The right act

By Steve Hodgkinson | Friday, December 11 2009

Shared services exacerbate the problem of fragmented ICT governance and management in the public sector. It might be time to legislate.

Governments and their public sectors are complex, diverse and fragmented organisations. The complexity is generally agreed to be beyond the wit of any central agency to manage, and most governments around the world have adopted devolved organisational models - with departments and agencies structured to deliver discrete sets of outputs but otherwise left to operate with a high degree of managerial autonomy.

The model has proved highly effective at improving the efficiency of the way discrete services are delivered. Agency heads are held accountable to their ministers for achievement of their business plans and targets. How they do it is largely their own business (subject to the requirements of legislation).

The problem, of course, is that this divide-and-conquer devolution is better at the discrete than the interconnected - better at producing technically correct outcomes than public value results. Another problem is that the vertical organisational diversity and fragmentation eventually translates into duplication, waste and inefficiency when one looks at things from a horizontal perspective.

Information and communication technology assets and resources are intrinsically horizontal, so it is no surprise that there is growing tension between the generally devolved organisational model of the public sector and the way ICT is managed. State governments have been pursuing re-centralisation and shared services strategies to cut costs, and the fuse has been lit on the debate at federal level by the Gershon review. It's a slow burning fuse so far but the eventual detonation could be spectacular.

Shared services strategies are sometimes seen as a quick-fix solution to over-devolved ICT management - throw all the plumbing and common applications and business services in a pile and everything will be a lot more efficient. Meanwhile agencies can just carry on as before with a new supplier.

The shared services movement, however, highlights an interesting paradox in public sector ICT management. The focus of shared services strategies is usually on that which is shared - the new entity and its processes - but in reality the biggest challenge is the ICT management maturity of agency customers. Best practice on the part of the shared services entity is necessary, but not sufficient.

Shared services create a many-to-one dynamic that exacerbates - rather than solves - the dysfunctional effects of overly devolved ICT management.

A shared service cannot prosper if it is bombarded with a blizzard of fragmented and unco-ordinated service requests. It can't play favourites among its customers to balance demand and supply without being accused of being unresponsive.

Before shared services, each agency could internalise its decision-making on demand versus supply - making trade-offs flexibly, according to political and business imperatives. With a shared service provider, however, demand needs to be aggregated on an agency-wide basis and then debated in the context of the shared service provider's decisions on demand versus supply.

Paradox of shared services
The paradox is that shared services are not about centralisation at all. They are about the creation of a coherent government-wide ICT organisation - able to co-ordinate and optimise ICT decision-making horizontally across its centralised and devolved agencies. The more services that are shared the more important it is that each agency has a consistent set of ICT governance and management processes in place to co-ordinate and marshal demand.

This somewhat counter-intuitive observation cuts to heart of the ICT governance dilemma of the public sector. The public sector administration and financial management acts institutionalise agency heads having the rights, powers and authorities of individual employers. This, however, no longer reflects the reality of our modern ICT intensive organisations with their reliance on shared and interconnected information assets and resources. Agencies are becoming increasingly information inter-dependent.

Pressure is building for the creation of a public sector information management act, or a set of directions to agency heads under the existing acts, to define clear expectations for how public sector ICT assets and resources should be managed.

An information management act would prescribe the key elements of whole-of-government and agency-wide CIO roles to prevent information waste and chaos - in the same way that the financial management acts prescribe the CFO role to prevent fiscal waste and chaos.

The imperative for an information management act has so far been theoretical and diffuse - it is up to each agency head to decide how to manage ICT activities - and who could really say otherwise? Real progress on ICT shared services and standardisation and consolidation strategies, however, will require this nettle to be grasped. And let's not even start to consider the information security drivers.

Steve Hodgkinson is research director, public sector at Ovum. Email comments to steve.hodgkinson@ovum.com