Shared services and the role of the public sector CIO

As we all absorb the findings of the National Audit Office’s research into public sector use of ICT, at K2 Advisory we have just completed our latest research study: Shared service centres in the public sector: the CIO’s role in scoping, supporting and managing them.

One finding from the research is clear — the UK public sector is planning a DIY approach to service sharing which we think is entirely justifiable, and which will require a different type of CIO relationship with suppliers.

It is the CIO who is the lynch-pin in moving shared service adoption forward in the public sector because, as our findings show, the IT Department is the top priority for public sector shared service provision — just under a third of public sector organisations expect to move IT services to a shared services model in the next 12 months.

The majority expectation is that this will deliver over 20 per cent in cost saving. For this reason, CIOs are key players in moving to shared service provision.

However, one of the main challenges for the public sector CIO is working out the benefits of quick cost-saving wins versus longer term solutions that may ultimately save more money.

Formal joint ventures with suppliers or traditional outsourcing agreements typically take a year or more to close the contract and put the legal framework in place before savings can be counted.

In other words, the Comprehensive Spending Review is focusing attention on quick wins, which eliminates options such as outsourcing and formal Joint Ventures that take time to set up.

Furthermore, as Geoff Connell, divisional director ICT services London borough of Newham and acting head of business systems London borough of Havering, puts it:

“With outsourcing you share savings with a private sector partner but with Shared Services you keep all the savings yourself.” This is a widespread sentiment in the public sector.

So, while it would be extremely useful to have shared service and public service hubs to turn to, these will take time to emerge.

Take, for example, something like the Kent Public Sector Network, which began as an idea in 2006, the supplier contract was signed in 2008 and began to deliver quality-of-service improvements and cost-savings in 2009.

This type of local authority shared service infrastructure may ultimately be aided by the relocation of some government agencies from London to the regions to reduce headcount, locations and properties. But which agencies are moving and to where is not yet clear.

Frameworks from buying solutions that enable shared service contracting with private sector suppliers would help, but to date the only such ICT frameworks in existence are Desktop 21 and the IT Managed Service and Software Application Solutions framework, and both still require a procurement process.

Therefore, CIOs within the public sector are either going it alone, or they are seeking to build mutually beneficial arrangements with other CIOs.

Will shared services strengthen the public sector CIO role? There is a lot of talk in the IT profession about how the CIO is in a strong position to head up shared service centres. In the private sector Paul Coby, while he was at BA, was something of a poster child for this belief as he was both CIO and head of BA services.

At K2 Advisory we have heard the argument that CIOs have a more rigorous approach to service provision than other function heads and therefore are in pole position to run shared service centres.

However, our research suggests that the CIO is only likely to be considered as head of the shared services function, where he or she has management experience outside of the IT Department – see Fig 1. This holds true even where IT is the sole shared service and IT is the largest employer in the shared service function.

Fig.1 In which instances would the CIO be the most appropriate head of service for the shared service?

This might suggest, depending on your CV, that as a CIO it is in your best interests to be largely neutral rather than enthusiastic regarding the development of a shared-service function.

However, as the budget cuts take hold within public sector we have to be realistic about the CIO role for the future. There is clearly an ongoing requirement for public sector organisations to provide better analytics and insights to more effectively deliver initiatives such as Total Place.

In other words, CIOs will need to have a view of what the large policy initiatives require and a transparent evidence base from which to judge the gap between as-is-performance and the to-be-desired outcome.

The CIO must become the business strategist with the information to hand to help steer delivery of public services.

The CIO’s role (whether provider or consumer of shared service delivery) is to ensure that your organisation is getting the right data and analytics to enable it to successfully deliver services while making best use of the technology available.

This is the direction of the CIO role whether using shared service centres or not. One of the main responsibilities will be managing the potential conflict between supporting new policy directives while preserving a commitment to lower cost services.

If a CIO does the right thing in cost terms but compromises the policy he or she is being asked to support there will be problems, so the CIO needs to negotiate back up to policy-makers to ensure business objectives and IT service delivery agreements are aligned.

This is more easily done if you are in a position to measure outcomes rather than just managing activities.

In other words, the CIO role should survive the migration to shared services, whatever shared service model is selected, and thrive afterwards. But, sadly, the number of other IT jobs will be reduced.

Dr Katy Ringis director at K2 Advisory

Pic: Tambako the Jaguarcc2.0