The back office shared services company, Shared Services Connected Ltd, created by the government and Steria, will benefit from the experience Steria gained working on the successful NHS shared business service (SBS).
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Steria will take a 75% share and the government 25% in a new joint venture. A total of 1200 staff in government departments have transferred to the new organisation. It will initially provide shared procurement, finance and HR services to 13 government customers, including Defra, the environment agency and Department for Work and Pensions (DWP). This could extend to other public and private sector organisations in the future.
The government aims to save £600m per year through its Next Generation Shared Services (NGSS) Strategic Plan, which this is part of.
NHS SBS, which Steria has run for the Department of Health since 2005, uses an Oracle platform and a single set of processes to run the back offices of NHS trusts. This is often cited as a great example of a successful shared services, which have reinvested money in the NHS. It promises trusts up to 30% cost savings and has even paid millions of pounds back to the NHS.
John Torrie, UK CEO at Steria, said all SSCL customer organisations will migrate to a new Oracle R12 platform from multiple Oracle systems. “This is a big job and won’t start until the beginning of 2015. All the clients use every flavor of Oracle known to man and some are very old.”
He said they will standardise the architecture. “By the time we have finished the migration, the government will have a clean set of data.”
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The company will also reduce the number of delivery centres used by the organisations. “There were eight delivery centres, which did a lot of the same things, but they all have different processes and technologies," said Torrie.
The NHS SBS was five times smaller than the SSCL when it was set up and is now twice as big after more than 100 trusts joined since 2005.
As well as the obvious cost-cutting benefits of running fewer versions of oracle, fewer delivery centres means there are other benefits through a shared service. Visibility between public sector organisations introduces many opportunities to cut costs. Torrie said the NHS SBS has enabled NHS trusts to cut procurement costs. “If another organisation is paying less than you for the same thing, by using the same system you will be able to see this and get a better price.
Another area where savings were made in the NHS SBS was the use of offshore staff. In this case, staff at Steria’s operation in Nodia, India. Francis Maude has given the go ahead for offshoring, but Steria will spend the next six months analysing existing operations before making staffing decision, including job cuts and offshoring. “We are allowed to use offshoring to meet government requirements but we do not yet know how much will be offshored.”
NHS SBS started with 300 people offshore and this has grown significantly as more NHS trusts joined the scheme. "If you look at NHS SBS, there has been more growth in UK staff than offshore staff.” Torrie said no customer-facing work will be offshored.
Torrie said there is a lot of experience gained from NHS SBS but he added there are differences. “The difference between this one and the NHS is that many of these organisations have been autonomous, so culturally work needs to be done.”
Torrie said that when the initial rollout is complete, the joint venture will look at integrating other public sector organisations and he sees no reason why private sector companies shouldn’t use the service. But he said the joint venture is not thinking about that yet, given the huge migration task ahead.
Government departments have similar back office functions that could be consolidated
Robert Morgan, Burn-Oak Partners
In 2009, under Gordon Brown’s premiership, the Treasury asked former civil servant Gerry Grimstone to find ways to raise money for the government.
The plan could have seen the creation of massive public sector companies that would eventually be floated on the stock market. They would compete with big public sector service providers such as Capita.
Grimstone told the Financial Times that there are lots of things in the public sector that are akin to business activity. "We are just embarking on what could turn out to be a radical piece of work on identifying business activities within government and corporatising them."
At the time, Robert Morgan, sourcing industry expert and director at Burnt-Oak Partners, described the idea as a "fascinating and wonderful idea".
He said the savings that can be made are "stupendous" and run into billions.
"This is a very good idea because all government departments have similar back office functions and these could be easily consolidated," added Morgan. He said this is not a new idea but in the past similar plans have "lacked political will."
Central government departments could follow local government, which has seen the rapid adoption of shared services since the government tightened its purse strings during the recession. According to figures from the Local Government Association, at least 337 councils across the country are engaged in 305 shared service arrangements, resulting in £263m of efficiency savings.