The government is relying on shared services projects to deliver substantial public sector cost savings over the next five years. Will Hadfield considers how these services will develop to meet the challenge
Central government has long believed that fewer people could be employed in support functions if only the different public sector bodies could be persuaded to share their back-office IT systems.
Whitehall’s efforts to promote shared IT services have moved from encouraging words to detailed plans that the different parts of the public sector will be expected to follow. The Cabinet Office, which is responsible for driving the use of shared services, is reviewing nine “sector plans” that prescribe the use of shared services for every part of the public sector.
The sectors covered by the plans are education, health, the criminal justice system, local government, the Department for Work and Pensions, defence, HM Revenue and Customs, departments with multiple agencies and any other central government organisations. The plans will be updated by the Cabinet Office this month and published in November.
Although the shared services projects contained in the plans will remain secret until November, Whitehall has already identified the types of project it believes can be delivered as shared services. They are back-office functions including finance, human resources and payroll, contact centres, technical infrastructure, data sharing, information management, information assurance, identity management and IT architecture.
Few organisations have decided to share their finance, HR and payroll with others in the public sector. The largest shared services deals have often been projects to share support services between different front-line services.
Birmingham City Council’s partnership deal with Capita – the ¬largest in local government – is worth a minimum of £420m over 10 years, but it could be worth several times that figure because the partnership is the preferred vehicle for the council’s transformation projects.
The £420m of guaranteed income provides only Birmingham’s own shared IT service.
The council expects the projects covered by the partnership to deliver £1bn of savings from 2006 to 2016. Those savings – none of which require the council to share services with other public sector bodies – are large enough to meet Birmingham’s efficiency savings targets.
Smaller public bodies, such as district councils, lack Birmingham’s potential for economies of scale.
The Transformational Government strategy, published by the government last November, says, “There is significant scope for rationalisation through sharing, particularly if central, local and other public sector bodies can team up.”
The message from Whitehall is that shared services means sharing between different bodies rather than just sharing back-office functions.
In February, the Whitehall civil servant responsible for the Transformational Government strategy said public sector bodies should share services such as finance, HR and payroll systems.
Ian Watmore, head of the Prime Minister’s Delivery Unit, said, “It is no longer optional to share. That will come through in the financing decisions [in the upcoming Comprehensive Spending Review], if nothing else. I am less interested in one or two local authorities working together. I am interested in something on a larger scale.”
Customer contact centres are ¬already being used to provide shared back-office services in some parts of the country.
Liverpool City Council’s contact centre, for example, is run as a shared services centre for both public and private organisations. The centre provides shared document management, revenues and benefits, HR and payroll systems. It will soon market a shared finance system after going live with a £7m SAP Financials system in April.
Although the contact centre’s services have been sold to only a handful of small organisations – a firm of architects is the only one from the private sector – Liverpool is still much further ahead than most public sector bodies.
The contact centre has grown from 65 to 400 seats since it was opened in July 2001. Its growth has come mostly from the council’s decision to use Comino’s document management system to support a greater number of services.
The council’s shared services company – a joint venture with BT called Liverpool Direct – had to turn down a district council that wanted to use its document management system. Liverpool Direct’s chief ¬executive, David McElhinney, who is also a director of Liverpool City Council, says, “We looked at Rossendale Borough Council [in East Lancashire] to provide remote document management and one of the problems was distance. There was not a network in place to handle the movement of images.”
Managers at the joint venture see access to core systems outside normal hours as a logical step forward for shared services. “Out-of-hours is a no-brainer. Not many local authorities have out-of-hours services,” McElhinney says. “However, most local authorities see out-of-hours as an additional cost rather than a saved cost.”
Liverpool Council moved its social care application, provided by Anite, on to Liverpool Direct’s contact centre. Every big council is required by law to provide 24-hour access to social care and therefore access to social care systems.
McElhinney says, “There is an obvious need for the emergency duty team through the call centre. However, because social care is so complicated, it is hard to split out the emergency duty teams.
“The shared services option for emergency cover is there, but if the customer contact centre model is not already being used for social care, it is a huge leap for councils to move to shared services.”
Most centres in the public sector are used only to pursue internal cost savings. Surrey County Council’s centre, for example, is called a “shared services centre” although its new SAP ERP system is only used to support Surrey’s own front-line services. As the UK’s fourth richest council, Surrey can achieve its ¬Gershon efficiency gains solely by improving its internal processes. It does not need to share services with other public bodies to save money.
The Cabinet Office’s plan to encourage common infrastructure for the public sector is being driven by a group of IT directors from both central and local government. London Borough of Newham’s head of ICT, Richard Steel, who sits on the Common Infrastructure Board, set up under the Transformational Government strategy to identify the infrastructure requirements for shared services, says, “We have had all sorts of targets around online service delivery, but these have been reliant on having some sort of shared infrastructure.
“As we move into broadband wireless, the opportunities are enormous for the public sector. Maybe we need some sort of public sector bandwidth set aside.”
Whitehall also sees data sharing as a shared service. One of the largest efforts to share data is the Department for Education and Skills’ plans to make agencies share records about vulnerable children.The Every Child Matters agenda, due to come into force next year, will improve the delivery of public services to children if agencies share data.
However, the IT challenges are so great – involving changes to customer relationship management, workflow, middleware and online authentication applications – that some public sector bodies expect to spend a year just establishing their business requirements.
Newcastle upon Tyne City Council’s head of city service, Ray Ward, says, “I do not know of anyone who thinks the Every Child Matters agenda is not of significant importance. That whole agenda around children’s services is the biggest transformational challenge in local government.”
Public sector IT directors will discover how far they will be compelled to share services when the Cabinet Office publishes its sector plans in November.
How Scotland will encourage shared processes
The Scottish Executive is consulting on its own proposals to encourage shared services among the public sector bodies based in Scotland.
The executive expects organisations to share the same support functions – finance, HR and payroll – that the Cabinet Office has identified for the whole of the UK. The only other area that the executive identifies as ready for shared services is “the common operational processes and systems that underpin front-line services and which are duplicated across multiple organisations”.
Unlike the Cabinet Office, the Scottish Executive has set clear targets for the savings it expects to be delivered by sharing enterprise resource planning systems.
The Scottish Executive will spend £24.6bn across its public sector this financial year. It estimates that between 5% and 15%, about £1.2bn to £3.7bn, is spent on support services in Scotland every year, in terms of employees and IT.
The executive believes that by implementing IT systems once for many different agencies, it can save 20% – between £250m and £750m – of the money it spends on support services.
The forecast savings from shared services are between 1% and 3% of the Scottish Executive’s budget. If it meets its targets for shared services, the executive will also hit the wider savings target it was set by central government’s Gershon Review in 2004.
It expects to publish its own shared services plans by the end of the summer.
Whitehall looks to mergers to consolidate IT
This summer, Whitehall will publish plans that could accelerate shared services by merging many smaller public sector bodies.
The Department for Communities and Local Government, which has replaced the Office of the Deputy Prime Minister, is due to publish a white paper about local government reform that will propose providing support services at a regional level and front-line services at the level of individual streets or suburbs.
The Home Office is also attempting to provide services at a regional level by merging many of the UK’s 45 police forces, although resistance from some forces may cause delays.