Principles for the Future of Shared Services
In my previous blog on shared services, I talked about a Dynamic Shared Service Delivery Model and 21st century technology delivery. The same principles that drove 21stCentury advances in technologies can be directly applied to the shared services environment. Portability of data is critical to competition, as shown in the telephony model. The mission of shared service providers should focus on the customer. There must be partnerships between the public and private sector in order to foster innovation. Transparent rules must apply in the marketplace in order to ensure that the playing field is competitive. An effective governance model holds providers accountable to delivering effective shared services to agencies. Funding and flexibility allows the model to be sustainable, while cost savings ensure that it is viable long term.
One critical concept that must be accepted by federal agencies in order for shared services to advance in this manner, is that you may not get everything you want, but you will get what you need. In other words, there is an underlying platform that’s going to provide a standard process, which will provide what each and every agency absolutely needs. The “wants” are going to be what some refer to as “snowflakes” – certain one-off processes that an agency may be required for legal or contractual reasons. Agencies will be provided with a base level of services that’s common across government, with the recognition that individually unique processes will be provided and funded.
21st Century Shared Service Model
So, what does the 21st Century marketplace look like? Built on the principles described previously, the 21st Century marketplace offers agencies the flexibility to obtain services from providers built on an “As a Service” technology model. Agencies will have several ways to get from Point A to Point B, procuring technology services from a vibrant marketplace with various options. Service providers will focus on enhancing offerings and providing timely and cost effective service.
Infrastructure will be provided as a service (IaaS), and will be delivered commonly across government by cloud providers. We know already that this move is driving significant savings in government, in the billions of dollars range.
Platform as a service (PaaS) is going to be provided by the private sector. The private sector is going to own, operate and, in a sense, lease the software to a provider. The platform will be configured as needed for providers and agencies, it will no longer be customized for each agency. Providers will then use that platform for all their functionality and service.
Data needs to be standardized. For data to be portable between service providers and platforms (Oracle, SAP, etc.), data standards will be needed. For each shared services functional area (HR, FM, Grants, etc.), data standards will drive this transformation. In some cases, different pieces of government may own different parts of the data – for example, the Social Security Administration would own your social security number – but all the data would reside in a commonly accessible data warehouse by both agencies and providers.
Given the IaaS, PaaS, and standard data warehouse model, providers are able to focus on service. The shared service provider now looks more like AT&T or Verizon – they are all able to provide services on the same platforms, but in ways in which they can differentiate themselves based on better offerings, price and service levels. Agencies would then be selecting a provider based on the provision of service, not on the software or technology.
The three layers of technology services would run below the view of an agency. An agency may be serviced by multiple providers, and may switch between providers quickly and cost effectively.
Software in the 21st century model will be “as a service”, meaning that the private sector will own and operate the software that HR, Finance, Grants, Travel and other functions that are transactional in nature. The advantages of this model include tiered pricing, service level agreements, and greater innovation, among other. Under the new model, agencies can focus their provider selections on customer service, offerings and price differentiation. Providers can focus on innovation and customer service, rather than spending time and money on IT management. The three layers below the provider level will be occurring behind the scenes to the agencies, offered seamlessly as services. Agencies do not have to concern themselves with the interactions between infrastructure, data and platforms. From an agency perspective, the service delivery will be a simple road from point A to B. Thus, agencies can focus all resources on core mission activities.
Evolution of Shared Services in the Federal Government
Since 2002, starting with the e-Government Act under the Bush Administration, we’ve been on a path for over ten years towards figuring out how shared services plays in the federal government. In very recent history, the creation of a public shared service policy officer (SSPO) in OMB, and of the creation of a Unified Shared Service Management (USSM) organization, have helped renew momentum and lead the effort. Now, we are thinking of the future of shared services, and how the advances in technology and management will lead additional transformation. This Dynamic Shared Services Delivery Model has had a real impact on the way USSM has begun to think about the marketplace. For example, USSM’s graphic below depicting the layers of services in the marketplace draws on many of the ideas discussed above, and the story begins to look the same as our idea of the journey.
Critical Changes in Thinking
For these changes to take place, the government needs to make several critical changes in thinking. In addition, there needs to be a willingness to change and think big when envisioning the future of the government shared services model.
Software as a Service
Federal government leaders have begun to see that Software as a Service is a key to success. It’s a key to success not just because it delivers cheaper, faster service, but because innovation rides on that software model, just as it did for telephony and the other technologies that have moved to a 21st Century model.
Aligning Government and Industry
Government and industry should be aligned in thinking about the future. This requires strong partnership between government and industry, where the government can tap into new, innovative industry ideas and capabilities, while industry can leverage government insights into priorities and initiatives.
Private Sector Investment
In a time of financial stress, investment becomes a critical dynamic of change, and to the extent it can be, it should be provided by the private sector. Technological innovation comes from the private sector, and this model allows the government to leverage that innovation while saving substantial upfront investment costs.
OpEx replaces CapEx
Operating expense (OpEx) should replace Capital expense (CapEx), which means that the investment is in the private sector and the public sector then pays for enhancement in its operating budget. Government agencies often have difficulties obtaining capital investment dollars to upgrade and modernize systems. In a service model where the private sector provides the technology, agencies can build those costs into long term contracts and build it into operating budgets, rather than capital funds.
Conclusions and Recommendations
There is a growing chorus of experts from within and without the government, from all political persuasions that there is a need to spend every dollar as wisely as possible. And it is particularly important that as few dollars as possible should be spent on support to make mission of government that much more effective. It is for that reason that this paper focuses on the areas most likely to produce results. First, it is important to de-couple services from technology so that each of the shared service requirements can be implemented and financed separately. Secondly, a public private partnership model allows each sector to do what it does best, including constant improvement and innovation. Thirdly, software as a service introduces a new pricing model based on number of users and functional modules. And finally, standardization of data allows for competition and portability which has been the engine for technology innovation in our private lives.
Shared services is poised to make a difference in the way government delivers service. By streamlining the administrative functions so that they use the most modern technology and business processes, the mission of government to support its mission will be enhanced.