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Making Sense of Shared Services

"[The evolution of e-government] started in the '70s with legacy systems, then through the Internet where you had a thousand Web sites bloom, to where we are today -- where sharing technology and developing a shared service environment really isn't a technological problem so much as a change management problem"

For all levels of government, sharing IT resources across agency and even jurisdictional lines is becoming a major trend, and the next evolutionary stage of e-government initiatives. While some state and local governments have moved in this direction over the last few years, the federal government has the greatest challenges.

"It's a question of scale," said John Sindelar, deputy associate administrator at the Office of Governmentwide Policy in the U.S. General Services Administration (GSA). "The scale and complexity of the federal government make it different."

According to Sindelar, e-government evolved as technology created new opportunities to cut across organizational boundaries and responsibilities. "That evolution started in the '70s with legacy systems, then through the Internet where you had a thousand Web sites bloom, to where we are today -- where sharing technology and developing a shared service environment really isn't a technological problem so much as a change management problem," he said.

Treating IT projects primarily as a change management issue was learned early in the federal government's e-government initiatives championed by Mark Forman, former administrator of the Office of E-Government and Information Technology at the Office of Management and Budget (OMB).

"I still remember the presentation slide where we identified the agencies across the top and the number of systems relative to various major business lines the government is involved in," explained Sindelar, project leader on the Quicksilver task force, which led e-government development. "When you added up the number of systems related to functionality across the various agencies, it ended up at 478. And that wasn't all the systems, just across government, so we titled the slide, 'The Federal Enterprise Architecture That Isn't.'

"The Quicksilver effort looked at point solutions where there could be a transition to a more centralized functionality -- ones that offered the biggest payoff to the system," Sindelar added.

Denis Gusty, director of the Office of Intergovernmental Solutions at GSA, spent almost two years as project manager for GovBenefits at the Department of Labor, the lead agency on that project. "It was painful at times," he said. "Someone in my position -- managing a cross-agency project like GovBenefits -- must wear multiple hats. You have to be a program manager. You have to be a salesman. And a lot of the time, the issues had nothing to do with technology."

Sindelar emphasized much the same thing. "In the days of Quicksilver in 2001 and 2002, this was viewed as an IT initiative," he said. "In fact, we are really talking about a business transformation. So in the sense that it was categorized early on as an IT initiative, it tended to have the attention and focus only of the CIO community."

So now the federal government's 2004 Lines of Business initiative, the next phase in consolidating functions across agencies, is not so narrowly branded with an IT label. While it is part of the Federal Enterprise Architecture program, it seeks to develop business-driven, common solutions for the six lines of business that span federal government: financial management, human resources management, grants management, federal health architecture, case management and IT security.

Shared Service Logic
On paper, the idea behind Lines of Business is simple. Rather than numerous agencies maintaining separate systems for payroll, financial management and human resource management functions, why not consolidate these into a few systems or "centers of excellence" operated by select agencies or outside vendors that pass due diligence criteria? These providers must offer industrial-strength security and capability to meet the customer agencies' requirements.

To maintain a competitive edge, the goal is about four separate systems for each function. "On the payroll side, which is a simple example, 80 percent of the government is funded by four payroll providers," said Sindelar. "It is a huge migration, I think, down from 26 to four."

There's much commonality in federal agencies' requirements, he added. "If you can meet 80 or 90 percent of a customer's requirements -- whether it is financial management, human resources, grants management -- the other 10 percent shouldn't be the reason for not moving in that direction, particularly in today's constrained resource environment."

To encourage amalgamation, the federal government stopped funding redundant individual proprietary solutions. When agencies request financial support for major system development, modernization or enhancement -- and many are fading legacy systems -- the federal government will fund a common solution should they fall within the identified lines of business.

The federal government's complexities make even this a challenge. The funding system, with oversight committees aligned by agency, is not set up to easily accommodate a shared services environment. When the committees appropriate dollars to agencies, they want to see them spent on their intended use. "When you start funding a shared service environment and that money moves from one agency to a center of excellence, that raises questions on what the accountability chain is for use of that appropriation," said Sindelar.

Congress also must come to view shared services as significantly beneficial to individual agencies in cost savings, improved performance and in enhancing the focus on their core mission. "In the EPA, that core mission is protecting the environment," said Sindelar. "The Department of Interior, it is parks and so forth. So Congress and the agencies themselves need to see that this allows them to free up resources to focus on what they were created to do."

Precedents support the logic of all this. Wayne Bobby ran the financial and accounting systems for the State Department for years before joining Oracle as vice president of public-sector finance and administration solutions.

"We had finance centers overseas within 250 embassies which all had to tie back into Washington to produce financial statements," he said. "At any embassy overseas, state was only about 27 percent of the presence, because there were all these other federal government entities as well. So really, shared services and supplying administrative services to other folks have been around for a long time."

Bobby also cites the U.S. Department of Transportation (DOT), which includes 14 operational agencies varying in size -- the Federal Railroad Administration has a couple hundred employees, and the Federal Aviation Administration has several thousand. "The DOT standardized business practices across all 14 agencies. Their financial management is now done on one Oracle database, but in a setup that allows each of those 14 entities to manage their own set of books a little differently from the others. These still roll up to one financial statement for the entire Cabinet-level agency."

In achieving this, the DOT encountered some challenges now facing agencies regarding the lines of business. "Accomplishing what we did at DOT was probably a bigger cultural change, or administrative nightmare, in managing that whole thing from an organization perspective, much more than it was a problem installing complex software," Bobby added. "But it shows it can be done successfully."

Governing Shared Services
Because a shared services environment embraces a different mindset, especially for the federal government, establishing structure to manage the change has proved critical. "One lesson learned from Quicksilver and elsewhere is that one of the hardest things to do is establish the governance structure to facilitate and make these shared service environments effective," said Sindelar.

For each initiative, the OMB's portfolio managers help oversee implementation strategy. But primarily interagency task forces have effectively laid the groundwork and formulated the business case -- whether to proceed, costs and benefits, alternatives, and its relation to the federal enterprise architecture, which is an overriding requirement. Private-sector partners are also queried for ideas and best practices.

"This has raised their interest in providing us ideas, but also is an opportunity to lay out eventual procurement concerns in terms of the direction we are moving," said Sindelar.

These task forces are a foray into the realm of intergovernmental management, according to Frank McDonough, vice president of intergovernmental solutions at Guerra, Kiviat, Flyzik & Associates. Formerly intergovernmental solutions director at the GSA, McDonough describes the challenge as "a whole other bag of cats on top of the complexity of a major system to begin with.

"The people managing it don't control the resources," he said. "The Department of Labor's money is appropriated by the Labor Committee on the Hill, and they are a stovepipe." If the Labor Committee is to collaborate with the Office of Personnel Management, because both care about people, it must be considered that the OPM is funded by a different committee, and is also a stovepipe.

"So all of a sudden, you are appointed as manager of, say, 'coordinating public employee information,'" he added. "You are in charge of that, so you bring together managers from both agencies. They might cooperate. They might not. You don't really have any direct control over them. There must be some things in place before one tries to go forward sharing resources horizontally. Both agencies have to see it will benefit their individual agency. It might be important from a governmentwide standpoint, but at the end of day, they don't really care about that because they are in this stovepipe. So the management is very, very difficult."

On top of this, many federal agencies have distinct cultures that often embrace 100 years or more of tradition. "When it comes to resource and information sharing across a number of agencies, the biggest issue is always culture," McDonough said. "Technology is always subordinate to cultural issues. That is why some of us started to view intergovernmental management as the future of public administration. How do you set it up? How do you deal with these cultural issues? How do you manage when you don't control the resources? How do you provide incentives to participants? How do you protect them? Sometimes agencies will be very unhappy with proposals for common systems and will look on the representative they have sent off as someone who didn't protect their interests. You need to take care of all these kinds of things."

Gusty considers breaking down the stovepipes a taskforce's primary role. "As long as the stovepipes exist, technology cannot become part of the solution because it won't work, at least not the way it is intended to work," he said. "The reason you want to implement a new solution is to overcome a problem. And that problem spans across governmental boundaries. Step one is figuring out who the players are. Who are the stakeholders? Who are the customers? What agencies, what branches of government are involved? Getting the right people -- all the people -- to the table at the right time to figure out first what the problem is, and then how we can overcome it. That's where it all starts."

Despite the obstacles, Sindelar is optimistic about the progress on the Lines of Business initiatives. "I think we are moving well toward implementing the financial management line of business," he said, adding that the human resource line of business has made tremendous progress. Its architecture is essentially developed, and its potential functionality is being discussed. "We have had great participation from the agencies to do this. Some of the other initiatives haven't proceeded quite as quickly. One big positive is a lot of recognition now that the idea of a shared services environment is an idea whose time has come."

Reprinted with permission from the Fall 2005 issue of Public CIO.