1. Shared services hot again
Shared services are back in the news. Nine out of ten local authorities in England are looking to share front line and back office functions within the next two years. A survey conducted by Ipsos Mori for law firm Browne Jacobson found more local authorities and government agencies are considering pooling resources to deliver services in the austerity era.
2. The vital statistics
Almost two-thirds (65%) will target back office functions and 68% front line services in the next year. Some 85% of local authorities might also consider outsourcing on a service by service basis whilst 78% would also consider setting up a joint venture with the private sector. Environmental and social care services are the two most popular areas where senior managers would consider sharing.
3. Some services more shared than others
True shared services consist of integrating IT departments and infrastructures – but that doesn’t happen often. Instead, there are many permutations of shared services: clubbing together to share procurement and gain the advantages of the economy of scale; multi-agency systems that are built and run by a provider; joint ventures where a local authority teams up with an outsourcing expert and keeps jobs on the local turf. Think Liverpool Direct Limited – a venture between Liverpool City Council and BT.
4. Political in-fighting biggest bugbear
Given that local government is a hotbed of ferocious politics, true sharing of services has not always been successful. Hence the various permutations of sharing that include a lesser degree of collaboration. Nonetheless, political and public opposition is seen by 28% of senior managers interviewed in the Mori poll as the biggest barrier to delivering shared services in the local government sector.
5. Lack of commercial experience
Is also cited as a major obstacle to successful sharing. Most IT managers or leaders of local authorities don’t understand how to measure the real costs of delivering IT services. This can work against them when they do an outsourcing deal as they award a contract to the lowest bidder, but if a supplier cuts corners, the price doesn’t go down.
6. And the drivers are...
Not surprisingly costs savings are the key driver for those mulling over a move to any variant of shared services. According to the Browne Jacobsen survey, 63% of the 150 senior LA managers interviewed, expect to save up to 10% of their total budget savings in the financial year ending April 2012.
7. The evidence is...
A global Benchmark study carried out by the Shared Services & Outsourcing Network (SSON) and Hacketts found that only about a third of all participants generated cost savings of 20% or greater. Companies were more successful at achieving productivity and quality improvement goals through the implementation of shared services.
8. In the pipeline
Westminster Council is halfway towards negotiating a framework agreement to purchase all software as a service (SaaS) and other LAs are expected to join. It’s part of its strategy to be infrastructure-free by 2015. By brokering the deal, the London authority can expect a handsome discount on software services. Hammersmith and Fulham and Westminster have announced their desire to share children’s services.
9. Harmony makes a partnership
Sounds obvious yet many shared services efforts don’t make it past the tender stage because local authority partners can’t agree on a standard way of doing things, whether it’s what applications or devices to put on the desktop, or who will host the servers. Instead, someone wants to be in the driving seat and winkle out the biggest gains. Outsourcing sidesteps some of these conflicts, but even then local authorities need to recognise their partner has to make a cut in order for the project to be viable.
10. Governance is all
Sharing or outsourcing a service or IT function doesn’t pass the buck for governance or responsibility for data. Contracts should specify who is in charge of day-to-day governance, and shared services need shared practices for governance. Steering committees can be set up for participating parties while accounting standards requires a clear audit trail for data. And, in the event of data going missing, remember, it’s unlikely that any tabloid will nuance the headline to reflect contractual obligations.
With thanks to Danny Jones, director of public services at TPI, Robert Mackenzie, business & technology partner at Scott-Moncrieff, and David Grigsby at LiquidLogic.
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