$91 million for “new visa processing technology”

Buried in an otherwise excellent report on NZ Tourism (found through this NZHerald article) is the statement:

Immigration NZ is investing $91 million in new visa processing technology that will enable visitors to apply for their visas online”

That feels ridiculously expensive, but overall this is very important to NZ and we need to make sure it works.

1: It’s expensive

The mind boggles. $91 million is an extraordinary amount of money to spend on any computer system. How unreasonable is $91 million?

  • $91 million is 758,333 hours or 431 person-years of work at an average all-in cost $120 per hour.
  • While $120 per hour is relatively cheap for contracting, at 8 hours a day and 220 days a year this equates to an income of $211,200 per year per person.
  • Perhaps there is a lot of hardware in this budget, but $91 million will deliver up to 30,333 pieces of hardware at $3000 each.
  • Maybe there are new operating costs involved (although the business case pointed to savings.) In this case taking $21 million from the budget would bestow $2.1 million a year for 10 years, which is 10 of those expensive $211,200 people per year, or, more reasonably, over 40 people averaging $50,000 per year.

2: It’s well underway

Implementation of Immigration ONLINE (also known as the Immigration Global Management System, or IGMS) started in February 2012 following Cabinet’s approval of the business case in November 2011. The project is on track to complete the majority of functionality by the end of 2015, including online visa applications and processing, the use of electronic documents, automation of simple tasks, access to the system by approved third parties and significant improvements in identity management. Remaining functionality that is not central to a quicker and easier user experience, relating to, for example, retiring legacy systems, will be completed by the end of 2016.

It’s all being being done by Datacom – which as they are a local company means that the money is cycled back into the economy, and diminishes the net cost to New Zealand considerably. One could even argue that there is a multiplier effect which creates a net gain for NZ, as not only are Datacom staff spending money in NZ, but the tax (GST, PAYE and income tax) goes back to the government, while the owners of Datacom are the government-owned Super Fund and a local family who plough (very smartly) money back into New Zealand through investments.

3: However it’s worth it.

The project, even at the ridiculous price, is easy to justify if it increases migration and tourism. One presentation I found from Immigration NZ, for example, states that migrants add $1.9 billion to GDP each year. I don’t doubt that, and they also point out that education alone brings $2 billion of export earnings. So getting this right is really important, and the sooner the better.

How is it going? Another presentation, from April 2013, stated that end to end student processing was targeted for first half of 2014. Today it’s still ‘please complete the form“, and prospective students have a very long PDF to print out, and must supply a vast amount of physical evidence like photos, medical and police certificates, their passport and evidence of their ability to pay tuition fees and that they have a place at an educational institution. It’s a nightmare, so simplifying it is well overdue.

In January this year FutureGov reported that the project was on track. Let’s hope so,

Overall: Let’s make sure of this one

The concern with large projects like this is not just the cost, $90.5 million in this case, but that the complexity makes them much harder to deliver a usable system that actually makes things easier. Nobody wants another Novopay, and I am sure that the conversations in the corridors of Immigration NZ, government and Datacom are held with that in mind.

This is arguably more important to New Zealand than Novopay (though I would be wise not to argue that 1-1 with an unpaid teacher.) Even during the worst Novopay periods teachers were still coming to work each day, and good for them. This Immigration system will, amongst other things, help or hinder students from paying  (generally tertiary) teachers at all. It’s also a critical piece of the tourism and immigration puzzle, both important drivers of our economy and society.

So I hope the government, Datacom and immigration stakeholders are well on top of this, and the project continues, on track and without fuss largely underneath the radar.

Published by Lance Wiggs


5 replies on “$91 million for “new visa processing technology””

  1. “One could even argue that there is a multiplier effect ” – I think the multiplier effect is generally a misguided argument. Its best to consider what the alternative is. Is there a shortage of IT jobs in NZ? If so and these staff would otherwise have been unemployed then sure, there is a beneficial multiplier effect. But i dont think there’s a shortage of IT jobs, there’s a shortage of IT workers.

    So the staff on this project might not have had jobs at Datacom, but i’m pretty sure they all would have had jobs.

    So the real question, in terms of multiplier effects, is what is the value of the finished product these 100 or so workers produce over 5 years versus what they would have done otherwise? Lets say that instead of doing this they were evenly spread across Movio, Orion, Xero, Unleashed, etc, what value would they produce then? Given the value of some of these companies and their growth rate its easy to imagine that adding a large chunk of talented tech workers would produce large returns.


  2. The multiplier effect should come from increased numbers of international students, tourists and migrants entering New Zealand over the next ten years compared to the number that would have entered if the present out-dated and cumbersome systems remained in place. The boost to the New Zealand economy could be calculated if Immigration NZ have projected these numbers in their reports.

    I think that the opportunity cost of IT people working on one project or another would be marginal at best. This type of IT investment is essential and one would hope that Datacom will do an excellent job and get it exactly right the first time. Any government project has high risk levels and costs due to the complexities and processes imposed by the public procurement process and the associated probity and audit requirements.

    Perhaps Lance could write us a post on the NZ public procurement process and the implications for companies hoping to win business in the NZ public sector?


    1. I worked for MED for a few years (crown-minerals, IPONZ, companies office, etc), and my opinion is that any project where the government is the purchaser is going to cost 10x what it would be for a well managed private company (I dont believe it matters whether the implementation is done by government or private employees). Yes government projects are risky and complex, but they dont need to be and thats my point.

      So government projects must deliver a 10x greater return on the activity then equivalent private company performing the same activity. OK, there’s no private companies doing visa processing, so that makes a comparison difficult.

      Remember we are talking about almost 500 man years (according to Lance’s calcs). How much value could NZ’s talented, highly skilled, tech workers produce in 500 years worth of effort? Given that Xero has produced $(whatever-insane-valuation-Xero-has-today)bn with $80mil (or so) thats a pretty high bar.

      I’m not saying that we should not do efficiency improving government services, but i think at some point we all need to recognise there is a problem and then do something about it. How much did Novopay end up costing? How much will the IRD upgrade end up costing?

      What i would love to see is for government to offer a services repository (far simpler then end services), or other market creating framework, which allows private companies to offer the end service. We already do this (conceptually) in some areas ie WOF’s, domain names, etc, and we’ve seen private companies re-purposing public services with good effect (eg http://www.coys.co.nz). Then we could deliver far better government services with far fewer resources, and free up talent for innovation based tech exports.


  3. Question: it should be clear that governments all around the world have a terrible track-record when it comes to even moderate-scale IT implementations.

    So, given the track-record, why does the scenario of ongoing failures continue.

    Whether or not private businesses have a better track-record is up for debate. However, that is a matter of their respective shareholders, whereas governments burn up our tax dollars, so a more transparent level of accountability should be applied.

    But it isn’t.

    This I believe is one of the two key reasons why such failures are tolerated.

    The other is that because behind these failures, or at least luke-warm “successes”, are a vast array of internal and/or external parties whose lives depend on a ready supply of such projects where accountability is limited at best.

    In this case, the $91m “investment” is going somewhere.



    1. I think its apparent that the vast amount of money simply goes to paying wages of IT workers. There are a lot of IT peeps on projects like this and they earn well about the national average, so that takes a lot of cash. And yes there’s a very small number of well connected people who do very well.

      But i think the real issue is that the efforts of good, talented people, who should be building the next Xero are instead wasted doing government make-work. And its not just me that thinks that, even the Daily WTF says so…

      “Big corporations are bureaucratic enough to make you say: “wtf?!”
      Governments are bureaucratic enough to make you shout: “WTF!!!””


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