Shared Services in the Public Sector
by Matthew Mower, sourcingfocus.com
Lincolnshire County Council’s recent commitment to a new public services network suggests that the public service is starting to catch up with private sector in terms of ITO.
Public sector ITO is worth around £16 billion, accounting for around 40% of ICT outsourcing in the UK. Last year the Public Administration Select Committee criticised overspending and lengthy procurement processes while the National Audit Office released a report into inefficiencies in shared services. However, this looks to have struck a note with local authorities, as the situation improves.
It seems local governments are taking a logical approach in sourcing IT – through shared services. Like the majority of sourcing strategies, cost-cutting is a core goal and some of this will be achieved through cutting jobs, but the long term cost rationalisation will be driven by new innovative processes. Efficiencies are driven in the long term incrementally as processes increase in productivity. It is all very well outsourcing to a firm who will run things just the way they are, driving savings through low cost of labour, but should the deal come to an end, there will be no infrastructure in place to allow this to continue.
This has to be taken into consideration at the start of the venture, and as Rod Matthews, an expert CIO who has worked for Knowsley Metropolitan Borough Council, the Cabinet Office and the London Borough of Barnet, states, forward planning is vital. Matthews states in ComputerWeekly.com: “Shared Services have significant advantages, but this delivery route needs to come with a bit of forethought. If you only specify continuing things as-is, or you think it is a magic bullet, you might find adapting around your shared service to be labour intensive.
Matthews continues: “Seated above the commodity are the technology enabled business processes. These are often bespoke and will likely have a range of possible forward plans.”
Like any other outsourcing deal, it is also important to gain a cultural understanding of the organisations involved and have patience. Organisational wants and needs may differ slightly, but if the long term benefits are kept in sight the need for cooperation should remain a priority. Terry Huggins, Chief Executive of South Holland Council, agrees.
Huggins was quoted in The Guardian: “You will have small differences in the way you see things, but it’s crucial you don’t fall out over things that are only worth a few thousand pounds, and in the process prejudice potential savings that are much larger.”
South Holland District Council set up shared services company Compass Point Business Service with fellow Lincolnshire district council, East Lindsey. Last year the company signed a five-year deal with Capita to run certain processes, such as finance, HR and benefit schemes for both the councils. Running the operations in tandem is believed to have saved around 20%.
Jos Creese, CIO for Hampshire County Council sums up as: “a collaborative approach where we pool resources, and say we’re going to operate with a single business model and operate in a very transparent and semi-commercial way.”
Shared services are an extremely effective way for organisations to extract maximum value from the resources they have. Pooling people, budgets, strategies and infrastructure allows for less investment while still gaining every benefit of innovative strategy.
I’m looking forward to reviewing the case studies entered for their Shared Service Centre of the Year award. The award will be judged on the basis of its ability to deliver both initial and on-going business value to the clients, incorporating both best practice and continuous service innovation.
For more information or to enter the award please see award number sixteen in the PDF below.