Bad Economy Will Trigger Shared Services Wave

IT consolidation is the movement of today, but shared services will be the necessity of tomorrow.

by / July 15, 2010

CAMBRIDGE, Mass. -- For years, government agencies have found it more convenient and comfortable to go it alone, instead of sharing common systems and resources. But that walled-off posture finally could be crumbling because of declining tax revenue.

In short, the current budget climate is red hot for shared services, said attendees and speakers Thursday, July 15, at a meeting on government shared services at Harvard University. The annual conference -- the Shared Services in the Public Sector Summit -- is hosted by the university's Leadership for a Networked World program.

Compared to last year, governments are more attuned to their bleak financial realities, and there's a sense -- particularly among states and localities -- that the worst is yet to come, according to Professor Jerry Mechling, faculty chairman of the Leadership for a Networked World program. The financial motive for implementing shared services is significant, said Mechling, adding that a generic government-run shared service can cut costs roughly 20 percent.

Reducing IT costs will be a long-term challenge for public agencies, said David Wilson, managing director of Accenture's state and local government practice for the U.S. and Canada, which sponsored the summit. He said that studies suggest the downturn in government revenue could last another five or 10 years. This could create a new environment, Wilson said, in which governments will have no choice but to streamline operations -- and shared services would be an essential ingredient in that process.

The pace of change also has quickened. Three years ago, governments were still struggling to understand the shared-services concept, Wilson said. Today there are real-life examples, including two agencies that presented at the conference: Ohio Shared Services, a state-run center that handles back-office administrative transactions like travel and expenses for 53,000 government employees; and a massive shared services program built from the ground up by the New York Metropolitan Transportation Authority.

Shared services such as those could become the rule rather the exception. A future predicated on financial restraint could mean that shared services become the next big wave for bread-and-butter applications like human resources and financials, said Michigan CIO Ken Theis. Technology consolidation may be today's No. 1 priority, Theis added, but it's merely the platform for delivering shared services. For example, after completing an enterprisewide IT consolidation in Michigan a few years ago, Theis has championed shared cyber-security, GIS and other services.

Michigan has been out front on shared services. But for others, the picture hasn't been as rosy nor the path to success as clear. Many barriers to shared services remain intact, according to some of the conference-goers. Obstacles include the same old culprits: cultural inertia, fear among employees, not enough backing from the executive branch and inadequate incentive to innovate.

But Theis said he's seeing progress. He said there's a growing sense among government CIOs -- not just in Michigan, but also across the country -- that roadblocks to shared services are slowly eroding and that enthusiasm for collaboration is ramping up. Theis said many of this year's summit attendees work outside of IT departments, which suggests that more government executives realize the potential of shared services to cut costs and improve service.

Still, Wilson said he's worried that too many governments will choose to delay shared-services implementations and instead hope that their revenues improve. When that doesn't play out, they're going to be in an even more difficult position, he said. They will not have done the necessary restructuring. So the pain that they'll put on their own organizations and citizens will be even harsher.



Matt Williams Associate Editor
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