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If shared services have been shown to work in the private sector, then the case for the public sector is even clearer. Whether it’s sharing the process of council tax collection or using a single IT system for payroll, shared services provide the greater efficiency that comes through economies of scale, and the greater effectiveness that comes from adopting best practice processes. “If you think of the number of local authorities, each one having the requirement to do revenues and benefits, and each one having different systems fundamentally doing the same job, it’s completely ludicrous to think how that can be justified,” says Anne Ware, director of public sector at consultant Atos Origin.

There are strong drivers for adopting shared services now. The 2004 Gershon Review required public bodies to make £20bn in efficiency savings by 2007-2008. Much of that could come from sharing services, while the Transformational Government drive launched by Ian Watmore, head of the Prime Minister’s delivery unit, states that government must move to a shared services culture, and a shared services team has been created in the cabinet office to push this forward.

So how successful has this drive been? Central government can certainly point to some successful initiatives. Her Majesty’s Prison Service has adopted a shared services approach to supply HR, procurement and financial management functions to all 128 of the prisons in England and Wales. By 2008, it hopes to save the prison service £32m a year. Much of this will come from the procurement function, which is being used to rationalise suppliers and bring down costs (see case study, opposite).

Similarly, the NHS set up NHS Shared Services in 2003 as a separate company offering automated invoicing services to NHS hospitals and foundation trusts. After its initial success, it entered a joint venture with outsourcing company Xansa, enabling it to grow more quickly. It now offers payroll and procurement services as well.

Hospital trusts are not obliged to use any of the services offered by NHS Shared Services. In practice, about 110 trusts are using its invoicing service, representing about a fifth of the available market. Where hospitals used to input invoices manually, they now send their paper invoices to the NHS Shared Services centre in Leeds, where they are scanned using optical character recognition and then authorised electronically by the trust. It’s a service that no single trust could afford to implement, says Daniel Rona, head of NHS Shared Services. Mr Rona estimates that the automated service costs each customer 30 per cent less than the method previously used.

NHS Shared Services is largely indistinguishable from a traditional outsourcer; the model is less a case of hospitals clubbing together and more a case of individual hospitals choosing a single supplier who can achieve economies of scale. Indeed, Xansa has a facility in India and some of the work that NHS Shared Services does is likely to be outsourced there at some point, says Mr Rona.

When it comes to joint ventures, such as local councils clubbing together to share council tax collection, there are far fewer projects in place. James Adams, senior analyst at research organisation Datamonitor, says that a survey carried out by the organisation earlier this year found that fewer than 5 per cent of local authorities were implementing shared services projects. Despite the push from the Gershon Review, there are still huge obstacles, he argues: “Because of the way government is funded in the UK, any money they save is likely to be taken away by central government.”

Ms Ware points to further barriers: “In the private sector, the business case for shared services came initially from reductions in the number of jobs. There is a big reluctance in the public sector to carry this through. When there’s a lack of sponsorship to carry it through, it’s hard to pin the accountability of organisational benefit on individuals.”

The success stories tend to be in areas where there have been measurable benefits to all the parties involved. For example, the Welsh Systems Consortium was formed in 2002 by seven Welsh councils and the Welsh assembly to create an integrated health and social care system. The £3m cost was split equally between the councils; none of them could have afforded the investment on its own, but by using a common supplier, they were able to make savings in set-up costs of 30 per cent.

Other councils have grouped together to create e-government portals, using the e-government funding from central government. Such portals allow citizens in a particular region to gain access to local services regardless of whether they are run by the district council or the county council.

One such example is Suffolk County Council and Mid Suffolk District Council, which worked with private sector partners BT and CGI to create a single point of access for citizens to the councils’ services. BT has put £15m into creating the service, known as Public Access, and into integrating back office functions, that it hopes to recoup over 10 years.

“Suffolk County Council and Mid Suffolk District Council previously had 25 to 30 numbers for each service, so if you wanted to pay council tax, you rang one number and if you wanted to report a pothole, you rang a different number,” says Syed Hussain, electronic service development manager of Customer Service Direct, the organisation created by the two councils and BT to manage the service. Now citizens need only phone one number, or visit one of several public access centres, or go to the website, to carry out a transaction.

The public-facing website gives access to the same system used by the public access staff: 75 per cent of queries are dealt with at the first point of contact, says Mr Hussain, with the remainder routed via a workflow system to the appropriate back office employee. Once the employee has carried out the service (repairing a broken streetlight, for example), he or she writes an electronic status report that is immediately accessible from the website.

Yet the project could have been much bigger if the other six district and borough councils in Suffolk had taken part. But it highlights the unique issues faced by public sector organisations which are hampered by the inherent difficulties in managing collaborative projects and the absence of obvious short-term gains. Central government is determined to push the shared services model throughout the public sector – but it may be a long hard battle.

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