Shared services cut costs survey finds

Public-private shared service deals have helped to unlock US$3.3 trillion dollars in government cash globally, according to a recent report from global consultant firm A.T. Kearney Inc. Nine countries are included in the findings, including Canada, which is recognized for its best practices.

The study found that in seven of the nine countries (Australia, Austria, Germany, the Netherlands, New Zealand, the United Kingdom and the United States) shared services have been implemented to balance government accounts, cut costs and ease the load on taxpayers.

However, Canada stands out for its emphasis on improved services to citizens, which A.T. Kearny considers to be a best practice. The report noted that the business case for shared services has also improved, with benefits now between 15 and 25 per cent.

Henry Sano, acting executive director of the shared services office in the federal Natural Resources department, says that the challenge is more cultural than technological.

“Departmental turf is a problem,” says Sano. “In the specific case of Natural Resources Canada we had a legacy in which individual sectors had played the fundamental role of owner investor. They managed the operations in terms of IT services.”

To move into a more collective and collaborative environment means that there will be issues of control and vulnerability, says Sano, with some people not wanting to abandon responsibility for Quality of Service (QoS).

Warren Shiau, a senior associate at The Strategic Counsel, claims that part of the problem is the disconnect that happens when political pressure meets resistance on the departmental level.

“There is also an ingrained desire of any government department to maintain its budget,” says Shiau. “The budget is the essence of a governmental entity. If you have a budget you exist, and if not, you don’t. This often contributes to cultural issues. You need not only to maintain budget, but also to grab on to as much as you can. Otherwise your numbers might get cut.”

There can also be problems associated with consolidation of providers. “It’s true that shared services provisioning is far more consolidated,” says Raymond Versteegh, director of public sector business development for Cisco Systems in Europe, a sponsor of the report. “At the end of the day you need services of a high quality, and governance is imperative.”

Despite government’s reputation for slowness and inefficiency, once change has been mandated in the public sector, it does happen. In fact, a more conservative culture with greater respect for authority can mean more follow through on initiatives in government than in the private sector.

For Henry Sano the challenge at Natural Resources Canada is that the bulk of the networks, servers, and tools are still with the old sectors. “The most obvious common elements have been brought in to be managed as a shared service,” he says. “But we are looking to consolidate further.”

Sano alluded to another budgetary reality in government, one of limits and not surpluses. He wants to get started putting his remaining IT assets under a single management structure, but he has to wait until the beginning of the next fiscal year.

“The potential is clearly there for efficiencies in terms of quality, speed of services, greater economies of scale, and a bigger critical mass internally for training and common IT issues,” says Sano. “Fundamentally it’s about supporting the enterprise.”

Val Stoyanov, managing partner for Cisco Canada’s Internet business solutions group, says that the agencies that benefit most from shared services are those that deal with money.

“Social welfare agencies, tax departments, these are very willing to look into shared services, because they benefit the most.”

Stoyanov claims there has been a shift in focus in Canada. “For shared services, governments in Canada used to look at optimizing procurement, purchasing, and payroll with the back office,” he says. “Over the years this has evolved into looking at shared services on the front end.”

Versteegh agrees that more agencies are looking into shared services for the front office.

“We know that in Canada there are 350 million transactions a year from these kinds of government agencies,” says Versteegh. “This creates more efficiency, has a positive effect on costs and budgets, and also brings about cultural change, because with these volumes you are touching a lot of citizens.”

Stoyanov is clear that the focus should not be only cost and efficiency, but the entire value chain of constituents from civil servants out to citizens and businesses.

“A good example is in B.C.,” says Stoyanov. “The government had to keep the promise of keeping up with the digital divide, with the Premier making it a priority to get services out to remote communities, and he did.”

Related content:

Government inks five-year shared services deal

Shared services: One CIO’s success story

Learning to share

Partnership imperative

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