has him the most fired-up.

“They want this, they are hungry for it and it’s up to us to deliver on that,” Vanderheide says.

In order to get there, he stresses that the leadership team, himself included, need to constantly call out and communicate the need for positive change and more contemporary project management and delivery methods like using lean and agile – even if they have become overused and a bit passé as buzzwords.

“The leadership team spend a lot of time walking around talking to people. We haven’t got there yet, it’s something we have to keep doing and doing.”

So far, the early results appear promising.

After racking up deficits over the four years between 2011 and 2014, CenITex managed to generate a surplus of $8.4 million in 2015, money that allowed it to keep prices steady this year and also set up a $2 million Innovation Fund that is being used to develop new ideas in conjunction with customers.

The essential criteria is that if a customer can stand-up an idea that will create savings, efficiency or productivity that can be applied across the public sector, it gets a run – and creates positive feedback loop too.

Next year, Vanderheide says, CenITex expects to pass on a price reduction of around 5 per cent to its government customers.

As the IT managed services market continues to consolidate and supplier margins shrink, that’s a cost reduction many government customers will be more than happy to take – especially when they don’t have to renegotiate contracts with the company that bought the company they contracted to.

Despite a baptism of fire, CenITex’s retention of a core internal ICT capability within the public sector might yet see it last longer than external competitors . . . and not just because they still support Lotus Notes.

[Government News is the media partner of the Public Sector Innovation Summit 2016 held in Canberra on 22-23 March. For more information on Mr Vanderheide’s presentation and other Australian and international speakers at the event, click here.]

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