Shared Services to Help Unlock USD$3.3 Trillion in Government Cash Worldwide

Research by A.T. Kearney Shows Public Sector Is Using Technology to Help Improve Productivity and Provide New Benefits tor Citizens

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The image of the public sector as slow to innovate is rapidly becoming a thing of the past as governments are using advanced technology to consolidate back-office functions, a report released today concludes. The "Shared Services in Government 2: Building a Platform for Better Public Services at Lower Cost" study, conducted independently by A.T. Kearney with sponsorship from Cisco® (NASDAQ: CSCO), has uncovered major service improvements and cost reductions as a result of "shared services." When shared services are employed, agencies across government organisations create shared access to functions such as finance or IT, instead of having to gather information from and work with separate departments.

Based on data from the Gershon Report in the United Kingdom and statistics from the Australian National Office for the Information Economy, Cisco estimates that the total government savings from the use of shared services could amount to USD$3.3 trillion worldwide over 10 years (1) -- equal to the amount spent annually on healthcare worldwide in 2005 (2) or the estimated cost of the United States´ entire federal budget for 2008. (3)

The A.T. Kearney report, which looked at nine countries, suggests that government organisations which have embraced shared services may be close to getting their share of this windfall, although there are clear differences in the extent to which benefits are passed on to citizens.

In seven of the nine geographies studied -- Australia, Austria, Germany, the Netherlands, New Zealand, the United Kingdom and the United States -- the primary focus shared services initiatives is to cut costs to reduce the burden on taxpayers and balance government accounts. In Canada, however, there is an additional focus on improving citizen services, which A.T. Kearney has identified as a best practice.

"In previous research on shared services in government, we have noted the case for change and the historic opportunity facing the public sector," said Ian Morton, Principal Consultant and project leader at A.T. Kearney. "We have now found that although cost reduction remains the most significant factor leading government organisations to combine and share back- and front-office functions, improving services to citizens is becoming increasingly important, with Canada taking a lead in many facets of transformation. In addition, the business case is much better than previously thought, with benefits being targeted in the 15 to 25 percent range."

The independent A.T. Kearney research, which follows a similar study carried out in 2005, involved 25 in-depth interviews with chief executives, chief information officers and programme directors. The 2007 study highlights good and bad practice and offers advice and frameworks to improve the implementation of shared services initiatives. The report concludes that, while the major cost benefits to government were down to headcount reduction, the second most important contribution was from IT contract and service consolidation.

"It is clear that technology is both a crucial enabler of and major target for shared services initiatives," said Yvon Le Roux, Vice President, Public Sector for Cisco in European markets. "One of the more interesting findings in the study is that there is often a mismatch between IT strategies and the real demands of the citizen. For example, half the organisations surveyed are investing in automated telephone systems even though research shows only six percent of citizens would use it. A.T. Kearney has identified that the critical technologies to enable shared services will help lead to improved communications, greater collaboration and increased productivity. Targeting these areas will clearly be of vital importance to governments in the face of greater financial pressures and increased legislation to improve citizen services."
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