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Local Authorities Missing Out on Cost Savings and Improved Efficiency

Local Authorities Missing Out on Cost Savings and Improved Efficiency Offered by Shared Services

Despite continued drive to cut costs, only 29% of organisations currently share back office processes and just 27% share data centre operations

Research commissioned by ICT services provider 2e2 has today revealed that the vast majority of local authorities are currently missing out on the cost savings and improved efficiency offered by the shared services business model. The Ipsos MORI-conducted research reveals that only 29% currently share back office operations such as HR and finance, while only 27% share data centre capability such as cloud computing and storage.

Despite this, the report does indicate that the same organisations acknowledge the role shared services can play in helping to manage budget cuts and improve overall efficiency. Reflecting this, 44% of local authorities are planning to share back office operations and 27% are planning to do the same with their data centre capability over the next twelve months.

“Shared services can significantly improve the efficiency of an organisation, whether through the cost advantages of shared funding and resourcing of certain services, or by the shared adoption of best practice processes. The fact that many local authorities have not adapted to this way of thinking reflects the issues that have hampered the model previously,” commented Adam Kamruddin, strategic engagement director, managed services at 2e2. “In the past, shared services have not realised potential cost savings and service improvements because organisations have simply merged individual ICT departments to create one big shared ICT service, which inherits all of the inefficiencies and issues of its constituent parts. This has led to ‘failed services’ and has, understandably, made the public sector nervous of the model.”

The survey also highlights a number of efficiency initiatives local authorities already have in place. For example, 94% of those asked already have an initiative for enabling a more mobile workforce, while 92% currently have an initiative to integrate business systems to reduce administrative overheads. Such programmes could be aided by shared services yet the lack of confidence in the model is hampering this. For example, 69% of organisations are looking to reduce telephony and IT infrastructure costs, yet almost half (46%) state they have no plans to share these services.

Also emphasised in the study is the importance placed on promoting online citizen services, with 95% of local authorities classing this as at least a fairly important priority, and 69% saying it is either critical or very important. Similar importance is placed on integrating business systems and workflows, with 96% classing this as at least fairly important to improving efficiency and reducing costs. This drive for cost savings is also reflected in that there is a clear move away from using CAPEX to fund such initiatives, for example 75% of local authorities plan to use at least some OPEX to enable a more mobile workforce. 

“The fact that local authorities are moving towards using more OPEX than CAPEX reflects the rise of initiatives such as cloud computing, which lets them improve their IT without the need to invest huge sums of money in technology hardware,” added Kamruddin. “Clearly, local authorities are comfortable with innovative IT models and it is unfortunate that they have yet to find the same confidence in shared services. To get past this, authorities must learn from past mistakes and realise that a shared services model is not just about merging ICT departments, it’s about business process transformation. As organisations look to improve efficiency, shared services make sense. The key to success will be to work with managed service providers who have the expertise and resources to ensure that shared services become a benefit, rather than just another IT management pain point.”

The survey consisted of 100 heads of departments from single and upper tier local authorities across England, conducted online between 26 April and 2 May 2011. It was commissioned by 2e2 and conducted by independent research company Ipsos MORI.