The public sector shared services paradox
The paradox is that delivering shared services requires an ERP solution enabler. The reality is most public sector bodies don’t have the capacity to implement both and large system integrators don’t have the capability across both. So it’s taking longer than planned for organisations to fully implement shared services and, therefore, deliver the required benefits.
Praktis Solutions have been analysing public sector shared services projects since 2002 and have been involved in projects in all the public sectors from central government, local government, police, NHS, Higher Education etc. In 2011 we have been analysing a number of programmes to identify trends but more importantly the common issues and challenges which are delaying the delivery of business case benefits.
Shared service programmes on our ‘watch list’ by hosting organisation (the body set up to run the shared services for more than one client organisation):
- DWP: viewed as ‘best in breed’ for central government and acting as a host for Cabinet Office and DFE
- NHS SBS: the Joint Venture (JV) with Steria which is now delivering profits
- Research Councils: acting as a host for seven research councils including MRC
- East Midlands Shared Services (EMSS): the Leicester County Council and Nottingham City Council-led partnership with local government
- London Borough of Havering: looking to host other boroughs
- Multi Force Shared Service: the Cheshire and Northants-led partnership with the police sector
- Home Office: much publicised but very expensive service
- MOJ: latest attempt after many years of failure and major cost overruns
Our key findings and areas for improvement:
- ERP implementations used as the ‘Trojan horse’ to deliver shared services
- Client organisations overwhelmed by the demands or disciplines ‘imposed’ on them by the ERP solution
- Organisations failing to invest adequately in ‘business change management’ and SROs pay lip service to demands for people-centric support and readiness assessments
- Organisations left in a ‘distressed state’ for at least twelve months not able to deliver previously defined basic services. Some organisations could not pay suppliers for up to nine months
- System integrators have no shared service practitioner capability and shared service companies have limited ERP capability. No one third-party company has the complete ‘offering’ to deliver shared services.
- To obtain business case approvals some organisations are ‘upping the ante’ by widening the shared service and ERP footprint into areas likes estates, manpower planning and supply chain functions
Step changes required to reduce the impact of the shared services paradox:
- SROs need to operate as sustaining sponsors throughout the shared service programme lifecycle and provide the leadership and organisational commitment to deliver what is a complex and business transforming series of activities
- Host organisations who host shared services need to invest in their in-house teams and then more importantly retain shared services and ERP practitioners. Many rely upon a trusted band of independent contractors or specialist SME firms – not the big consultancies such as Accenture, Steria, HP, IBM etc who dominate the Cabinet Office procurement frameworks. The Cabinet Office’s new procurement team need to urgently address this situation in order to better manage supply side resources and to reduce their apparent over-reliance upon the large consulting firms. System integrators too often ship out the key consultants and architects early in the life of the host organisation.
- Host organisations need to mature and reach a level of service performance which can then adequately support additional clients. Host organisations need to carefully select their clients and ensure there is a cultural fit and that a shared services due diligence exercise has been undertaken
- Host organisations need to be properly constituted into operating companies with appropriate governance structures. The operating boards should include external members either from a JV partner or non-executives
- Host organisations need to invest in experienced shared services and ERP professionals to protect and develop their shared service business models and supporting ERP/IT infrastructures for the long term
- Client organisations have the responsibility to invest and support on-going business change initiatives in a proactive manner and not rely solely upon the hosting organisation to deliver the business case savings and other future benefits
Praktis Solutions’ research supports the current Cabinet Office ‘strategic vision for shared services’ published in July 2011. They identify the barriers to sharing across central government under a lesson-learnt section but in our opinion these barriers have not been addressed over many years going back to 2003 and the Cabinet Office has lacked the authority and credibility to sponsor or lead the creation of JVs. However, we would argue that the Cabinet Office should now act quickly to establish a number of accredited Independent Shared Service Centres (ISSCs) across all areas of the public sector. It will be interesting to see how many of the above-listed hosting organisations become ISSCs in 2012.
The future landscape could see the following:
- Two ISSCs in central government
- One NHS ISSC with the SBS being extended to absorb the ESR Payroll Shared Service and NE Patches
- Police ISSCs covering Scotland (Strathclyde to host) and two covering England and Wales (43 forces)
- Regional ISSCs for local government such as EMSS covering the whole East Midlands region
- Large red-brick universities hosting regional Further Education Shared Service Centres
To achieve some of the above would require the Treasury to provide financial incentives for public organisations to transfer to an ISSC. Taking the NHS ESR payroll shared service as an example, the NHS Trusts were mandated to join and had penalties imposed if they missed implementation dates. In the next spending round the Treasury should consider this type of approach with the Cabinet Office empowered to provide the strategic guidance and acting like a corporate or group function we see operating successfully with the likes of BT, GE Capital and other large corporations.
About the Author
Colin Grace has spent the past ten years working across the public sector to promote and implement shared service centres (SSCs). From his days working with the Liverpool City Council and BT joint venture in 2000 through to his work with the NHS, DWP, Home Office and now with the East Midlands Shared Services Centre he is well placed to assess the progress to date in achieving service improvements and costs savings – in particular, what can now be achieved in the current deficit reduction climate to reduce costs by at least twenty percent. Colin is a director at Praktis.