This is my fifth blog which looks at the critical choices being faced in the Public Sector both at the National and Local level.
The first two articles were: UK Local Authorities and Shared Services: Cost-Cutting – Myth or Reality?, and Public Sector Performance: Catch 22 type Dilemmas.
This is now the third of four related blogs:
1. Cost Cutting Vs. Cost Reduction (Blog 1)
2. Business Transformation (Blog 2)
3. The Role of IT in Business Transformation (Blog 3) – focus of this blog
4. Strategy and Politics (Blog 4)
Before focusing specifically on IT, it is worth talking stock in the wider context, looking at progress in overhauling public services. This week the authoritive Economist leads it’s UK news with a headline entitled “Dave’s amazing adventure“. The secondary headline reads “Overhauling the public services proving slower and harder than the government once hoped”. The article concludes that Coalition Government’s vision of a public sector enlivened by greater competition and less dependency on state funding is holding up well. However, the article identifies numerous examples where the reform agenda is seriously struggling. Without effective reform, we are left with a reduced funding which in the main leads directly to cuts in front-line services. Government reforms are similar to Business Strategy in the Private Sector – without an effective business strategy, customer performance, quality and financial returns are progessively marginalized, leading to a progessive downward spiral. Success requires vision, strategy (reform), leadership and effective transformation. This blog focuses on IT strategy and how it supports transformation.
THE ROLE OF “IT” IN BUSINESS TRANSFORMATION
Technology (or IT) is one of the three critical elements of Business Transformation, along with Processes and People. It is essential to understand that IT does not offer a silver bullet for providing strategic advantage. There are very few cases like the SABRE airline reservation system where IT directly enabled strategic advantage.
IT has offered us Best Practice and Best of Breed options. Best Practice is recommended as lower-risk and more cost-effective for non-strategic options. Best of Breed is recommended where the business is going for first-mover or lowest-cost advantage – IT is supporting strategic options.
Over the last ten years, Tier 1 ERP providers like Oracle and SAP, plus their value-added network of implementation partners have had rich pickings. On the one hand, there has been new work from the constantly changing technology but also from the increasingly important business solutions to support both Best Practice and Best of Breed models. Business cases are justified on lower costs of operating standardized processes, deploying self-service and self-help, with high levels of automation. Implementation partners also offer Shared Services and Outsourcing solutions, with near-shore and off-shore options to take advantage of Labour Cost Arbitrage (cheaper to do the job in India or China).
For an ERP, Shared Services or Outsourcing Solution to be effective, People and Processes must receive appropriate sponsorship and resources, as well as IT. In my experience of over a dozen ERP/Shared Services programmes, there is enormous pressure for IT to take the lead and call-the-shots. IT Transformation is only able to offer first level Business Transformation (Localized Exploitation). For the four higher levels of Business Transformation (identified in Venkatraman’s pioneering research at MIT), it is essential that the leadership and sponsorship is business-based, with IT held in check as an enabler.
IT is quite prolific and enormous focus is required to ensure that businesses get value and are not dazzled by the latest technology. Outsourcing and off-shoring IT has become increasingly popular but it is not without its challenges – on the other hand there is clear evidence that stock/share prices have responded favourably when leading businesses have announced outsourcing/offshoring decisions.
For the Public Sector both at the national and local levels, IT presents an enormous challenge, both in terms of cost-effectiveness, quality and customer service in continuing services. In the case of business transformation, the risks are compounded because IT is frequently a more powerful force than Processes or Employees.
This week we have seen Francis Maude, Minister for the Cabinet Office publish the Coalition Government’s ICT Strategy (information, communications and technology). In his forward Francis Maude identified the following challenges that had been identified by the Coalition Government:
• projects tend to be too big, leading to greater risk and complexity, and limiting the range of suppliers who can compete
• Departments, agencies and public bodies too rarely reuse and adapt systems which are available ‘off the shelf’ or have already been commissioned by another part of government, leading to wasteful duplication
• systems are too rarely interoperable
• the infrastructure is insufficiently integrated, leading to inefficiency and separation
• there is serious over-capacity, especially in data centres
• procurement timescales are far too long and costly, squeezing out all but the biggest, usually multinational, suppliers
• too little attention has been given at senior level to the implementation of big ICT projects and programmes, either by senior officials or by ministers. Similarly, senior responsible owners (SROs) have rarely been allowed to stay in post long enough.
Francis Maude identified the following remedial steps, which either had been or would be implemented:
• introduce new central controls to ensure greater consistency and integration
• take powers to remove excess capacity
• create a level playing field for open source software
• greatly streamline procurement and specify outcomes rather than inputs
• create a presumption against projects having a lifetime value of more than £100 million
• impose compulsory open standards, starting with interoperability and security
• create a comprehensive asset register
• create a cross-public sector Applications Store
• expect SROs to stay in post until an appropriate break in the life of a project/programme; and
• encourage boards to hold ministers and senior officials to account on a regular basis for the progress of ICT projects and programmes.
From a strictly technology perspective, all the above actions seem eminently sensible and appropriate. It is revealing that the Government ICT Strategy does not mention how technology strategy is going to support Business Strategy nor the Business Transformation agenda.
We established earlier that for effective Business Transformation there is need to carefully blend the following three strategies:
1. Technology, plus
It is very significant that there is no mention of Technology supporting Transformation, nor dovetailing with the other pivotal elements of effective transformation, namely People and Processes strategies. This is quite alarming, given the cost-cutting that the Treasury is mandating with available funding envelopes. It would seem to indicate that there is no over-arching approach to transformation across Government, with Technology being addressed in effective isolation as an area of significant funding.
Francis Maude’s address mentions that the CIO Delivery Board will publish a strategic implementation plan, in collaboration with the departments and the Treasury by Summer 2011. Perhaps, the strategic implementation plan will give us some insight as to how technology will support transformation activities?
Effective transformation is really important because the greater the savings from transformation, the lower the level of cuts from front-line services. Why are transformation activities being excluded by the Government? Is it the reform agenda (strategy), political will, Public Sector leadership, inertia? Is it because of the shortage of transformation specialists and champions in the Public Sector? Perhaps, it would now be timely to reconsider the Cabinet Office’s Catch 22 type controls on consultants and interim managers? Catch 22 controls mean that some of the UK’s most talented and experienced transformation specialists are on the bench. The UK probably has the most developed interim management community in the World – surely this is a competitive advantage wasted?