State-owned businesses and corporaties

Teaching case

Raise your glasses – the water’s magic!

Strategic IT at SA Water: a case study in

alignment, outsourcing and governance Alan Thorogood1, Philip Yetton2, Anthony Vlasic1, Joan Spiller3

1Australian Graduate School of Management, UNSW, Sydney, Australia; 2CORDS Limited, Sydney, Australia; 3Welsearch Limited, Melbourne, Australia

Correspondence: A Thorogood, Australian Graduate School of Management, UNSW, Sydney, Australia. Tel: 61 2 9931 9249 Fax: 61 2 9662 7621 E-mail:

Abstract The South Australian Water case study illustrates the management challenges in aligning Information Technology with business objectives in a publicly owned corporation. To achieve the alignment, the new CIO begins by refreshing the IT infrastructure to support the required business applications. When the Government establishes ‘Improved water quality’ as a major corporate goal, the CIO seeks to add value to the business by developing a quality reporting system that leverages the existing technology. At the same time, he demonstrates to the corporation the IT function’s capability to deliver business value through the management of multiple outsourcing vendors. Journal of Information Technology (2004) 19, 130–139. doi:10.1057/palgrave.jit.2000017 Published online 13 July 2004 Keywords: outsourcing; strategy; project management; governance; government


S outh Australian Water (SA Water) is responsible for the secure supply of quality water to Adelaide and the world famous Barossa Valley vineyards. Much of

South Australia is the Great Sandy Desert and the largest river, the Murray, is both shrinking and unpotable. SA Water addresses this challenge through an internationally recognised water-testing laboratory.

Historical context Water delivery is an ancient technology, which changed little until the introduction of electric pumps. It has always been more economical to lay one large pipe between two localities than it is to lay two smaller pipes. So, water delivery is a natural monopoly and is therefore often government owned or regulated.

Over the years, SA Water had evolved into a vertically integrated government department. In the past, its scope spanned from managing the catchment areas to retail billing and it had its own castings factory to make pipes. At its peak, it employed 6000 people, many of whom had

joined the organisation as apprentices and worked their way up through the ranks.

During the 1990s, the South Australian Government outsourced its IT infrastructure to EDS, privatised some State-owned businesses and corporatised others, including SA Water. After being restructured as a Government-owned corporation, SA Water outsourced the maintenance and operations of Adelaide’s water supply to United Water, a joint venture of Thames Water, Vivendi Water and Halliburton KBR. It also sold the castings business. This reflected SA Water’s goals, which had changed from ‘security of supply’ to ‘efficient security of supply’. More than 4000 employees left, many of them to join United Water.

Business background In the late 1990s, the Government became increasingly concerned with environmental issues and added water quality to the goals. The Government also directed the Corporation to become more customer-focused, more commercial and to develop a vigorous export-focused