If you always do what you’ve always done, you’ll always get what you’ve always got, so the UK budget deficit has prompted some radical changes – and there are more in the pipeline. To quote chancellor George Osborne: “We are all in this together.” It’s a remarkably apposite turn of phrase that extends even into the world of information technology (and on numerous levels), says Lesley Meall, FSN contributing editor.
Just as the budget deficit has brought Conservative and Liberal politicians closer together, it is blurring the dividing lines that have traditionally separated many public sector organisations, and turning the heat up under a trend that has for many years been something of a slow burner.
“We have had more conversations about shared services over the past five or six months than we had during the previous two or three years,’ reports Dean Dickinson, managing director of Advanced Business Solutions, and the nature of those conversations has changed too. “Before the general election, people in the public sector often talked shared services then put it into the ‘too hard’ basket,” he says, but this tentative interest has been replaced by something more earnest. “Discussions are at a level of granularity we have not seen before,” he says, which is perhaps unsurprising. After all, if you need to make budget cuts of 30 or 40 per cent, there are only so many ways you can go.
Although Labour’s Operational Efficiency Programme previously provided a bit of a nudge towards increased use of shared services, managed services and outsourcing (and the areas where all of these sometimes overlap), the new wind blowing through the corridors of power has significantly heightened interest. Since the coalition was formed there have been numerous announcements from local councils, parts of the National Health Service and hospital trusts, about plans to outsource some or all of their business processes, or their IT infrastructure, services and staff, or take their first steps towards some sort of shared services initiative, or widen an existing programme – and there are bound to be more.
But the nature of shared services in (and around) the UK public sector has always been a little different to the commercial sector, where the trend has a much longer and well-developed history. Initiatives in the commercial sector have tended to be the preserve of large, complex, (and often) international organisations, and they have been driven by the wish to exploit the cost savings, simplification and economies of scale that can be offered by centralisation and consolidation – with one part of an organisation or group providing services that had previously been duplicated in other geographical or operational areas.
So near but yet so far?
While shared service initiatives in the public sector are driven by similar motives, they have tended to be either much smaller projects or joint ventures between separate entities – which creates new challenges and opportunities, and raises all sorts of issues relating to what is, and is not ‘best practice’. Some of these public sector initiatives are following the well worn path where business process and ICT shared services become (either accidentally or deliberately) a way-point on the road to some sort of managed servivce or outsourcing arrangement, and this is particularly noticeable among bodies that came together as (relatively) early adopters of shared services.
For example, NHS Islington, NHS Camden, and Camden and Islington NHS Foundation Trust recently decided to move on from their joint shared services initiative. The three organisations have signed separate five year managed ICT service contracts with the systems integrator 2e2, because the shared services initiative had, apparently, “failed to deliver the expected benefits because of lack of investment.” Lack of vision may also have been an issue, as they seem to be putting 2e2 in the driving seat as far as future developments are concerned, by accepting a roadmap that will be designed to get the most from their legacy investments and systems.
According to David Thomas, head of ICT at NHS Islington: “The roadmap means that 2e2 will tell us what they think we should be investing in, but we have an overall say as to whether we take that on board and whether we go to another vendor.” The managed service provider has already recommended virtualising all of the trust’s servers, and the trust is also considering the possibilities offered by remote working and smart working. “The new contract has provided us with a knowledge and skills base that we just couldn't provide ourselves,” adds Thomas.
But as FSN managing editor Gary Simon noted in a recent article, according to Deloitte, there is evidence that “an effective use of shared services reduces costs, while outsourcing seems to have the opposite effect.” Which goes some way towards explaining why some public sector bodies are still enthusiastically heading off down the road towards shared services – and giving the process an entrepreneurial twist. “One of the contracts we recently won to develop a shared service centre for a borough council, stipulated that the implementation be done so that the council can use the services itself and sell them them to other councils too,” says Dickinson.
This is not a new idea; others have already trodden this path – and with some success. East Lancashire Financial Services Shared Services (part of Calderstones Partnership NHS Foundation Trust) was set up in 2002 to provide services to five North West NHS organisations – and it has since been transformed from a cost centre into a revenue generator. Now in its eighth year, ELFS Shared Services is providing accounting, financial management, procurement, payroll, online expenses and other shared service solutions to 11 NHS organisations in the North West and beyond, and there is plenty of scope for adding more customers.
“Driven by the NHS operating framework and the increasing pressure on NHS organisations to cut their back-office administration significantly, more and more NHS organisations are looking at a shared service approach to managing their financial, payroll and business software systems,” observes Graham Gornall, shared services director at ELFS. So, even if NHS Islington, NHS Camden, Camden and Islington NHS Foundation Trust couldn’t make their approach to shared services work economically for them (or anybody else), some organisations can, and given the success of approaches such as ELFS’s, it’s not hard to understand why others are keen to follow suit.
Evolution or revolution?
Meanwhile, the need for swinging public sector budget cuts is driving the shared services trend ever higher up the pecking order – and further away from parallels in the commercial sector. Back in 2007 the neighbouring councils in Adur and Worthing took the pioneering step of becoming the first in the UK to have one single workforce providing shared services (with the councils remaining two separate entities). As Adur council leader Neil Parkin explained at the time: “Doing nothing and staying as we are is not an option. This way we protect our key services for the benefit of residents in Adur and Worthing. Without taking this step frontline services would have to be cut.” Since then others have followed suit, including the London boroughs of Camden & Islington.
They recently announced that when John Foster retires as chief executive of Islington Council in 2011 Camden’s chief executive Moira Gibb will take the helm for both – if the councils agree. “In the face of government cuts, it’s more important than ever that we save money,” says Catherine West, leader of Islington Council. “We have already worked together successfully and I believe that a shared management team will bring a fresh approach,” she adds, observing: “By working together, we have a combined purchasing power and more clout when it comes to getting better value for money in service delivery.”
How all of these initiatives play out over the next couple of years remains to be seen; how many shared services initiatives deliver their promised savings and improved value for money; how many end up being outsourced because they don’t; how many can be turned into sustainable generators of revenue; how unions will react to these changes and how big an impact this will have; how many of these shared services initiatives will be as good for public services as they are for the commercial organisations providing the required software and services; only time will tell. But if you always do what you’ve always done, you always get what you’ve always got…
