By Tony Collins
The Cabinet Office has published “Government Shared Services: A Strategic Vision – July 2011″ which suggests a “cloud- based ERP standard platform which Departments could buy into and from”.
The idea is part of the coalition’s plans to standardise IT systems within government. Standardising could save money – but, as the Public Administration Select Committee warned last week, not if standardising means giving even more control of government IT to a few large, monopolistic suppliers.
The Cabinet Office says that a number of Departments are due to upgrade their supporting IT systems for back office corporate services in the coming years.
“A co-ordinated management approach by Government will lower the cost of reinvestment whilst enabling a rationalisation of the current landscape,” says the Cabinet Office.
“For example, a number of large Departments who have implemented and operate an Enterprise Resource Platform (ERP) solution need to plan for the expiration of support to the current instance by 2013.
“This presents an opportunity for UK Government to source a “vertical” solution for a “cloud based” ERP standard platform which Departments could buy into and from.”
On Shared Services, the plan is to
“reform how Central Government procures and manages consolidated back office corporate services – by establishing an equitable market of a small number of accredited Independent Shared Service Centres and enabling Departments and their ALBs [arm’s-length bodies] to choose between these – in order to drive up quality and reduce costs of these services, in support of Governments cost reduction targets.”
The Cabinet office says that approved shared services centres will “provide outcome based services, using standardised simplified processes, with the expectation to regularly publish performance data against established benchmarks”.
They will be able to make use of different business models – such as mutualisation – to “leverage capability and the financial investment needed to deliver this service and may operate virtually or from a small number of fully integrated delivery centres”.
This focus upon shared service as a method to save money will massively increase costs and worsen services. All of the arguments made for sharing come from within the shared services industry (IT companies, consultants, or think tanks funded by companies selling shared services). All of the so-called evidence is based upon estimates, projections and surveys. No real data.
Professor John Seddon, an expert in service organizations with extensive experience in public sector systems says that there are two arguments for sharing services. The ‘less of a common resource’ argument and the ‘efficiency through industrialisation’ argument.
The former argument is ‘obvious’: if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.
The second argument is ‘efficiency through industrialisation’. This argument assumes that efficiencies follow from specialisation and standardisation – resulting in the creation of ‘front’ and ‘back’ offices. The typical method is to simplify, standardise and then centralise, using an IT ‘solution’ as the means.
The problem with the industrial design is simple – it doesn’t absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can’t get what they want.
The evidence of this flawed theory can be found everywhere. In HMRC or South West One shared services which predicted savings of £176 million over 7 years and actually recorded a pre-tax loss over its three financial years. Duplicate payments sitting at £772,000 and a struggle to manage £12.9m in outstanding debts.
This week Western Australia followed Queensland in ending its shared services. It was claimed that it would save $58 million a year and instead cost $444 million dollars (no savings). It is estimated that it will cost taxpayers between $1 – $2 billion dollars to rectify.
With the cost of failure so high, doesn’t the public deserve a proper investigation of shared services? Let us at least closely examine the supposed successes to see if they really are successes.
Three articles on shared services (and a short video)
Short video on scale in services
Shared services a commentary http://www.thesystemsthinkingreview.co.uk/index.php?pg=17&backto=5&utwkstoryid=43&title=Shared+Services%3A+A+commentary+on+the+CIPFA+%2F+PWC+report+&ind=12
Shared services will deliver the greatest efficiency
Economies of scale is a myth in services