Focusing on IT efficiency can help the public sector cut costs
Helping CIPFA members find IT cost efficiencies
Published 12:15, 01 March 12
Given the current economic climate, government finance experts are now joining their CFO counterparts in the private sector by increasing their focus on IT efficiencies. Reflecting this trend, ImprovIT has recently begun working with CIPFA, the Chartered Institute of Public Finance and Accountancy, offering members advice on how IT professionals can achieve the kind of cost and productivity efficiencies that will improve their organisation’s bottom line and impres those who sign the cheques.
Perhaps ironically, while facing the same budgetary restrictions as other sectors, IT is at the same time viewed as the means by which the much needed cost savings (of at least a billion pounds) and service improvements can be delivered. Certainly, technology can be a powerful efficiency enabler, but it isn’t a magic bullet: to ensure the IT service support environment is operating optimally, there are a number of important strategies to consider.
Some key strategies include:
- Finding ways to unleash greater performance from existing resources
- Retiring expensive-to-maintain legacy systems
- Rationalising service centres
- Infrastructure re-engineering
- Workflow transformation
- More competitive service sourcing and procurement regimes.
For the IT professional, the question must be how to identify those cost efficiencies that are going to optimise performance and not just cause services - especially those that are public-facing - to suffer. Followed of course by: ‘Where do we start?’
Following the roadmap
When it comes to new IT components or applications, they need to be viewed within the context of organisation-wide services and business requirements. Strategic and tactical procurements need to be made against the backdrop of a coherent and agreed-to roadmap into the future, and all aspects of system’s functionality need to be understood and optimised.
In the face of reduced staffing, many public sector IT services are being outsourced. However, when it comes to external service providers, simply rolling over an existing contract - especially if it is long-term - is not advisable.
All service level agreements need to be closely examined, with component costs assessed against market fair value, and new, more competitive SLAs put in place. However, because these contracts are often less than fully transparent, independent advisory services can be employed to both identify areas of savings and help negotiate contracts - a service that often pays for itself several times over.
That said, it is generally agreed that innovative technology, applied with understanding and in the context of a sound strategy, is the best way to achieve increased efficiencies without suffering productivity erosion. However, as stated at the beginning of this article, CIOs, like other departmental heads, are also under the gun to cut costs. So, to address this need, here follows seven useful guidelines:
Assessing best practice
Public sector entities, just like their private sector equivalents, need to think of their particular organisation as a set of business and technology processes that underpin public services. In this, the key question is what business process improvements and good governance procedures - including enterprise-wide service delivery standards - are in place, or should be introduced, to ensure best practice.
The second question is what IT structures are in place that either help or hinder best practice, whether handled in-house or outsourced.
Increasing staff productivity
In most organisations, staffing is the most cost-intensive resource, which means it is often the first to suffer cuts. This, however, is often undertaken as a knee-jerk reaction and can be a short-sighted solution that has devastating downstream effects on service quality. It is far better to find ways to make staff more productive by implementing new workflows, giving them better tools with which to do their jobs.
These would include the automation of previously staff-intensive systems that reduce the need for manual intervention, and web-based customer self-service portals that free up personnel for higher value tasks. These can include analysing CRM systems for greater insights into citizen and service user needs, and business intelligence systems for insights into enterprise optimisation - value-added activities that are often swamped by the demands of routine administration.
Staff productivity can be greatly enhanced by introducing remote, more flexible working options that reduce office overheads and commute time. Again, this requires the delivery of IT tools that support mobility, such as tablets, smartphones and virtual desktop solutions with a server environment at the back end that can leverage new virtual and cloud technology for optimum cost and productivity efficiencies.
Smarter, integrated IT systems
Often legacy technologies function as standalone systems that are inefficient and no longer fit for purpose, having been designed for conditions which are now obsolete. Typically they are unable to ‘talk’ to each other without expensive workarounds and interfaces that are costly to maintain.
What is needed is an open, standardised, streamlined and simplified platform that can integrate data from diverse systems, join up the back office with the front office and enable citizen and patient case records, CRM, ERP, housing inventory, accounting, planning and a wider range of other information to be shared - often in realtime. This makes it much faster, easier and more cost-efficient to provide better quality, more responsive services.
Over the past few years there has been a major trend in shared services and local area agreement, largely driven by advances in technology such as virtualisation, cloud computing, open source and service-oriented architectures, as well as better data security systems, allowing regional hubs to be easily developed and supporting data sharing across large and disparate systems and geographies.
This not only provides faster, more accurate and up-to-date information to government and healthcare agencies, it means that IT resources, from staff to hardware and office space, can be rationalised to reduce cost.
Making the decision to transform and modernise a legacy infrastructure or make a large capital investment in mobility tools is clearly a major undertaking, especially in the current climate - even if they do promise to pay for themselves with greater efficiencies.
It often takes committed and visionary leadership to on-board stakeholders. It always takes a thorough assessment of ROI with short to long-term deliverables; procurement planning should wherever possible be strategic, not tactical.
IT replacement and/or upgrade programmes should be timed to take advantage of the best economies of scale. Procurement heads should have access to current market pricing data to ensure they are paying competitive prices for products and services.
In looking to reduce overheads, outsourcing IT services is an obvious alternative. However, while it might be the best solution for some parts of the IT environment, it might not be for others, either based on cost, control or a range of other criteria. How does the CIO decide which is which?
Cost and performance measurements need to be taken and comparisons made against past and present internal metrics, and those of one’s external service providers. Then further cost and quality comparisons need to be made across a range of suppliers for specific serviced components to find best value. This kind of data is not, however, readily available and may require the help of specialists with access to current market pricing databases.
Having decided on either a new outsourcing partner, or to renew an existing contract, an in-depth review should be made of the service level agreement (SLA) to ensure terms are favourable and costs are competitive.
It is vital not to allow service provider contracts to drift on year after year, under conditions that weighted towards the supplier’s advantage. SLAs need to be based on specific deliverables which are monitored and benchmarked regularly.
Talking about IT innovation in an era where public sector CIOs are battening down the hatches and delaying new investment may seem counter-intuitive. And indeed, innovation for its own sake can be a red herring - one that IT departments are historically prone to.
However, as we have touched on in this piece, modernising systems and harnessing new technology such as server virtualisation, self-service web portals or social networking tools, often achieves remarkably speedy ROIs.
The important thing is to remain open-minded, even during periods of austerity: always asking the question: ‘Is this new technology a game-changer we cannot afford to ignore?’
By Paul Michaels, CEO of ImprovIT