Collaboration essential to overcoming skepticism about shared services, report says

A new report points to buy-in from all stakeholders and communication among agencies as essential to a shared services environment that consolidates business processes across government. But reluctance to relinquish information, confusion about the business model and skepticism about funding continues to stall progress, said a government official.

In 2004, the Office of Management and Budget established the lines of business initiative to meet a President's Management Agenda goal to expand electronic government. The intent was to provide services across agencies and consolidate operations to save money and improve efficiency. Agencies are encouraged to share services managed by federal or commercial providers. Human resources services, for example, are offered through the Treasury Department's HR Connect Program, the Agriculture Department's National Finance Center and the Interior Department's National Business Center. Interior's center also provides financial management services.

"This is a new concept for agencies -- where one is a service provider and another an acquirer," said Hamid Moinamin, chairman for the Best Practices Committee of the Industry Advisory Council and chief executive officer of Inserso of Annandale, Va., a provider of application development and information technology staff services. "It creates a whole new set of issues. What do you do when there's a problem? Commercially, you bring people in, yell at them and fire them if you need to; but you can't do that when there's another agency involved, and a mandate telling you 'this is how it has to be done.' This whole area is just new, and folks in the federal space have to realize it can't be perfect. It takes time."

To help agencies make the transition, IAC's Collaboration and Transformation Shared Interest Group interviewed service providers and their customers at large civilian agencies to determine best practices. The analysis focused on four of the administration's e-government initiatives: payroll, rulemaking, financial management and human resources.

The overarching finding from the report was that managers and staff at both the provider and customer agencies, as well as oversight organizations, should be involved in the initial design, planning, migration and operation of shared services. That, in turn, allows more customization of services and a migration path that is least disruptive to the agencies involved.

"Because it's intergovernmental, the successful providers treat customers as partners, get them involved early and make them feel part of the game," Moinamin said. "It's about treating this as a joint effort, rather than 'this is my program.'"

Other best practices highlighted in the report include continuous marketing of services and a business approach to funding.

"There are hidden costs that get ignored," Moinamin said. "In the commercial software world, companies make a research and development investment to build a payroll system -- let's say $10 million -- which is recouped in sales of licenses. But that's not how the federal world works." Often agencies have working capital funds for research and development that are spread over a couple years and may be recouped in three to five years. But figuring out how agencies pay for the services remains a challenge. One solution is to tax customer agencies through service fees, for example, Moinamin said, "but agencies, of course, don't like that."

Beyond the cost of developing and acquiring services, migration to a new system often has wider impact on an agency's IT infrastructure. A number of other systems that handle critical processes might pull information from the application being phased out, for example. "Where does the money to fix all of those issues come from?" Moinamin said. "There are solutions, but nothing's perfect. It's all evolving."

Funding is not the only issue driving skepticism from some agencies about shared services. A reluctance to hand over ownership of information and confusion about the business model persist. While many agencies praise the concept, Ed Meagher, deputy chief information officer at Interior, which was among the agencies interviewed for the study, compares the buzz to the emperor's new clothes -- outwardly positive, but artificial.

"People are perfectly happy to entertain the notion of shared services, as long as it doesn't involve something they consider mission critical or give them the feeling of losing control of their data," he said. "Then they want to hug their box."

To come around to the idea of shared services, agencies need a clearly defined and gradual approach that doesn't require completely scrapping existing business processes, Meagher said.

"Issues concerning requirements definition, governance, funding, cost allocation, change management and end user support have not been resolved," Meagher said. "Saying 'this is how it is going to work' is not the same as saying 'how do you need it to work.' Once you get the model right, you can replicate it over and over again.… You can mandate these things only as long as you can mandate them; if you want to ensure real lasting change, you have to communicate, demonstrate and then instantiate."