Local government is adopting shared services at lightening speed

Back in December a colleague of mine wrote an article about research from the Chartered Institute of Public Finance and Accountancy. The research suggested nearly all local councils will use shared services.

It seems to be moving in that direction of recent tenders are looked at. There is loads going on in local government.

How deep can these sharted services go? How long will it be before all IT enable services are shared ion local government? Which other public sector organisations can share IT with local authorioties?

– This week a tender has been placed on the Official Journal of the European Union by four London boroughs that are looking for a systems integrator to support their plan to share a single instance of Oracle’s latest ERP software.

The contract, which will be worth up to £88.5m over four years, includes the London boroughs of Barking and Dagenham, Brent, Lambeth and Lewisham, which are existing Oracle users. It is hoped other councils – including Croydon and Havering – will join the shared services deal at a later date.

– Early this month Surrey County Council put out a tender for a managed network service that will be shared between public sector organisations within the council as well as neighbouring Berkshire.

The contract titled Unified Communications over Regional Networks (Unicorn) was been put out for tender on the Official Journal of the European Union.

 It is asking for bidders that provide integrated network systems and services as well as telecoms suppliers.

The supplier will be tasked with providing services, including managed wide and local area networking and IP voice services, to public sector organisations, provide the ongoing management of contracts within the overall project, as well as technical, commercial, migration, training and support. The service provider will be expected to work alongside staff from the public sector who will provide specialist business and procedural expertise.  

– Also this month came news of seven Scottish councils joining up services in a move that is expected to save around £30m a year. The participating councils include Glasgow, Inverclyde, East Renfrewshire, Renfrewshire, East Dunbartonshire, West Dunbartonshire, and North Lanarkshire.

Staff numbers under the new shared services model are expected to decrease by around 25% over time, which could see more than 100 IT roles go. IT is the most expensive function across the councils with a total cost of £58m per year. 

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A few corrections if I may.

My understanding is that West Dumbartonshire is pulling out of the Clyde Valley shared services scheme.

They know that there is no evidence to support shared services, just estimates, projections and surveys generated from within the shared services industry.

Professor John Seddon, an expert in service organizations with extensive experience in public sector systems says that there are two arguments for sharing services. The ‘less of a common resource' argument and the ‘efficiency through industrialisation' argument.

The former argument is ‘obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.

The second argument is ‘efficiency through industrialisation’. This argument assumes that efficiencies follow from specialisation and standardisation – resulting in the creation of ‘front' and ‘back' offices. The typical method is to simplify, standardise and then centralise, using an IT ‘solution' as the means.?The problem with the industrial design is simple - it doesn't absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can't get what they want.

Worse still once shared, costs can be locked-in by contracts, SLA agreements and other un-evidence and poor management practice.

The evidence of this flawed theory can be found everywhere. In HMRC or South West One shared services which predicted savings of $176 million over 7 years and actually recorded a pre-tax loss over its three financial years. Duplicate payments sitting at $772,000 and a struggle to manage $12.9m in outstanding debts.??

This year Western Australia followed Queensland in ending its shared services. It was claimed that it would save $58 million a year and instead cost $444 million dollars (no savings). It is estimated that it will cost taxpayers between $1 - $2 billion dollars to rectify.


Thanks for your detailed comment. I will blog about your points today to balance the debate.

Thanks again for taking time to share you knowledge.


Karl Flinders