Analyst issues warning to govt on shared services pitfalls
- 08 July, 2011 12:44
- Comments 1
An analyst has issued a warning to governments considering shared services not to underestimate the depth and resilience of agency independence, following the decision by the WA government to decommission its shared services.
Ovum research director, Steve Hodgkinson, said governments should learn from the documented shared services failures in WA, South Australia and Queensland and understand that agencies have strong incentives to make decisions based on the importance of local issues.
“Whole-of-government incentives and drivers, on the other hand are weak,” he said. “When push comes to shove, agency autonomy always wins because it is agency heads that carry accountability for operational service failures.”
“Unfortunately when shared service are forced onto agencies this autonomy manifests itself as an inability to compromise requirements for shared systems leading to complexity and risks. Theoretical economies of scale rely on one-size-fits-all systems and fail when the resulting customised system is so compromised that it fails under its own weight.”
According to Hodgkinson, governments must tread with caution when handling business cases provided by consultants for a shared service outfit, as it can work but the risk is high that costs will be greater and benefits smaller than expected.
In order to succeed, Hodgkinson said, realistic expectations and strong leadership is required.
“The way to keep risks to a manageable level is to constrain the scope of shared services to commodity-like infrastructure services,” he said, citing Victoria's CenITex as a prime example.
“No agency can mount a credible argument that it has unique requirements for data centre ops, application hosting and core desktop services,” he said. “Risks increase when the shared service attempts to provide business systems that need to be tailored to distinct agency requirements.”
Hodgkinson said government departments should wake up to the potential benefits of the Cloud as an answer for shared infrastructure and applications. He noted while many express concerns around the risks of the Cloud, they overlook the risks of flawed shared services strategies.
“How can it be that over 100,000 organisations around the world meet their needs using Salesforce.com — a one-size-fits-all shared service — while a handful of agencies in WA cannot agree on how to share common HR and finance systems after wasting millions of dollars trying?
“The key difference with the Cloud is 'cloudy is as cloudy does' — the services and apps already exist and agencies can make their own decisions.”
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Comments
Howard Clark
1
The success of shared services is nothing to do with strong leadership or better project management.
Shared services is based upon a flawed theory. Better delivery will not solve these problems.
Professor John Seddon argues that that there are two arguments for sharing services. The ‘less of a common resource' argument and the ‘efficiency through industrialisation' argument.
The former argument is ‘obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.
The second argument is ‘efficiency through industrialisation’. This argument assumes that efficiencies follow from specialisation and standardisation – resulting in the creation of ‘front' and ‘back' offices. The typical method is to simplify, standardise and then centralise, using an IT ‘solution' as the means.
The problem with the industrial design is simple - it doesn't absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can't get what they want.
I would suggest you consider this more fundamental point before organisations spend hundreds of millions that will line the pockets of private IT shared services sellers, at the same time as making services worse the taxpayers and those who desperately need them to work.