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3 Best Practices for Successful Shared IT Services Programs

Shared services succeeds when local governments follow certain best practices and focus on the right technologies.

Editor's note: The Digital Communities Special Report, which appears twice a year in Government Technology magazine, offers in-depth coverage for local government leaders and technology professionals.View links to the entire report here.

The lack of shared IT resources at the local level stems from several factors. Common roadblocks often center around concerns with liability, accountability and autonomy, according to a report written by Tim Hoefer and Michael Wright of the Empire Center, a think tank based in Albany, N.Y. The result is that local governments may be only willing to enter low-risk agreements, which likely will result in modest cost savings.

Another common problem is to try to take on too much in one effort. “Some people try to boil the ocean, and you are never going to get there in government,” said Roy Mathew, a partner with Deloitte Consulting. “How are you going to declare victory every three or six months if you have a mega-project with many requirements and victory won’t be known for four years?”

A third and typical pitfall that can affect government more than other industries is communication with unions about shared services. “Labor unions want to hear what’s happening so they don’t feel threatened,” said Bryan Sastokas, CIO of Long Beach, Calif. It’s an issue tied to the pitfall of not securing and maintaining buy-in. Not only can unions feel vulnerable when the issue of shared services comes up, but also supervisors as well as subordinates need to be engaged so that issues about jobs, responsibilities and budgets don’t spiral out of perspective.

A fourth and less well-known pitfall is a guideline buried in the U.S. Office of Management and Budget Circular A-87 meant to ensure that when federal funds are used to pay for shared services, costs are allocated fairly and that no one misuses the funds. The problem that can come up is how one local or state agency might bill another agency for shared IT services. If there’s a profit in the billing, a credit must be given; if there’s a loss, rates need to be adjusted.

“Agencies that accumulate more than 60 days’ worth of ‘working capital’ from their shared services programs could be considered making a profit under A-87 rules,” according to Michael Claytor and Geoff DePriest of Crowe Horwath, an accounting firm. The surplus capital could be reclaimed by the feds in certain circumstances, resulting in lost revenue, or worse, demands that the state or local agency return the federal funds.

To ensure success for a shared IT services program, certain best practices stand out:

1. Start with strong leadership.

While it sounds like a cliché, leadership is indispensable to a project that might have turf issues. Anyone who wants to do shared services in government is going to run into the naysayers who will have a lot of reasons why it’s not going to be possible. “Have consistent and strong leadership at the top, with both IT and business leaders involved,” said Mathew. “You need more than the CIO involved, because you don’t want the project to be viewed as just an IT effort.”

The hard part is identifying the leader or leaders who have the ability and passion to move the project from concept to implementation. Such a leader needs to have good communication skills and to work collaboratively. According to the County Manager’s Guide to Shared Services in Local Government, most often the leader in a shared service project is the county executive or county manager or administrator — someone who is responsible for the day-to-day operations of government. Such a professional manager is more likely to advance cooperative projects with neighboring governments because they maintain regular communication with their counterparts in other local governments.

According to Sastokas, shared services succeed when leaders and the managers who work for them understand that the project is in the best interests of everyone involved. “They have to figure out whether the shared service is about saving costs, whether there is an economy of scale to work together and that the system is something both parties can maintain,” he said. “You don’t want to get weighed down by IT turf battles — who is really in control. If you can work through those problems, it can work fine.”

New York Helps Fund Local Shared Services

If shared services is so beneficial, why aren’t states helping local governments more? Since 2005, that’s what has been happening in New York, which has more than 3,000 local governments (include all the school, fire and lighting districts in the state and the number tops 10,000). Starting with its Shared Municipal Services Incentive grant program, the state has encouraged municipalities to develop and pursue cost-saving opportunities through shared services by making funding available to assist with feasibility studies or implementation costs.

In 2009, a research paper from the Office of the New York State Comptroller estimated the potential cost savings from all forms of shared services (not just IT) was $765 million statewide.
In the first three years of the program, the state awarded a total of 161 grants worth $30 million. Digital Towpath, a consortium of small local governments that provides shared IT services in the cloud, has received grants from the state archives’ Local Government Records Management Improvement Fund for the development of an electronic records management system that can be used by all local governments (not just members of Digital Towpath).

In his 2015-2015 budget, Gov. Andrew Cuomo proposed spending $150 million “to help local governments implement transformative shared services and consolidation efforts that lead to property tax reductions.” Clearly the state believes the payback from shared services is worth the investment.

In the first three years of the program, the state awarded a total of 161 grants worth $30 million.

2. Have a clear vision of what the shared service is to achieve.

What exactly is the IT service that will be shared and how will it happen? Who has responsibility for what among the participating local governments? What will the performance measurements be? What will the costs be? Goals and objectives for an IT shared service need to be clearly articulated, say experts.

3. Measure outcomes.

“Whether the goals relate to cost savings or service quality improvements, the participating governments should put a system in place in advance to collect the information necessary to determine if the project has been a success,” according to IBM. Don’t rely on anecdotal information to measure the outcome. Metrics not only help when it comes time to measure success, but it can also help provide local governments with the information they need when it comes time to pivot or move in a new direction if the original objective isn’t working, said Mathew.

Review a list of shared IT service projects in local government and they tend to fall into the category of commodity services: email, content management, data storage, disaster recovery, networks and servers. While these IT operations will probably remain the bread and butter of shared service projects, the world of technology continues to evolve.

Trends in cloud computing, mobile technology and social media are disrupting how local governments deliver services and engage with the public. Gaining access to those kinds of technologies has become an issue. Does a jurisdiction need to hire five mobile computing software developers, or does it make more sense to build one application that can be shared among several local governments?  

Some local governments have discovered that key applications, such as geographic information systems, which are expensive to build and maintain, work well in a shared environment. Today, the application might be open data, according to Mathew. Many cities and counties have built platforms for publishing and sharing government data with the public. They are creating application programming interfaces, which make it easier for software programs to communicate with one another. Application programming interfaces also make it easier for third parties to develop applications that can be used and shared by others. It puts a whole new spin on what is considered a shared service.

Similarly, shared talent is becoming part of the local government conversation. While it may take time for some local governments to embrace the concept, those who are willing to try something different in order to hold down IT costs will explore this avenue.

It may start by joining an online consortium, such as GovLab’s Network of Innovators, and sharing knowledge, before moving to something more substantive like a CIO-as-a-service. But these arrangements don’t always have to be formal or set up through an independent firm that specializes in the practice. Some local CIOs have let it be known that they are willing to advise and help smaller jurisdictions when the need arises.

What is clear is that more local governments need to get involved with shared services as a way to hold the line on costs while opening themselves up to new technologies that are needed, but may be too expensive to develop on their own. “You always have to be trying to improve the effectiveness and efficiency of the services you provide,” said Sastokas. “Government can get complex, which means IT needs to find ways to lower costs to deliver those services more cost-effectively.”  

With more than 20 years of experience covering state and local government, Tod previously was the editor of Public CIO, e.Republic’s award-winning publication for information technology executives in the public sector. He is now a senior editor for Government Technology and a columnist at Governing magazine.