Analyst View: Government shared services perspectives

As the age of austerity descends upon the UK public sector, attention is turning to shared services as a means of generating efficiency savings. Many organisations in the sector are considering joining forces to deliver services in order to reduce costs and benefit from economies of scale. Major change could be on its way as diverse organisations, such as local authorities and health trusts, pair up to work towards common goals. However, the future could be far from bright if, in the rush for benefit realisation, the sector fails to gain key enabling competencies.

Desperate times call for desperate measures
As a result of the recession, the UK public sector is facing significant funding pressures. The Chancellor of the Exchequer confirmed in the Budget in 2009 that he would seek £15 billion per year of 'efficiency savings' across the public sector by 2013/14. Substantial back-office and IT savings are being sought: the Operational Efficiency Programme (OEP) workstreams are expected to deliver a potential 20-25% in savings in the back office, or £4 billion of the total estimated spend of £18 billion per year, by April 2012. A further potential 20% of savings, or £3 billion of the total estimated spend on IT of £16 billion per year, is also anticipated over the same period.

The latest government ICT strategy, published on 27 January 2010, fleshes out the government's approach to generating savings by focusing on smarter, cheaper and greener ICT. The strategy is set to bring together government departments, local government and wider public sector organisations to tackle costly duplication of technology and to eradicate unnecessary overlaps between departments.

Rising to the challenges of shared services
The public sector is turning to shared services with a sense of urgency. Shared services can be described as akin to 'internal outsourcing', by which organisations gain economies of scale by building and/or using one large central organisation to replace sub-units (i.e. the same function within different public sector organisations).

As well as cost benefits, if implemented well, shared services can deliver consistency and quality of service by embedding best practices in processes that serve a large customer base. To achieve these goals, it is important for organisations not to rush into a programme of change without first developing or gaining some key competencies. In terms of skills, competencies should be sought in the management and governance of shared services that require subtly different skills to the decentralised model of delivering IT. For example, shared services often have to run alongside other existing services, with lines of management into different organisations that have their own priorities and needs. A service has to be managed and led well to deliver against those different needs within its budget and the scope of its remit.

Business process and technical expertise should also be sought to help identify and implement the best approach to delivering shared services. For example, organisations with similar requirements might opt for highly specialised and packaged services, while diverse organisations could opt for the most basic utility computing environment that is intended only to facilitate service delivery at an infrastructure level. At a more detailed level, a key enabler of shared services is a common standardised business vocabulary between the participating bodies. It will enable appropriate, timely and automated information access in the front office. Additionally, in the back office, shared data definitions and business rules are required for process integration and automation of information delivery and workflow between systems.

Good governance is key for shared service enablement
Governance of shared services is essential to ensure that they meet the requirements of all the businesses concerned. Policies and procedures must be in place to guide investment decisions, provide continuous visibility of project progress, monitor and measure business processes and outcomes, and assess and mitigate risks. Without effective governance, the business value of shared IT can become substantially impaired as inefficiencies quickly eat into its cost benefits. IT governance must run throughout the entire value lifecycle, have both business and IT elements, and help to align these two perspectives to a set of shared objectives.

This is an extract from Sarah Burnett's Straight Talk from market researcher, Ovum.