Finance looks to ERP-as-a-service as part of shared services reboot

By Stephen Easton

June 27, 2017

The Department of Finance has outlined its latest thinking on shared services, as it puts the call out to vendors that can provide modern cloud-based enterprise resource planning software to replace ageing systems across the public service.

The central agency is establishing a new co-ordinated procurement panel for ERP, shortly after the Digital Transformation Agency took over responsibility for eight other ICT procurement panels, including cloud services, at the start of May.

However Finance’s plan to consolidate and upgrade back-office administrative software, with a preference for cloud-based services where possible, is part of its own fairly new responsibility — shared and common services — and will be carried out through its new model where corporate services are to be delivered by six hubs.

The department wants vendors to understand that part of the government’s vision of a “smaller, smarter and more productive and sustainable public sector” is to establish the hubs as “centres of excellence” in corporate services.

Consolidation is still the core agenda, but there’s an emphasis on the value of agencies being able to shop around in a new position paper that precedes an approach to market:

“The vision for shared services is one where [agencies] have choices, providers are competitive and innovation is harnessed.”

The aims are both “minimising the number of ERP systems used across the APS” and “standardising business processes at an agreed level” between the hubs, while retaining the ability to “localise at lower levels where required”.

According to the paper, the six hubs will take over work that is currently done by 85 “internal service providers” — a number that includes agencies with in-house corporate affairs teams, which are counted as serving themselves.

The hubs will start taking over core financial transactions — payroll, accounts payable and receivable, credit cards and ledgers — before looking at others classified as “value-add” or “strategic” in a shared services catalogue that is published as an appendix to the paper.

The plan will receive funding from the new APS Modernisation Fund from the start of the new financial year in a few days until the end of 2019-20. “To date 14 agencies (including six Hubs) have already transitioned with 73 agencies due to transition over the next four years,” according to the paper, which outlines three phases:

a. Consolidation – establish provider Hubs to begin to standardise and transition services and build economies of scale;

b. Standardisation – drive further standardisation across the Hubs through cloud-based ERP systems and automated business processes where appropriate; and

c. Contestability – encourage agencies to adopt a more commercial mindset and improve the performance of existing or proposed government functions, shown by measureable benefits and value for money across the APS.

The document says “this is not necessarily a linear process” — suggesting that the contestability phase is overarching. The initial focus of the hubs will be consistency and reliability, standardisation across government and, hopefully, the significant economies of scale that have for so long failed to materialise.

Finance flags in the paper that it might be looking to the same section of the market for more advanced “business-process-as-a-service” offerings down the track as the latest iteration of the shared services program matures.

At the same time, the DTA is of course enforcing a broad moratorium on almost any new ICT investments related to front-end service delivery, with a range of exemptions.

‘Feedback loops’ link practice to policy

As part of taking over policy responsibility for making shared services work, the Shared Services Centre that was previously run jointly by the Education and Employment departments moved into Finance last December and was rebadged as the Service Delivery Office — a somewhat confusing name that refers to delivery of back-end administrative services inside the APS.

Rosemary Huxtable

It still provides services to 12 agencies, mostly in the two portfolios where it was created, and its original parent departments seem to have retained most of its former staff as well.

The decision to move the SSC is no big deal, according to Finance Minister Matthias Cormann, who told ACT Senator Katy Gallagher it was just a “a pretty standard housekeeping decision” in the most recent round of Budget Estimates.

Gallagher asked for the official “rationale” behind the machinery of government change but, while secretary Rosemary Huxtable offered to take the question on notice, it doesn’t appear to have been listed. The committee heard the move increased Finance’s annualised average staffing level by 78 “plus some contractors” that came with the SSC.

Earlier, Huxtable had said the remnants of the SSC, which at one point had about 600 staff, was helping the central agency “develop and refine the policy” based on some of the former entity’s experience.

“We now have the policy responsibility for shared and common services, but we also have the practical service delivery office, so we are living the shared services experience,” Huxtable said.

“We are in a unique position because we can create those sort of feedback loops between the practice of delivering shared services and the policy settings for shared services.

“The Modernisation Fund provides an investment to accelerate agencies moving to the shared services environment. I think that is an area where we have got a lot of opportunity, and my objective is that we use that opportunity to the fullest extent that we can.”

The following day, the hearing continued and shared services was the first order of business, with committee chair James Paterson asking Finance officials to respond to The Canberra Times reporting the government had “quietly abandoned” the SSC.

The department’s new deputy secretary for business-enabling services, Kerri Hartland, told Paterson “the opposite of that is actually happening” with the former SSC continuing inside Finance, although it sounded like the plan was still not set in concrete.

“This is about ensuring viability and ensuring that the centre is operating and able to expand or consolidate so that it can be in a position where the government can take whatever the next steps are, in terms of the shared services centre arrangements, that are in line with government policy,” said Hartland, a former ASIO deputy director-general.

She said the department’s new appendage would also try to expand its existing APS client base to serve up to 27 agencies, which Finance believes will be enough to deliver the economies of scale it requires for viability.

Paterson asked Hartland if the federal government was learning from attempts to introduce shared services in state governments, noting the news report suggested these had failed in Western Australia and Queensland. She said Finance was looking at other governments near and far.

“We have certainly been reaching out not only, particularly, to New South Wales but also to people who have experience right throughout the world,” she said. “We were on a phone hook-up the other day with some people in the UK to learn from their experiences.”

Huxtable further assured the committee that NSW public servants were providing very helpful advice on setting service standards. Small agencies might not get a huge financial benefit from going with the hubs but according to the deputy secretary for governance and transformation, Stein Helgeby, they could stand to gain in terms of reliability.

Settling in to what could almost be described as a run of Dorothy Dixers from Paterson, Helgeby said greater standardisation would “absolutely” make machinery-of-government changes easier to manage in future, as well. He suggested agencies would eventually become “agnostic” about what kind of platform they used following a MoG.

For old Times sake

Gallagher brought the discussion back to the news story — specifically its mention of an auditor-general’s report that criticised the former SSC’s governance and recommended it avoid taking on any new clients until the various problems were resolved.

Hartland assured her the work to make it “viable” would come before expanding its client list and Huxtable said Finance had been “working tirelessly to address the issues that were raised in the ANAO recommendations” for several months.

“Our focus has been on developing the governance, having greater clarity on roles and responsibilities, and developing clearer MOUs with the client agencies, and certainly our intention is to stabilise those arrangements and to embed them,” said the secretary, pointing out Hartland had only moved across from the Department of Human Services in January and a new CEO was found around the same time.

“Then that provides a platform on which a greater sort of expansion to scale becomes possible, noting that this also sits side by side with the investment that has been made available through the sustainability and transformation streams of the modernisation fund, which will also support agencies to do what they need to do at their end to enable them to join shared services hubs, including the Service Delivery Office.

“It is a sequencing and timing issue, and our plans, which are in the shared and common services policy area that Dr Helgeby manages, are to see an accelerated growth of the hubs at a greater rate than what was previously expected, but it still occurs over a four-year period, so it is still a reasonable transition period that we are managing.”

The Finance staff were less forthcoming on questions about pricing or overall operational costs under the previous arrangement, and said they could not be sure what the Times was referring to with this claim:

“A review into the centre, undertaken by the Finance Department in late 2015 is understood to have uncovered even more embarrassing details but the increasingly secretive central agency has blocked a Freedom of Information request to release the document.”

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