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Has Government Shared Services Enthusiasm Waned?


June 25, 2010

by Doug Hadden, VP Products

The United States Financial Management Line of Business (FMLoB) moving to the “cloud”? Gartner Group concluding that “shared services” is on the descent to the trough of disillusionment? To say nothing of analysis like:

a disturbing feature of the current debate on shared services has been the absence of a well-articulated economic and political rationale for this form of service delivery, a lack of analysis of alternative models of shared service provision and a neglect of available empirical evidence.

Yet, there seems to be an overwhelming set of evidence that centrally hosting budget, financial, grant and human resource management has significant cost savings. In an era of “doing more with less”, why have shared services run into so many difficulties?

FreeBalance Point of View

Just to be clear – FreeBalance supports shared services. Our Government of Canada Cluster is a shared service. Canadian government organizations work together to reduce support costs, and set FreeBalance product direction. (Along with the FreeBalance International Steering Committee.) Most of our international customers operate on a government hosted centralized system or shared service.

Cost-Benefit of “One Size Fits All”

It’s  difficult to find anything but unbridled enthusiasm about shared services on the Internet. Of course, much of the content is fashioned by large vendors and consulting companies who benefit from shared services approaches. There are many compelling arguments that many processes in government organizations are identical or similar and should be standardized. Standardization simplifies support, enables personnel movement without re-training and facilitates product upgrades. It eliminates duplication. Gains economies of scale.

Yet, many government agencies have unique requirements. Some are legally mandated. There are often many systems in place to manage the entire budget cycle. Many governments find it difficult to support this legitimate variability in need. Many hosted shared services implementations host completely different instances of the same software. According to Jeff Steinhoff, formerly with the US Government and now with KPMG:

when people started going to huge ERP solutions, for which they were dumping hundreds of millions of dollars, in some cases in excess of $1 billion, they were over-engineered, not well designed, everybody invented their own wheel. There was just problem after problem.

That’s why most ERP vendors recommend that government shared services use “vanilla” implementations with zero code customization. Which is a bit of challenge. Especially using software designed for the private sector. Especially when there is constant reform and modernization in government. It’s not “one size fits all”, rather it is more a “lowest common denominator” for those government agencies with modest needs.

Shared Services Today: Square Pegs and Round Holes?

Maybe it’s time to consider that the problem isn’t the shared services round hole. Maybe the problem is the software square peg. That wasn’t designed to fit into the round hole. We need to round these square pegs to make shared services work.

Square Peg Problems Round Peg Solution
  • Governments need to customize private sector software to meet needs.
  • Upgrading private sector software to the next version is expensive and time consuming because the customizations need to be managed.
  • Adapting private sector software to meet government changes is also difficult and expensive
Use Government Resource Planning (GRP) software that configures to meet government requirements.
  • Software designed for “on premises” hosting is difficult to centrally host.
  • Enterprise software with client/server base technology is difficult and expensive to scale to multiple configurations.
  • Software designed for the cloud, like Salesforce, is more effective that traditional software designs.
Use GRP software that is fully web-based, with no client/server code and designed for multiple configurations.
  • Enterprise software does not integrate well with special-purpose software.
  • Technical platforms for the development of special purpose applications are not able to leverage core enterprise software functionality
Use modern software with a component-based Service Oriented Architecture to enable reuse, connectors to support legacy systems and ERP

Yes, the FreeBalance Accountability Suite Version 7 meets these needs. But, it’s not a big secret: it’s just software architecture best practices.

Governance: Tail wags dog?

Gartner Group has predicted:

By 2013, more than 60 per cent of existing IT shared services that do not revise their current governance model will not be able to achieve the benefits expected in the business case.

The software industry seems to work like this: vendors tell customers what they are going to get. Central shared services agencies decide how to overcome the software limitations. Departments and agency users are frustrated by software limitations. These users blame the central agency.

Most of the shared services governance literature describes how to manage decision-making within the government. The problem is that governments are not setting software product directions.

The big  dog needs to wag the tail.  Software companies must commit to meet government requirements. These companies should not be “hands-off” operating through consulting organizations. Software companies providing software for shared services – whose annual Total Cost of Ownership (TCO) for large governments is in the hundreds of millions of dollars – must devote resources to meet government needs. There must be steering committees that obligate vendors to meet government goals.  That’s governance.

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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