Shared Services: Driving Success using Cost Chargeback Model

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NASC Annual Conference March 2015

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• Overview

• Shared Service Model

• State and Local Challenges

• Best Practice Solution

• Conclusion

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Overview

Driving Success using

Cost Chargeback Model

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Overview Shared Service_Model State & Local_Challenges Best Practice_Solution Conclusion

Government is a

Service Provider

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Today's Reality: Much attention is focused on deciding policy, but the end result is:

Government provides services to citizens, itself, and 3rd_parties.

Best Practice: Deliver service that produce the following Outcomes: Service Efficiency

(Frugality) Deliver outcomes at the lowest cost.

Service Excellence

(Warranty) Deliver the promised outcomes.

Service Alignment

(Utility) Deliver outcomes we value.

Service Integration

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Enterprise Resource Planning (ERP) Tools

 Have a transaction engine that is typically GL based.  Adds analytic capabilities on top of the transaction engine.  However analytics are only as good as the data set.

Service Management System (SMS)

 Focus on customer and business outcomes;  Service Oriented Architecture (SOA) holistic view;  Multiple views (role based) into data and services;  Service blocks define capability and cost.

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States comply with Federal OMB P-225 by:

 Rigid approach using GL and required Federal allocation plans  Satisfies Federal compliance, but problematic for shared services

Shared Service organizations:

 Complex service models;

 Cost accounting mechanism insufficient for P-225 compliance;

Shared Service customer workarounds often include:

 Earmarked or “siloed” resources (dedicated to Federal programs);  Duplication of services across agencies or departments;

 Sub-optimized business models due to the threat of jeopardizing funding;  Manual administrative processes to meet P-225 compliance.

Funding Compliance Challenges

Shared Service model inefficiencies are caused by Federal reporting

requirements (formerly A-87, recently centralized into 2 CFR, Part 225).

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Best Practice Solution

Driving Success using

Cost Chargeback Model

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Shared Services Optimization involves 4 primary components

 Shared Service Catalog  Cost Model

 Integrated Cost Allocation Plan

 Shared Service Operating Model (processes, technology, people)

Approach Benefits

 Provides a service catalog that clearly articulates the central services provided

 Underpins the catalog of services with a flexible cost model that addresses P-225 needs and local requirements (i.e., budgeting)

 Develops a shared service operating model that closes immediate gaps and provides a roadmap addressing future improvement opportunities (process, people and technology elements)

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8 For this County, the solution was:

 Assessed their current Service Model and cost allocation method;  Developed a detailed Service Catalog and service architecture showing

dependencies;

 Developed a Cost Model using the Service Catalog architecture;  Developed a rate structure based on the Cost Model;

 Developed a Roadmap to:

obring the Service Catalog, Cost Model, and rate structure into P-225 conformance; oredesign internal processes that had devolved;

odeploy a Service Management System (SMS) to quantitatively manage services. odrive the County’s shared services to optimize value

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Multiple Views of the Shared Service Catalog

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Customer View of Services:

 described in business language

 bundled into service offerings that add value  service levels with periodic performance reporting  quantifies customer consumption and cost

Technical View of Services:

 described in technical language  supporting services for offerings

 defines service blocks by capability, cost, & level  organized into functional value chains

 quantifies service provider consumption and cost

Best Practice Shared Service Catalogs have both the customer view and the

technical view because they are both important for service optimization

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IT Stacks & Blocks Core Functions

Business Application Service Bundle

Electronic Document Mgmt. Service (EDMS) Document Management Application Document Management Support Doc Mgt S/W Virtual Machines Hosting Storage Application Staff Network Application support portion of Data Center Staff Financial System Application HR & TK Application Service Offerings Overhead costs Other Applications or Services . . .

Capital Depreciation costs

A-87 Information:

Direct A-87 Cost Indirect A-87 Cost A-87 Capital Deprec

IT Shared Services Traced to Benefiting Programs

Example

Service Catalog and Cost Model Diagram

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11 Example

Roadmap to repair devolved processes & Service Model

1. Prepare the Organization – Use Kotter 8-step process for organizational change. Addressing

the Organization first will accelerate the rest of the Roadmap.

2. Redesign Request & Incident Processes – Have a single ordering and repair ticketing system

that covers all shared services to have an immediate and positive impact.

3. Implement Configuration and Asset Management – A Configuration and Asset

Management Database (CMDB) provides a logical model of service delivery and accelerates the rest of the Roadmap.

4. Integrate Cost Chargeback into IT Financial Management – Necessary to update the Cost

Model, get better transparency, and allow cost-benefit analysis. Also allows services to be re-bundled at Service Block level.

Prepare the Organization

Redesign Processes (Silo) CMDB (Data) Cost Chargeback (Quantify) Current Capabilities (Service Catalog) Initial Service Lines Re-bundle Service Offers for all Shared Services Realign Services Restructure underlying Support Services Manage Costs Update Services to Optimize Value Service Value

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Service Efficiency

(Frugality) Deliver outcomes at the lowest cost.

Service Excellence

(Warranty) Deliver the promised outcomes.

Service Alignment

(Utility) Deliver outcomes we value.

Service Integration

(Agility) Deliver outcomes that optimize value.

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Driving Success using

Cost Chargeback Model

Shiva Verma

Performance Transformation Lead T 703.373.8740

E [email protected]

For more information on the topics covered in this publication please contact us:

Steve Stevens

Service Management Expert T 512-391-9950