Plans for three London boroughs to create a joint IP telephony network is just one example of how the public sector is embracing shared services.

The aim is to maintain and improve public services despite tightening budgets, by sharing administrative systems such as IT, finance or human resources (HR) between multiple organisations.

In London, local authorities in Hillingdon, Hounslow and Brent are testing an inter-borough voice over IP system that twins existing local infrastructure with the London Grid for Learning and the NHS network.

The plan will save money, reduce reliance on external suppliers and improve resilience, said project manager Bob Mackay, from Hillingdon Council.

‘It is not about an immediate return on investment,’ he said.

‘But if the proof of concept is successful and all traffic both between boroughs, and possibly also with health organisations, is routed that way, it starts to become financially viable.

‘A single telephony system for all London boroughs would save us buying a system 32 times over.’

There are also potential disaster recovery benefits. ‘During the London bombings, the public internet and telephony network slowed down, but if we had our own system we would be able to continue communication,’ said Mackay.

Shared services are vital if the public sector is to meet its cost-cutting targets.

The first tranche of efficiency goals, from the 2004 Gershon Review, called for £21.5bn of administrative savings by 2008.

And the current budget negotiations ­ which will set spending levels from 2008-2011 ­ will include five per cent year-on-year efficiency savings in administration and an overall spending reduction of three per cent year-on-year across the board.

Sharing will be crucial to maintaining investment levels for public service
delivery, said Steve Palmer, head of IT at Hillingdon.

‘We want to outstrip the Gershon savings and put as much money as possible into front line services,’ he said.

Sharing schemes are also under way in Whitehall. Large departments such as the Home Office are to standardise within the estate. And the Department for Work and Pensions (DWP) and HM Revenues & Customs are to provide HR and
finance services to smaller government organisations.

The first to make the transition will be the Cabinet Office, which is transferring 1,700 staff records to DWP’s Oracle system.

But a number of hurdles remain, said Butler Group analyst Sarah Burnett.

‘Compared with the private sector, councils do not have the same level of resources at their disposal to reap the benefit of economies of scale,’ she said.

‘Success will also depend on strong leadership because there is a lot of discussion necessary to iron out the business rules.’

In London, the push is coming from the boroughs, said Steve Pennant, chief executive of London Connects, a capital-wide agency.

‘Councils know they will not get more money from central government, but there is demand on services so IT-enabled shared services is a big lever,’ he said.

Shared services takes off across the world

* The public sector’s appetite for shared service is a major factor driving the worldwide market, according to the latest predictions from analyst Datamonitor.

* UK government spending will quadruple from £154m in 2007 to £628 in 2012, says a report published last week. And technology revenue from shared services projects in the US and Europe combined will grow at an annual rate of six per cent from $57.4bn in 2007 to $76.2bn in 2012.

* Governments will start with administrative services. But ultimately, the model could be used for higher-value functions such as citizen contact centres, tax collection and social payment schemes, says Datamonitor.