Governments are increasingly consolidating common services into a central organization to create economies of scale. Shared services models enable public bodies to improve the efficiency of IT deployments while ensuring they benefit fully from the projects. Given this, IT revenue from shared services projects in the US and Europe is set to grow from $57.4 billion in 2007 to $76.2 billion in 2012.
Government spend on US and European shared services projects is set to reach $76 billion by 2012.
Shared services models can take many forms – from a unitary structure where a single organization consolidates and centralizes a business service, to an outsourcing arrangement where a private sector third party sells a shared service to multiple agencies.
It is perhaps best understood as a form of internal outsourcing, where the organization hope to get economies of scale by building one large central organization to replace a multitude of small sub-units.
Sharing services reduces duplication of efforts
While large private enterprises have been developing shared services models for longer, public sector organizations have a lot to gain from consolidating business, or ‘back office,’ functions. Traditional public bodies tend to have a high degree of duplication in their back office services. For example, most agencies will have their own HR or accounting systems. By consolidating these services into one organization to serve many agencies, governments will reduce the costs of maintaining multiple systems, ensure consistency of service to internal stakeholders and disseminate best practices, while also allowing individual units to focus on their core responsibilities.
Governments will start with administrative services, but move on to higher-value functions
When evaluating functions to move into a shared services model, agencies should look for a few common characteristics. Currently, human resources and financial functions are common shared services targets because they are widely used across the enterprise, benefit from technological automation, promise significant cost savings and are not the areas agencies usually specialize in.
Shared services are expected to evolve over time to incorporate higher-value functions, such as citizen contact, tax collection and social payments, as consolidating these functions offer governments opportunities to improve constituent service and reduce costs. However, because consolidating these types of services is politically risky, shared services models must first prove themselves with administrative functions.