This is the first in a two-part series on a new approach to back-office service delivery from shared services to service delivery transformation.
Agencies can overcome the traditional hurdles associated with federal shared services by pivoting to a more responsive and agile model for sourcing mission support services – service delivery transformation. By expanding the shared service model to consider a broader mix of options—to include government, commercial or a blend of both—and conducting more deliberate analyses that are not just about technology, agencies will arrive at better decisions that deliver both significant cost avoidance and best-in-class services.
At the heart of service delivery transformation is the notion that the sourcing options—and their supporting decision-making analyses—are more comprehensive, enabling more deliberative methodologies that can readily point to solutions that optimally balance an agency’s service and financial needs. The goal is not simply to migrate services into a single provider, but rather to find the best option for each service, regardless of where that option resides.
For example, in 2015, the Department of Commerce began looking to rationalize back-office service operations peppered throughout the department’s 12 bureaus and Office of the Secretary. The department adopted a highly methodical approach conducting in-depth baseline cost/benefit assessments and identifying consolidation opportunities for improved service delivery across the department and each bureau.
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The department then examined sourcing options to arrive at a “build or buy” decision for whether solutions should be delivered in-house or through a third-party government or commercial vendor. With that, the department developed a concept of operations for each service that outlined service transition priorities across each bureau. Lastly, it developed phased implementation plans for each service, leading up to service delivery.
As a result, Commerce will be the first cabinet-level department to adopt a combined service delivery model for all human resources, financial management, information technology (IT), and acquisition support systems, according to Glenn Davidson, the Commerce Department’s executive director of enterprise services.
To accomplish this, Commerce deviated from the traditional federal shared services path, i.e., they did not simply do a binary yes/no for a given service and government provider. First, they considered a wider set of sourcing options than are typically considered. Second, Commerce approached the task from a comprehensive enterprise perspective, looking across all support categories in all of its many bureaus.
One critical stumbling block to the spread of government shared services has been the inability of some traditional government shared-services providers to invest in and support the IT infrastructure needed for low-cost, low-risk, high quality service. This investment challenge faces any agency trying to transform back-office operations for themselves or for the provision of improved services to others.
But if federal agency leaders are willing to look beyond conventional thinking, two new opportunities have emerged, one technology-based and one policy-based, offering a potential path forward: Software-as-a-service (SaaS) and the Modernizing Government Technology (MGT) Act.
A service delivery transformation approach promotes consideration of a rich set of service delivery options, including available commercial suppliers. One main benefit to this approach is that many service options are increasingly offered in the form of software-as-a-service, which means agencies can choose modern, best-in-class services for far less capital expenditure. Additionally, time-tested and vetted commercial SaaS offerings tend to carry lower cybersecurity risk. SaaS vendors also assume technology maintenance, refresh and security responsibilities, so agency staffs are free to focus more on mission-critical tasks.
SaaS models of service delivery provide a novel way of potentially reducing an agency’s CapEx needs for modernizing legacy systems. That is because software is provided as an Internet-based service and paid for based on a customer’s usage of that software, like a utility.
And like a utility, the funding for that service comes out of operating expenditure (OpEx) accounts. The initial cost of interfacing with the software provider, as well as the costs of updating the technology and on-going security of the service, are spread over the customer base — thus reducing it — and amortized over the duration of the contract period, making the transition far more affordable from an up-front investment perspective.
As SaaS models are helping to lower CapEx barriers to modernization, new and innovative government funding models will soon become available to help agencies more easily address the CapEx costs that remain. The Modernizing Government Technology Act, which became law as part of the fiscal 2018 National Defense Authorization Act, authorizes a central modernization fund. In fiscal year 2018, appropriators gave $100 million to GSA for the fund. In addition to that fund, the act also gives CFO Act agencies the ability to establish their own working capital fund to pursue IT modernization efforts.
As a result, agencies will have access to unprecedented financial flexibility that should spark a flurry of modernization activity across government and end the “use it or lose it” approach to spending that often undermines modernization investments. To make the most of this opportunity, agency chief information officers, CFOs, and program managers will need to capture modernization-driven savings in a disciplined and deliberate way and proactively align those resources to priority projects. Much of the potential benefits of the MGT Act will be lost if leaders use those funds just to patch legacy systems (thought the need for patching may be great). The greater flexibility of funds will, hopefully, lead to greater creativity in finding solutions.
This confluence between new technology, an evolution in shared services and new funding options gives federal agency leaders more opportunities to transform their back-offices. But those opportunities will be best realized if leaders widen the scope of options they consider for service delivery. By focusing on finding the best option for each service rather than the mere shifting or consolidating of services, agency leaders have the ability to access these newly available funding resources and drive greater mission outcomes.
As example, significant benefits typically become more attainable when enterprise resource planning (ERP) systems are optimally integrated with mission systems; when common functions, such as help desk support, are shared across support services; when innovation is smartly employed to address capability gaps; and when best-in-class citizen or employee experience is incorporated as a foundational pillar in service delivery planning.
Ultimately, service delivery transformation enables agencies to think in new ways about how they meet their service delivery needs. With more options comes greater flexibility to address legitimate agency differences that arise from mission-specific needs. By shifting the focus to designing a holistic delivery model, created in part through sourcing analysis that considers best-in-class options, and enabled through leadership at the department level, federal agencies can better position themselves for mission success with a back-office that delivers value.
Dave Mader is the chief strategy officer for civilian federal government practice and Jennifer J. Walcott is a principal and federal service delivery transformation leader for Deloitte Consulting.