Supplier Relations Division

1
Supplier Relations Division

• Delivering the Shared Services agenda sourcing
  options

John Hollister Head of Strategic Supplier
Management BPO and Professional Services sectors
2
Sourcing options questions

• What is the vision for Shared Services?
• Whats currently going on in the centre?
• What are the generic sourcing options?
• What about existing Contracts?
• What are the commercial principles?
• Are there any other models/options?
• What could/should all of this mean to NI?

3
Shared (Corporate) Services Vision

• In 2016 Corporate Services in the public sector
  will
• Be delivered through a handful of professional
  organisations
• Be mainly outsourced
• Use common business processes
• Use a very limited number of systems platforms
• Be staffed by experts, who are flexible, mobile
  and professional
• Allow users to take control of the information
  they use
• Have the highest levels of control, assurance and
  transparency

4
Why Shared Services eGU
5
eGU steps diagram
6
Whats going on in the centre?

• Spending Review 07 efficiency/effectiveness
  benefits
• eGovernment Unit (eGU) Shared Services team
• Whitehall 2 procurement 60 day clock
• OGCbuying.solutions Catalist Total Solutions
  framework
• OGC SRD key suppliers and BPO market report
• Plus for local government ODPM, IDeA, LGA,
  RCEs, SOCITM

7
Generic sourcing options

• eGU options-
• Build and Sell
• Buy internally
• Buy externally
• Club build
• Club purchase
• Sentiment generally favouring in-house options
• Everyone wants to be first but winners/losers
  inevitable
• Significant issues with location of work NB
  outside SE England
• eGU role to facilitate not drive
• Need to sort out commercial/sourcing issues NOT
  procurement (yet)

8
Sourcing solutions assumptions

• Buyers shouldnt feel compelled to accept the BPO
  approach-
• single prime contractor (partner)
• providers end-to-end delivery responsibility
• risk transfer and performance incentives (as
  PFI/PPP)
• pricing based on continuous improvement to
  services
• But a number of BPO features are assumed to be
  required-
• Initial gt20 improvement in efficiency
• business case based on payback in lt3 years
• payment by delivered business outcomes
• focus on transformation and change management
• SLAs will be based on annual improvements (lt3gt)

9
eGU view of the supply market
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The market deals in operation(based on market
intelligence maintained by OGC on key suppliers)
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The current market

• Fragmented supply picture at the expense of VfM
• lots of contracts
• few suppliers
• Few Finance only deals
• Few HR deals, except in local government
• Local government HR deals tend to include
  ICT/(Finance)
• ICT deals small smaller than HR but lots of
  them
• Many deals long term 2012 and beyond
• The market is already worth 1.9 billion/year
• BPO is logically where ICT providers expect to
  earn margins

12
Sourcing/commercial implications

• Link with existing ICT contracts
• ICT suppliers want to play in SS (NB HR/Finance)
  space
• SS benefits require significant ICT input
• many existing contracts include ICT
• Risks to Shared Services solutions of mixed ICT
  environment-
• add cost, delay benefits, distract from
  transformation
• reduce security, stability and resilience
• Need to consider ICT Shared Services as part of
  overall sourcing/commercial strategy based on
  aggregation

13
Aggregating demand

• Aggregation bottom-up or top-down?
• if bottom-up, what drivers will make it happen?
• if top-down, how will commitment be obtained?
• early termination/negotiation, or at end of
  existing deals (with contract novation)
• Who gets the benefits of aggregation?
• top-down will secure benefits for HMG
• Bottom-up may lead to early market leaders taking
  benefits (at the expense of those who move later)
• Suggests need for a small number of strategic
  procurements, possibly balanced by framework
  call-offs

14
Commercial principles

• Aiming for a small number of professional
  suppliers implies
• Partnering deals and joint governance
• VfM mechanisms in-built
• efficiency built into pricing
• sensitive approach to benchmarking
• co-partnering access to specialist
  sub-contractors
• Open Book, Profit Sharing and gain share
• Flexibility in scope pricing
• Ability to re-compete successfully without
  disruption

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Any other options

• Client-side SPV for delivery
• Executive Agency, NDPB, CLG/PIC
• one/more per sector
• Joint venture(s) equity or contractually based
• Appoint Strategic Partner(s) pre-approvals and
  jointly manage a supply chain
• Procurement regulations and competition
  constraints will apply, including state aids and
  trading rules between public bodies

16
Implications for NI

• NICS programmes have established some models-
• eHR transformation partnership with
  Fujitsu/Capita/PwC
• ASP services contract with BT (Accenture as
  sub)
• ICT Shared Service in-house rationalisation
• Workplace 2010
• RPA changes may be an opportunity to adopt the
  Shared Services model from the start
• Possible benefits for NI plc from location of
  work and aggregation by providers (eg Capita
  eHR and BBC)