Shared
servicesis yesterday's news, a project that
has sunk without trace, according to anarticle in the Guardian. However, this
great white hope for IT savings for government departments is
indeed alive and well, although the thinking behind shared services
has moved on.
The roots of shared services go back to the
Gershon review released in 2004, which outlined a £20bn package
of savings to be achieved across government. Shared services was
widely cited by the report as being the best opportunity to achieve
real savings.
"The supplier community feels like the agenda has stalled," says
Tom Raggett, a director of the Buy IT consultancy and leader of the
Shared Services Advisory Group, a group of "thought leaders" who
help guide the e-government unit.
"Departments have been told they have to provide the same
service or better at minus 5% cost each year. Fiddling around the
edges is not going to do that," Raggett says. "Shared services is
only one of many delivery models, but one which has a lot of
traction at the moment."
What is now emerging is a model that embraces a softly-softly
approach to encouraging departments, agencies and local authorities
to adopt the shared services approach. The hope behind this is that
the need to achieve efficiency targets will naturally encourage
public servants to look towards approaches that are well
established in the private sector.
"The move to shared services almost always involves a change to
both systems and processes," says Raggett. "What makes one
government department different from another one? With a vanilla
set of processes, such as SAP or Oracle out of the box, you can
make it work with minimal customisation - these systems work for
organisations all over the world."
The effectiveness of this approach can already be seen in
practice.
The Department for Work and Pensions and
HM Revenue & Customs have built their own platforms based
on Oracle and SAP, and the Cabinet Office has handed its human
resources and finance operations to the DWP.
In separate initiatives, the Ministry of Defence has established
its People, Pay and Pensions Agency to offer human resources
services to 80,000 staff, and the Prisons Service has taken
administrative functions out of prisons into a separate unit. In a
commercial organisation, these moves might be seen as
consolidations rather than shared services, but Raggett says this
misses the point.
"It is proper shared services," he says. "It is different from
centralisation where you just put people in the same place you are
creating an organisation whose job is just to do human resources or
finance and to be excellent at that."
Although efficiency savings may be the driver behind shared
services, Raggett points out that money is not the be-all and
end-all of shared services in government.
"Success is measured by the management information that is
passed through to the organisation," he says. "The Department for
Transport, for example, now has an integrated platform they have
taken chunks of the individual silos within transport and put them
in shared services centres."
Shared services in the NHS
Outside central government, shared services is chalking up
success in areas that normally make the headlines for other
reasons.
NHS Shared Business Services (SBS) is one of the biggest shared
services operations in the world, providing finance, accounting and
payroll functions to more than 100 NHS organisations.
It began in 2003 as an in-house project run by the Department of
Health, but the decision was quickly reached to move to a
joint-venture structure, which has been up and running with
outsourcing specialists Xansa as a partner since 2005.
"If you try to do shared services internally, there can be a
lack of clarity about who is the client and who is the customer,"
says Peter Coates, deputy director of NHS finance. "We do not have
the operational skills in government to do these things, so we need
the right world-class partners to make the assets work for us."
Coates also believes that this approach has marked advantages
over outsourcing, "With outsourcing, you spend all your time trying
to fix things in the sand: output specifications, performance
specifications and so on. Shared services is really dynamic. It
allows the business to grow and determine service levels based on
moving customer needs."
There is no mandate for trusts to join Shared Business Services,
although there is a requirement to come up with a transparent case
for not using either SBS or adopting the Oracle platform. Capacity
issues also mean that the service will need several years to reach
the necessary capacity to support the entire NHS.
"The worst kind of customer is one that is forced to do
something," says Coates. "A large trust with a single provider can
be as effective if they are very efficient. We need to demonstrate
our worth in terms of cost and quality of service."
Currently, SBS is focusing on building critical mass in London
and the South East, where staff costs are highest and trusts rely
more heavily on contractors. Later, these economies of scale will
be rolled out to other areas.
The shared services approach has the benefit of encouraging NHS
units to merge resources, says Laurence Ansell, business
development director of NHS SBS, who has supported the merger of 67
NHS clients into 23.
Pooling resources at the local level
For local government, the experience of shared services is
usually more of a patchwork, and local sensitivities mean that
there is less likelihood of a top-down approach. However,
interesting deals are being struck on an ad-hoc basis between local
authorities wishing to share a variety of services.
An example of this is the creation of a disaster-recovery
consortium in Wales that brings together Cardiff, Carmarthenshire
and Wrexham councils to provide digital back-up for key council
functions.
The inspiration for this project came from the Welsh National
Assembly's decision to sponsor the
Lifelong Learning Network, a 100Mbps backbone connecting Welsh
schools, libraries and all 22 Welsh local authorities.
"Some authorities had their own arrangements, some had no
budget," says Colin Gadd, operational manager for infrastructure
and ICT at Cardiff Council. "Eight or nine showed real interest and
that was whittled down to three."
The nature of the project meant that the authorities were happy
for the recovery centre to be situated anywhere on the network, and
by chance Cardiff had recently acquired a suitable datacentre from
NTL.
After an audit to assess the hardware requirements, the
consortium opted for an "open-hire" sourcing arrangement based on
Sun Microsystems equipment provided by Fujitsu Services on a
four-year fixed contract.
"We did not want anyone to be able to say, 'that is my bit of
kit,' and break up the consortium," says Gadd. "We sliced the cost
three ways, and Cardiff funded a separate link to the network. We
felt that because the other authorities had to travel to use the
centre, we should contribute something over and above."
Gadd says savings are hard to quantify because the nature of the
service goes beyond what each council could have afforded
individually, including helpdesk support and access to
Sun's storage area network.
"We would be paying the same, if not more, for a traditional
disaster recovery system with two three-day testing slots a year,"
he says. "The tests are so infrequent you take most of your time to
get the data primed and only have time for a hurried test before
you have to wipe the data clean."
The contract comes up for renewal in June 2008, at which point
the consortium will also look at whether to open up discussions
with other authorities in Wales. However, the benefits of sharing
costs will have to be balanced against the benefits of extended
testing.
"We always had it in our heads that if all 22 authorities wanted
to do this that we would need to take a regionalised approach,"
says Gadd. "But it is still far more cost effective operating as a
consortium than going it alone on disaster recovery."
The bottom-up approach can be taken to the point where the
shared services initiative - and the risks and costs of setting it
up - can be externalised to suppliers.
"Rather than having a top-down and very grand approach, which
outsources entire functions at a stroke of the pen, you can build
it up in small steps by persuading suppliers to take risks and
market the service themselves," says Mark Thompson, director of
Methods Consulting, which took this approach when asked to set up
an e-recruitment system for the
Department of Health.
"We said we can build you a system if you like, but it is dead
in the water if you cannot market it," says Thompson. "But if we
can persuade you to view this as a service delivery project, we
will take the responsibility for hawking it round to the
employers."
Thompson believes that this approach could open up government IT
to deeper levels of sharing through the adoption of open-source
techniques.
"Government is potentially very good on the supply side,"
Thompson says.
"There are all sorts of opportunities for people to approach
local government and say, for example, I have developed an
abandoned-car reporting system. The problem is aggregation of
demand. Proprietary software is very good at assembling demands,
open source is not very good at that."