Federal Treasurer Joe Hockey has strongly hinted that the federal government’s two biggest transactional computing systems – at the Australian Taxation Office and Centrelink – are set to be replaced as part of an urgent technology infrastructure renewal program worth “billions” that could be set down in the Budget in just a fortnight.

The likelihood of the big ticket replacements are understood to have been triggered by the ageing IBM-based mainframe systems effectively approaching the end of their useful life with the availability of skilled labour to maintain the so-called ‘big iron’ systems now dwindling to critical levels as experienced systems and software engineers and programmers retire from the workforce.

Centrelink is understood to be the front runner for an initial core system replacement for its 30 year old Model-204 transactional database that is the backbone of most welfare payments that hit recipients bank accounts, with the replacement cost ballparked at around $1 billion.

Mr Hockey has already hit the airwaves to front-run the need for the big ticket replacements to grass roots welfare recipients, telling Melbourne talkback radio personality Neil Mitchell last week that the systems had been run into the ground under labour.

“It is very expensive, Mr Hockey said of the need for a replacement for Model-204.

“The mainframe for Centrelink, which provides services to millions of Australians is aging, it is in bad shape, only Centrelink and the Pentagon in the United States are the only two customers in the world of this one company that maintains the Centrelink mainframe, which is extraordinary.

“But it is an indication that the infrastructure has been run down. The waiting time for a Centrelink phone call at the moment is 17.5 mins”

Asked directly how much systems fixes at Centrelink and the ATO would cost Mr Hockey said it would be “billions.”

“We have got no choice. The question is how we do it and how we try and ensure we have better service delivery into the future,” Mr Hockey said of the need for replacement.

The replacement of Centrelink’s core system has been a long sought after target by big name software and hardware vendors including SAP, Oracle and IBM that are all now having their traditional revenue streams challenged by the surge in cloud computing and virtualisation.

Sources have indicated to Government News SAP is regarded as a front-runner for the Centrelink replacement, in part because of the successful core systems overhaul at the Commonwealth Bank of Australia.

The CBA’s success with SAP contrasts strongly with the state wide misery caused by the botched deployment of the Queensland Health payroll system that had been undertaken by IBM.

Costing taxpayers more than $1 billion, Queensland’s debacle not only resulted in legal conflict IBM but the company being banned from doing further business in the state by Premier Campbell Newman.

Understandably, replacement of the core system for welfare that has functioned for three decades with minimal disruption is also regarded as a high risk and complex undertaking for any government because problems in payments would directly hit millions pensioners and payments in the pocket.

The ATO itself only recently completed a major overhaul of its main taxation software under the massive “Change Program” that took close to a decade because of the systemic complexity.

Following the release of the Henry Review into taxation, ATO officials conceded that in the event of major tax reforms the Change Program’s work could potentially be out of date before it was completed.

In the meantime, the Department of Finance is actively investigating ways to bring down Enterprise Resource Planning software costs across government, with work from that probe also anticipated to flow into the 2014 Federal Budget.