In New York State, Governor Andrew Cuomo\u2019s Countywide Shared Services Initiative \u201crequires counties to assemble local governments to find efficiencies for real, recurring taxpayer savings... by coordinating and eliminating duplicative services and propose coordinated services to enhance purchasing power.\u201d[i] New York is currently offering substantial financial incentives to municipal organizations that \u201ccreate savings.\u201d\nAccording to a 2013 study[ii], about 8 percent of municipalities participate in IT shared services programs. Considering the financial incentives, I suspect that the percentage has increased significantly since that time.\nIn theory, shared services agreements among municipal entities appear to be a great deal for everyone involved, and especially for taxpayers. In reality? I am not only skeptical; I have seen the negative consequences of such agreements in the form of low-quality IT services that cost far more than similar services delivered by commercial vendors.\nOne possible scenario\nA common scenario for shared IT services might take the form in which a county IT department becomes a service provider for cities, towns and villages in its jurisdiction. This may include email, infrastructure services, help desk services, software, printing of tax bills, break\/fix services, hardware procurement and much more.\nIn this type of scenario, the county\u2019s management may view such a deal as an opportunity to turn their IT operation from a cost center to a profit center. However, the differences in performance and productivity between the private and public sectors can be stark. Running a successful commercial IT services business is a tough, highly competitive undertaking that requires excellent management skills and continuous improvement.\nFor many municipal managers and elected officials, the one-time financial incentive may blind them to the necessity of examining the long-term consequences of such an arrangement. In other words, they will want to build the airplane in the air and the basis for the deal may be something that is not much more than a handshake deal, devoid of reality and details.\nGet it right!\nIt is possible for a municipal shared services agreement to be successful, but success won\u2019t be accidental. If you are involved in negotiating such an agreement, I provide the following suggestions to ensure that you make the best deal possible.\nUse rigorous procurement methodology\nA shared services agreement should be treated exactly the same as a deal with a commercial vendor. A few examples of documentation required for the evaluation should include the following:\n\nService level requirements. This is a document that precisely defines your requirements. Before entering into any service agreements with outside agencies, your organization should thoroughly understand and document your business needs, goals and objectives.\nService\u00a0level agreement. This agreement is an essential part of any professional services contract. It defines requirements, responsibilities and accountability and includes financial penalties if the provider fails to meet agreed-upon service level targets.\nCatalog of services. What is the universe of services offered by your service provider? How much does each service cost, and when are such services available? How do you obtain services not covered in the agreement?\nPSA (professional services automation) system. An automated, auditable system for tracking incidents is a requirement for managed service providers. The system should be configured to send alerts to management and executives when the provider fails to meet agreed-upon service levels. Daily or weekly status reports should be available to the customer.\n\nThe agreement framework\nWill this be a simple agreement using an MOU (memorandum of understanding) or some sort of BPA (business partnership agreement)? Regardless of the format recommended by your attorney, a clear exit path must be part of the agreement in case the relationship doesn\u2019t work out. Agreements with commercial vendors always spell out how the relationship may be dissolved, but I have seen municipal shared services agreements that have no such escape clauses for the \u201ccustomer.\u201d Make sure you can get out of the deal if it isn\u2019t working out.\nComingle infrastructure resources carefully\nA significant risk of a shared services deal is that IT infrastructure built between the parties may become intertwined to an extent that may be difficult and expensive to unravel. Clear boundaries should be established that will allow the parties to simply unplug if the deal doesn\u2019t work out. Also, who owns infrastructure and data? How do you get your data back once the relationship is dissolved?\nInformation security, governance and policy\nWhose governance policies will apply? Acceptable use policies, security policies, regulatory compliance policies and personnel policies as well as organizational culture should all be considered. How will sanctions for policy violations be addressed between agencies?\nIs the provider using best practices for ITSM (information technology service management) and ISMS (information security management systems). Are they in ITIL or ISO 20000 shop? How will security be managed? Do they follow any generally accepted frameworks for information security?\nQuality control\nWho will define quality standards? In the commercial world, the customer determines quality. In the public sector, the provider often defines quality \u2014 the DMV being a perfect example. What recourse do you have if the provider fails to meet quality standards? With a commercial vendor, you simply terminate the deal. In a shared services scenario, terminating the deal may require political capital that is not available. These arrangements present the real risk that you could be stuck with a bad deal for years or even decades.\nSummary\nThese are only a few examples of the processes required to evaluate and negotiate a successful shared services agreement.\nThe great advantage of democratic local government is that citizens have the ability to address poor municipal management through the democratic process. If we\u2019re not happy with the decisions and actions of management, city council or a county commission, we can simply vote them out of office. The problem with the trend toward regionalization of government functions and services is that we lose that ability to control it through elections. Don\u2019t lose your ability to control your information technology operations by making a bad shared services deal.\nReferences and endnotes\n\u201cShared Services Among New York\u2019s Local Governments,\u201d research brief, Office of the New York State Comptroller, Division of Local Government and School Accountability, November 2009\n\u201cShared Services: Establishing a Competitive Business Within a Business,\u201d NDMA Inc.\n[i] Shared Services Initiative, State of New York.\n[ii] \u201cShared services in New York State: A Reform That Works,\u201d George Homsy, Bingxi Quian, Yang Wang and Mildred Warner, August 2013.