Shared services

Today's high level of interest in shared services comes from the premise that by sharing a service, economies of scale can both cause reductions in unit cost of provision and a large-scale service can be designed and operated to exhibit "best practice", giving an enhanced quality of service to its users.

 

This note discusses shared services in the UK in a tertiary education context.  The services relevant to the discussion are those that universities and colleges operate at an institutional level e.g. finance systems, student records systems, timetabling, HR, estates, timetabling, payroll virtual learning environments or customer relations management.

Governmental and tertiary education background

The story starts in the Gershon report for the Treasury, published in July 2004, which identified the importance of transactional and back-office services to a shared services agenda as types of service that were amenable to both economies of scale and improvement of quality.  Following this, the Welsh Assembly published a series of three documents that set a trail from an overall strategy to a set of specific actions.  In November 2005 the Westminster government laid out a vision of the transformation of its activities to the use of IT in which it clarified an aim of "better using technology to deliver public services and policy outcomes that have an impact on citizens daily lives".

 

HEFCE responded to this document in measured terms, mentioning problems with use of a central government payroll agency and the former MAC initiative in higher education, where the desire to develop commonality hit problems because of rapidly changing needs and technology.  HEFCE commissioned KPMG to study the area and in 2006 they produced a comprehensive report which identified many of the key issues.

Shared services in UK FE and HE

There are a number of well-established instances in which academic institutions share use of in-sector services.  Prominent examples are the academic network provided by Janet UK, the Universities and colleges admissions service UCAS and the plagiarism advice service PlagiarismAdvice.org established by the JISC.  It is fair to say though, that a simple customer provider relationship exists for these services and that the institutions that use them have little involvement in the governance or management of the services.

Types of shared service

The KPMG report for HEFCE identified six basic structures that could be applied to shared service provision in the public sector

· Unitary – a single organisation consolidating and centralising a business service.

· Lead department – an organisation consolidating and centralising a business service that will be shared by other organisations.

· Joint initiatives (internal) – an agreement between two or more organisations to set up and operate shared services.

· Strategic partnership (external) – contractual arrangement with a third party provider for a range of services which may include shared services.

· Joint venture – joint venture legal entity between “Authority” and third party provider.

· Outsourcing – third party provider takes full responsibility for managing and operating the service.”

 

KPMG opined that most universities were internally operating many internal services that were unitary and furthermore that outsourcing could not really be seen as a shared service situation.  This left four options as candidate types of service sharing situation.  

 

In 2008 we carried out the "Study of Shared Services in the UK Further and Higher Education" for the JISC and in the first of the three reports we gave the following definition of shared services:

 

“By shared services we mean institutions cooperating in the development and delivery of services, so sharing skills and knowledge, perhaps with commercial participation.”

 

This definition envisaged a situation where the participating institutions were not merely customers of the service but were also involved in its governance and development.

 

In our work for JISC, we produced four reports:

· The current landscape of shared systems implementation and planning for administrative systems in UK FE and HE

· The software currently in use for administrative systems in UK FE and HE

· The potential for shared service models for the delivery of administrative systems in UK FE and HE

· A final report for the JISC, making recommendations to assist its further work in this area.

 

The following JISC web page

http://www.jisc.ac.uk/whatwedo/programmes/programme_jos/ssprev.aspx

gives access to these reports.
 

Immediately after this study, we carried out another piece of work for the JISC in which we made proposals for a programme of work to ready institutions for forming shared services consortia.  This became the JISC FSD programme.

Planning for shared services

Deciding to move to shared services is a major undertaking.  Baselining work has to be done to produce descriptions of current business processes and their costs.  This information is needed so that the changes in business processes that would result from adoption of shared services can be understood in detail so that the organisation can prepare for them.  Costing information is vital because without it no assessment of the cost savings expected from shared services could be made.

 

As the information associated with services is kept in and processed by IT systems, consideration of technologies is a critical part of the investigation and planning process for service sharing.  The technologies for integrating major administrative systems such as a student system and a finance system are improving steadily.  For example, service-oriented architectures (SOAs) continue to hold promise although implementations in the UK academic sector remain rare.  More recently, cloud technologies offer the potential to create and provide IT based services with much lower capital investment that heretofore, typically using consumption-based charging models. Placement of data, platforms or software in the so-called cloud is attracting increasing attention, in good part because of its potential for reducing "back office" costs and complexity.

 

If a shared service based on cooperating institutions is being considered, means of producing solutions that are acceptable to all are essential.  In practice this means that the arrangements for governing the consortium and planning and managing its activities need to be well thought through.  It is reassuring if these arrangements are fully transparent to all concerned.

 

Regarding payments for services to providers, VAT remains an obstacle if the provider is a separate legal entity and the most recent increase in the VAT rate only serves to heighten this barrier.  It is noteworthy that the Treasury has given VAT exemption to the Shared Services Centre company operated by the Joint Research Councils as they have successfully argued that it is under the same tax heading as the Councils themselves.

 

At the end of the day, moving to shared services requires planning that embraces

· The participating institutions who will jointly plan for service provision and development.

· The people using the services, who are likely to encounter changed business processes.

· Those who provide the services, many of whom will become mediators who manage services delivered from elsewhere.

· The technologies used to provide services.

 

Each of these areas has its own risks and it is important to note that decisions taken in one area can vary significantly influence the risk picture in other areas.