Features: February 2nd, 2007

Exploring the Drivers for Shared Services

By Stephen Butcher

Public sector organisations are under constant pressure to spend less of taxpayers’ money without compromising the quality of the services they provide. As part of its Transformational Government strategy introduced in November 2005, the Cabinet Office Information Officer Council defined as one of its core objectives the encouragement of the public sector to drive efficiencies through shared services, be that through collaborative procurement processes or through sharing actual services. The aim of this approach is to make considerable cost savings by reorganising and reusing assets that are often duplicated across different government bodies. A year on, can we see any improvement in the operational efficiency of the 1,300 organisations that make up the UK public sector?

Recent reports by the Economist Intelligence Unit (EIU) and the National Audit Office (NAO) have highlighted the benefits that the implementation of modern procurement processes and shared services in the public sector can deliver. The EIU reported that over half the international public sector organisations surveyed were already using a shared service model to deliver efficiencies, and a third of the remainder expect to do so by 2010. While this suggests a worldwide consensus, the findings may not reflect the dominating attitudes amongst organisations in the UK.

The NAO study, which focused on further education colleges in England, suggested that institutions could cut costs by a staggering £75 million per year by March 2008 by introducing more efficient and effective processes. To reach this target, the NAO recommended that institutions explore opportunities to create economies of scale when buying goods and services. What are the barriers to success?

Stumbling Blocks

Organisations often begin their shared service quest by exploring opportunities to develop a service with a like-minded establishment within its sector. Although there are some that have collaborated successfully, governance and cultural issues represent barriers for the shared service strategy to reach its full potential. In addition, although the adoption of shared services with peers has its advantages, organisations may not be able to find enough like-minded collaborators to achieve critical mass, and may find the process of developing and delivering a resilient external service laborious. A collective is also likely to incur high development costs.

The Cabinet Office identified a lack understanding of EU public procurement law as a barrier to the adoption of shared services. As a consequence senior managers have to devote valuable resources in familiarising themselves with the complexities of EU legislation. A further task for senior managers is that of tracking down organisations that share their needs.

In light of these barriers, wworking with a third party may actually deliver a better return on investment than direct collaboration. This frees up time for each organisation to focus on their core business while developing and sharing with their peers best practice in the management of service providers.

Reducing the Burden

Eduserv, which is not-for-profit IT services group, started out as a shared service initiative and has a real understanding of what it takes to develop a secure, scalable and fully supported service. An example of shared services, from a procurement point of view, is Eduserv’s software and information licensing service Chest, which negotiates and manages preferential licence terms for commercially available education and research resources, reducing the burden of complex negotiation processes for individual organisations in the UK and Ireland.

Whilst there is a real discrepancy between the budget constraints of organisations operating in the public sphere and the cost of the many indispensable resources they need, Chest enabled the education sector to save an estimated £25 million in the financial year to July 2005. This saving has a dramatic and positive impact on the institutions’ ability to access the best possible resources within very tight budgets, and more importantly, to redeploy these savings to support front-line teaching.

The aim must be to increase the savings that shared services can offer to public sector organisations, but also to build positive, fruitful relationships with the suppliers of these resources.

Health – Pioneer in Best Practice

Despite the heavy criticism the NHS has faced recently over its funding, the health service is leading the way in the successful adoption of shared services. As its expenditure is under such close scrutiny, the NHS needs to deliver value while cutting costs.

The National Library for Health is an excellent example. The NHS subscribes to a wide range of clinical data resources on behalf of those working in the UK healthcare sector. To facilitate use of these resources Eduserv Athens provides a single password sign-on for doctors, nurses, medical students and researchers. As well as enabling NHS staff to access resources wherever they are, this shared service provides significant savings in password administration for all the trusts involved and enables compilation of user statistics to judge value for money on the subscribed contents.

The way in which the National Library of Health has been able to enhance the quality of services it provides to the community it serves, by streamlining the access and identity management of its information resources, is one true shared services success story. There are still many other opportunities to increase efficiency through the alignment of needs and the adoption of different collaborative practices throughout the public sector.

The challenge for public sector organisations is how to cope with the varying demands of Government and stakeholder expectations, and save money without compromising quality. Shared services can deliver significant benefits, but the right choices need to be made on how to get there.

Stephen Butcher is the CEO of Eduserv, the not-for-profit IT services group serving the public sector.