An IT project run on behalf of five of the top ten industry superannuation funds — AustralianSuper, HOSTPLUS, HESTA, MTAA and Cbus — is four years late and reportedly $180 million over budget.
And what it had promised to deliver – a unified IT platform for the funds who control the retirement savings of six million Australians – is still nowhere in sight.
The funds, which trade on slogans of low fees and services to members, have called a halt to the IT project while they work out what to do next.
It is a catastrophic project failure, and a lesson in the importance of rapid implementation of IT platform change in the modern world.
One of the biggest problems is that the world has changed since the project started in 2008.
The funds are much bigger – doubling in size since the project started – and their regulatory requirements and competitive landscape have changed. The original scope of the project is now obsolete.
Each individual superannuation fund also is increasingly looking to provide a specific offering to its members.
The project was being run by Superpartners, a service body which manages $134 billion on behalf of its super fund shareholders. Superpartners contracted Tata Consulting Services, part of India’s Tata Group, to do the IT work.
The aim was to replace eight platforms with just one to run all member accounts and to have this completed by 2010 for $70 million.
In 2012-13, Superpartners reported a $7.4 million loss on revenue of $257 million after taking a $20.4 million impairment charge relating to the IT project.
Management consultants Booz & Co have been brought in to look at the business model for Superpartners.
Superpartners said, in its 2012-13 review: “With the assistance of an external Transformation Partner Booz & Company (appointed July 2013), we are now laying down a transformation roadmap including the completion of our core registry system replacement (the IT project).”
AustralianSuper, which is the largest shareholder at 29%, last year downgraded by 50% the value of its holding in Superpartners to just $41.1 million. The other shareholders have followed in writing down the value of their holdings.
None of the funds will talk in detail on the issues or the history of the IT project but AustralianSuper said shareholder funds had decided to start a detailed assessment of the options.
Work on the core platform of what they call the nextGEN project has been suspended.
“We have decided to do this in the interest of good process and good governance because our requirements have necessarily evolved with our scale and also the regulatory changes that have taken place over the last few years – in particular the Stronger Super reforms,” AustralianSuper said.
“Our focus is on acting in our members best interests and supporting our funds’ strategic needs now and into the future,” he statement said.
Industry funds continue to grow significantly. The shareholders have grown funds under management to more than $134 billion from $67 billion over the past six years.
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