IBM Australia’s five-year whole-of-government agreement has exceeded $2 billion in value to the vendor - double the initial $1 billion expectation - with almost a year still left to run.
An analysis by iTnews - confirmed by the Digital Transformation Agency - shows that contracts awarded to IBM Australia since the whole-of-government agreement was announced in July 2018, hit almost $2.1 billion by August 16.
The value of the whole-of-government agreement was initially put at $1 billion, which at the time was touted as “the highest value contract negotiated by the Australian government”.
Digital Transformation Agency (DTA) general manager of digital investment advice and sourcing Wayne Poels told iTnews that “the initial arrangement was established in 2018 based on the spend from participating agencies at the time.”
“Additional contracts have since been signed due to organic growth, environment refreshes, and changes in business requirements over time,” Poels said.
Poels said that all agencies that struck contracts via the arrangement already benefitted “from the best possible terms and conditions available to the Australian government for IBM products and services.”
“The arrangement also offers commercial flexibility to the agencies, which were able to leverage the arrangement to support the uplift required to deliver for Australians during the recent pandemic and disaster events,” Poels said.
But the larger than anticipated volume of work under the existing arrangement is also a key discussion topic as the DTA enters discussions about the future of the arrangement.
The current five-year term expires in June 2023 and Poels told iTnews that the DTA has already “commenced commercial discussions with IBM” to extend or renegotiate terms.
Given IBM hardware, software and services are being contracted well above expected levels, the DTA is about to start an exercise to scope the full extent “of the IBM commercial landscape within the Commonwealth, to inform future negotiations with IBM.”
Whether that effort and understanding, together with evidence of the increased demand for IBM in government generally, may lead to even better sourcing terms is unclear - and Poels was circumspect in his comments on where the renegotiation might lead.
“The DTA is monitoring the market and working with agencies to understand the current level of demand across government,” Poels said.
“The DTA cannot comment further on any commercial discussions that are now underway.”
