June 24, 2016Doug Hadden
An article from Thomas Elston and Muiris MacCarthaigh, “Five risks to cost saving from sharing services” in Public Finance International was published a day after my post about lessons learned from failures in government technology shared services came out. Both articles come to a similar conclusion “question the widespread presumption that shared services are a viable and valuable cost-cutting solution in every scenario, no matter the context.”
Both articles come to this conclusion in different ways. My article focused on the specific assumptions made when government leaders decide on shared services such as thinking risk is reduced through very large vendors or failing to realize there are diminishing returns for process standardization.
Elston and MacCarthaigh had a rigorous approach to analyzing shared services risk. It’s high time for independent academic observers to burst the vendor hyperbole about the wonders of shared services. Shared services is not a magic bullet to massive savings. Governments need realistic expectations to better leverage scarce public money.
The article is technology neutral. (My sense is that there are differing levels of risk related to technology complexity: data centre consolidation is less risky than e-mail/office tools consolidation, which is far less risky than enterprise software.)
The key takeaway from “Five risks to cost saving from sharing services” is the recognition that government organizations have technology that would need to change to support shared services. This adds “startup costs”, according to Elston and MacCarthaigh.
Many costs can increase because of duplication, complexity, and reduced service quality. This is often the impact of standardization where processes can become more complicated. Central support often results in the loss of overall service quality, availability or responsiveness. Change to systems becomes highly complex. Governance structures for shared services organizations can be unwieldy, or simplified to the point where many government organizations have no voice.