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January 16, 2013

Government COO says shared services ‘critical’

Promises to tackle fragmented accounting systems, payroll and HR

By Cbr Rolling Blog

Stephen Kelly

Stephen Kelly, Government COO

By David Bicknell, editor of CBR sister publication Government Computing.

Government chief operating officer Stephen Kelly has promised that the government will aim to be ahead of schedule against its newly launched plan for ‘next generation shared services.’

Kelly, who is senior responsible owner (SRO) for the shared services programme, told Government Computing that aspirations to enable savings of £400-£600m each year are achievable, but he admitted that they will not be achieved in the first couple of years.

Kelly is the former CEO of legacy modernisation firm MicroFocus. He resigned suddenly from the firm in 2009 after three years in the role. Prior to his role at MicroFocus Kelly also led Chordiant, where he was in the unusual position of being a Brit in charge of a US company. Chordiant was subsequently bought by Pegasystems.

Talking to Government Computing, he said, "What I’m really keen to do is to get the momentum going and make sure that we’re ideally ahead of schedule. The first phase and our focus will be delivering against the plan. There’s loads of things we could do. In terms of blue sky thinking, we could look at some of the independent service centres but we won’t be doing that in the short-term. Our focus for the moment is the very fragmented accounting systems, payroll systems, HR, and there are some significant savings there."

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Kelly added that to get to the full £600m worth of savings, the government would need all departments to attain upper quartile benchmark targets. Another key element to achieve savings is the reduction of enterprise resource planning (ERP) annual operating costs by more than 40% through consolidation, and by up to 70% through the use of lower cost ERP solutions, alongside around £32m of avoided system upgrade costs through system consolidation.

"Shared services is a key delivery arm of what we’re seeking to do across Efficiency and Reform. In 2004 we had Sir Peter Gershon’s report on shared services," said Kelly. "And nine years on, what’s really changed? Candidly, what’s been achieved in two years is probably as significant as what was achieved in the previous ten years, in terms of getting a coherent plan together and getting people on board with those plans. Starting to get the bus through first and second gear is very clearly a big step forwards."

A critical tenet

Kelly believes shared services define a much more coherent business model for government to run both its core transactional systems and professional services capability at a fraction of the cost and improved services for the users across departments.

"Shared services is a critical tenet of civil service reform and the encapsulation of that is the Interlocking Board which looks at the whole remit of not only transactional services, but what other services make much more sense to consolidate as you would in any functional business. They include legal services, supplier procurement services, and similar areas, where some of the professional services and IP based knowledge comes at the centre and is available across government. So there’s consistent methodologies, consistent business process, consistent systems, things like procurement.

"I’d be massively disappointed if in 18 months time, we didn’t operate something similar to ‘gBay’ for buying anywhere in the department. It looks as good as best-in-class private sector and it has consolidation and aggregation of all our spend. We spend £45bn on behalf of the taxpayer across government which is 3% of gross domestic product."

Kelly said he is happy to come in as SRO, because shared services is one of those things that is continually being discussed.

"Everybody intellectually gets it and then when you tell them, ‘Well, actually, we’re going to be running your accounting systems,’ they say, ‘Well, we want to go last and could you do it with everyone else first.’

Kelly is now mobilising a team to deliver on shared services. There is a programme director, Paul Marriner, in place, and Kelly is also looking at the different commercial model options.

"We’ve put together a team to assess those and we’ll report back in February. With ISSC1 there’s a procurement going forwards. That will be announced in the next couple of months. There’s also a whole load of strands of work and a significant project team building up. We published our plan just before the New Year, and we have the resourcing being geared up ….but for me personally, this is a boot strap, a table stake. We also have digital, which is breakthrough, radical, and really transforming the way government interacts with citizens, and things like the consolidation of accounting systems, HR systems. We should have been doing this a long time ago; we’ve got catch-up to do on shared services."


Kelly insists that the £400-600m savings target is attainable through the next generation shared services plans but he admits that those savings are not going to be achieved in the first couple of years.

"To get to the full £600m, we’d have to be at the top quartile. We’re not talking Manchester United and winning the Premier League or the Champions League. We’re talking about MK Dons and we’ve got a long way to go."

Kelly’s shared services plan contains figures that break down the annual operating cost levels per employee for departments.

"Some departments are about £160 per employee; departments like DWP are best-in-class at £89. But we know from even that level we can get 30% or even 60% reductions in cost by executing against the plan. I think it’s realistic to say the savings we can bank are £150m. We can see a consistent way to get to, with a plan, about £300m.

"And then we get into areas where we know it’s not just the system, the technology, the consolidation of one platform, one software licence, one instance of the software code. It’s also the business practices, manual hand-offs, business process changes, and those sorts of things: systems, people, process, that need to be all encapsulated to get to that £400-£600m."

Kelly agrees that the £400-£600m savings can only be achieved in the next Parliamentary term, but insists that the focus of the plan is to deliver and get the plan completely executed within this Parliament.

Kelly says one of the discussions now underway concerns commercial model options, which could involve greater use of employee ownership, or even mutuals.

"During the course of March, we’ll outline more of what we think the appropriate commercial model is, particularly for ISSC2. That will be a showcase integrated shared services centre, an area close to my heart and to the Minister’s heart, and that could include employee participation. That’s one of the discussion points. We’re doing a lot of exploratory work to look at various options of in-house, or things with external participation with the private sector and what employee engagement makes sense. Is it just normal employee engagement communication or are there more expansive employee opportunities? And we’ll probably use that process to consult with industry."

In terms of oversight of the three ‘standalone’ government departments – the Ministry of Justice, HM Revenue and Customs (HMRC) and the Ministry of Defence (MoD), Kelly plans to use the government’s policy on transparency to publish costs per employee and use the comparison between the integrated shared service centre and departmental figures to drive down costs.

On the edge

Discussing his government chief operating officer role and civil service reform, the one thing he would change in the civil service is retaining a feeling of being ‘on the edge.’

"I like that feeling of being on that precipice, being on the edge. When I ran companies I used to go and see the R&D guys and I used to say, ‘Just always think of the CEO who can’t do payroll this month. And having that ultimate kind of angst that says, ‘We’ve got 30 days to deliver, what do we do?’ We’ve only got 400-odd days to the next election, so what are we going to do today?"

Kelly has high praise for the people in the civil service, and is focused on ‘delivery’ against his plans.

"Content is king, but delivery is better. The overriding thing for me is that we are right at the start of the perfect storm. You have the macro, you have the deficit, you have public sector productivity, you’ve got the balancing to support the private sector, and see the growth required from Austerity Britain to Prosperity Britain. And then you have a civil service team like Bob Kerslake and Jeremy Heywood. We’ve got a lot of people who’ve come in and know what the journey looks like, know how the movie plays out and know that they’ll be bumps in the road.

"The civil servants have such high integrity and there is that purity of why they joined the civil service. But sadly there’s been frustration and they’ve been ground down by the bureaucracy. The thing about the Government Digital Service is that it is a Trojan Horse to fundamentally, radically change the speed of operation and improve services dramatically at a fraction of the cost of the old route, and I genuinely think that in two, three, four years’ time, there’ll be some of the same team and there will be more. We’ll have built up our capability and we’ll have delivered so much."


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