SUMMARY BUSINESS CASE FOR AN ICT SHARED SERVICE FOR THE LONDON

BOROUGH OF SUTTON AND ROYAL BOROUGH OF KINGSTON

INTRODUCTION

1. This paper presents a summary of the Full Business Case for an ICT shared service for the London Borough of Sutton and the Royal Borough of Kingston. It documents the scope, scale, potential benefits and costs associated with creating a shared service. It follows on from the Outline Business Case agreed by Members in April 2011.

SUMMARY OF PROPOSALS & BENEFITS

2. The following proposals are made in the Proposal, Governance and Financial Consideration sections of the Summary Business Case:

• To implement a fully integrated ICT Shared Service on an in-house ‘hosted’ basis with Kingston as the host

• To include in the ICT Shared Service applications support staff. In Sutton, this is a fundamental change in direction away from a devolved approach

• Further work is undertaken to determine the extent of applications support resources that should be included in the ICT Team and how the reorganisation should be implemented

• That the functional model shown in paragraph 48 is used to help develop the full organisational structure for a shared ICT Service

• To review all applications to ensure that they are delivering good value, are capable of supporting the required innovation in service delivery and to reduce spend

• To implement a fully integrated & portable ICT infrastructure serving Sutton & Kingston

• To adopt a delivery model for Project Management based on a combination of in-house and external resources. The ratio of in-house to external being agreed through the ICT Governance structure proposed

• To implement the Governance arrangements as shown in paragraphs 67-69 and to review these once the shared service is agreed to be fully up and running

• To establish sub-groups of the Project Board for HR and Finance to make recommendations regarding establishing the financial framework for the shared service and delivery of the organisational structure

3. Implementation of these proposals would provide the key benefits of improved service delivery, greater resilience of service and the agility and flexibility to meet changing needs. Gross revenue savings of £1m per annum (to be apportioned between the Councils) would be achieved through consolidation and rationalisation of applications, reduced infrastructure support and maintenance costs in the medium term. A shared capital investment of £3.2m, above that already available, would be required for a shared ICT infrastructure. However, implementing a shared infrastructure would reduce the need for investment of £2.6m of capital expenditure and remove the need to spend £500k on staffing costs against separate implementations.

OBJECTIVES & METHOD OF APPROACH

Objectives

4. The overriding objective from a shared ICT Service is the delivery of a service that has the

scale, capability and flexibility to meet the requirements of customers and can adapt and survive in an environment facing significant change. The key aim of the project has been to test the business case for a shared ICT Service between Sutton & Kingston Councils to see the extent to which this objective can be met. In order to do this the project has sought to:

• Clearly articulate a joint ICT Strategy to deliver a shared service and to align with business needs & the national ICT Strategy

• Identify the legal framework and governance within which ICT Services can operate

• Design how the Councils are going to work & organise ICT services

• Understand what skills & capabilities are needed

• Identify the benefits & financial implications of the options available & proposed recommendations

• Define an implementation roadmap which enables the early achievement of opportunities for collaborative working & the implementation of the shared service

The scope of the project covered all ICT functions in each Council and was detailed in a Project Brief.

Project Plan

5. A detailed project plan was prepared through to October 2012 which is when the Business

Case for the way forward is considered. A summary high level plan is shown below.

Project Governance

6. The project followed the Sutton/Kingston Shared Services Framework and operated within the Public Sector Programme Management Approach adopted by both Councils. The project has been run within the following governance structure:

7. The ICT Member Steering Group consists of the two ICT Lead Members plus one other Member for each Council and a member of the Opposition in Kingston. External consultants (RSM Tenon) have been procured to provide CMT and SLT with independent advice about the process being followed, the suitability of the ICT Strategy and the quality of the Business Case. The interests of the each council are protected by the scrutiny provided through the Support Functions Review Board (Sutton) and ICT Governance Board (Kingston). The Strategic Director - Resources (Sutton) and Director of Place (Kingston) are the Project Sponsors.

Project Approach & Principles

8. The project followed the five phase approach below. TOM refers to Target Operating Model.

9. The project was undertaken within the following principles:

10. The project team has considered the benefits of a shared ICT Service with each option explored being evaluated within the framework above and against a ‘test’ of eight questions:

• Ability for improving services to our customers?

• Increasing the resilience of ICT services?

• Strengthening the position of ICT Services to take advantage of new opportunities for

service delivery?

• Creating a platform for sharing of other Council services?

• Creating a platform for bringing other Councils’ ICT Services on board?

• Ability for delivering increasing savings over time?

• Agility & flexibility to meet the changing needs of the business?

• Improving & broadening the range of services offered from ICT?

STRATEGIC CONTEXT

11. All public and private sector organisations need to be capable of adapting to changing

economic fortunes, new policies and legislation and the needs of their customers. However local government is uniquely placed in having responsibility to its citizens to develop and support the local community together with our local partners and central government. We are now in a period of significant change with an emphasis on developing society through greater community empowerment and individual involvement in decision making, personalised budgets in social care, the opening up of public services through shared services, working with charities, social enterprises and the private sector to provide better value for money. All of this against a backdrop of severe financial constraint and increasing demand for many services.

12. ICT has a key role to play in facilitating and supporting many of the changes taking place. Customers now expect the public sector to provide the same ease of access, self-service and

personalisation of services as delivered by the private sector. ICT needs to be focused and flexible to meet the changing nature and shape of local service provision in the next few years and be in a position to drive down transaction costs to contain the costs of rising demand and also deliver real financial savings.

13. While local government is going through unprecedented change, something similar is also happening within the ICT industry. For years each local authority has planned, developed implemented and maintained its own ICT solutions to meet service requirements. This approach has led to fragmented and expensive service delivery with little standardisation of approach across Councils. New technologies, the need to drive down costs and improve services have opened up the opportunity to have a common, secure and flexible ICT infrastructure that is available across the public sector. This is referred to as ‘cloud computing’ and is set to transform the way Councils procure ICT services including telecommunications, data centre capacity, applications and desktop services. ICT will be provided as a utility service. This is the fundamental thrust of the National ICT Strategy.

14. Over time, the approach will change the way ICT is purchased with infrastructure and applications being bought on a service basis. There will be opportunities to buy on a pay as you go arrangement including just paying for the storage and capacity of bandwidth used. The focus will be on sharing common services to a defined standard across the public sector with a significant reduction in costs.

15. The approach will have a significant impact on the strategy, shape, skills and management of ICT within councils. Over the next 3-5 years as the market matures, it will mean a move away from local solutions to the procurement of shared services through public/private contracts. The ICT strategy will move to a multi-sourced approach where different elements of the service are purchased through contracts with different suppliers. Council ICT teams will retain a core skills base around strategy, procurement and contract management, enterprise architecture and service relationship management. The traditional localised ICT operational function will change over time as more Councils share resources and services.

BACKGROUND 16. The way forward for both Councils follows a very similar approach with Kingston’s direction

shaped by the One Kingston Programme underpinned by Destination Kingston and Sutton’s through the Smarter Council Programme. These both have a similar focus and vision built around Place, council-wide strategic commissioning, community involvement in setting priorities, high quality services and a reputation as a good place to live and work.

17. Services are being shaped by personalising choice and control to meet the needs of

individuals and communities and designing services and making them accessible in ways that suit those that want to use them. This all being achieved by working with partner organisations in the voluntary, public and private sectors. Managing the delivery of these changes is set within a framework of principles to ensure that the Councils’ financial, human and physical assets are used to best effect while ensuring that the Council remains agile and adaptable. Both Councils recognise technology as a key driver to enable a flexible and mobile workforce to be able to work from anywhere at any time.

18. Both Councils have relatively small ICT functions. Kingston spends £4.5m revenue a year on ICT and typically around £500k capital. There are around 50 staff (this varies in accordance with the number of contract staff employed on projects) the majority of which (90%) are in the core team. Sutton has annual revenue expenditure of £5.3m which includes the cost paid to Steria who manage the server infrastructure and provide a disaster recovery service, and capital around £1m per annum. Sutton has around 54 staff of which 24 are in the core ICT team and the balance spread across Directorates. Unlike Kingston, where the core team provides all ICT services with a small number of systems administrators in the business, Sutton has a devolved approach to supporting applications and these staff (approximately 30 full time equivalents) are managed by the individual Directorates who own the business systems; this excludes the Schools’ ICT Support team of 23 staff who operate on a fully traded

basis with customers within and outside the Borough. There is not an equivalent team in Kingston where schools buy-in the service from the market as required.

19. The next 3-5 years will be a challenging period of change for ICT services. Sutton and Kingston would benefit from facing the challenge together. The starting point is that there is a significant amount of common ground on which to build:

• The technical strategy for both Councils is very similar with a focus on further virtualisation of the server estate and the delivery/expansion of technology to support flexible working arrangements

• Both Councils are reviewing/have reviewed back office support functions

• The Councils are looking at a range of shared services between them and with other Councils

• Both Councils are heavily reliant on Microsoft technology but with plans to investigate other options and the licensing flexibility to do so

• Virgin Media provide the telecommunications infrastructure to both Councils

• Both Councils are signed up to the London Public Services Network

• Both Councils are lean and benchmark favourably against comparators on a cost basis.

• Both Councils have a cost reduction programme in place for ICT services

• Both Councils are exploring the opportunities from ‘cloud computing’, in conjunction with Merton, Richmond and Wandsworth, through a proof of concept project funded by Capital Ambition. An output from this work is an Inter-Authority Collaborative Working Agreement

• Both ICT services are pursuing the implementation of best practice

• There are some applications that would be open to ‘instance’ management o Agresso (finance system) o MS Exchange for email

• Both Councils are looking at how to deliver a flexible ICT service to cope with the changes regarding Public Health, closer working with the NHS, council services being shared with different partner organisations, working closely with colleges and universities and sharing arrangements and procurement with a number of neighbouring councils

20. Inevitably there are some key differences in approach that would need to be addressed if a

shared service is adopted:

• Sutton has a traded approach to some services eg. project management where Kingston does not

• Sutton is implementing a Siemens unified communication system (voice & data) and Kingston is already running an equivalent Cisco environment

• Applications development and support is provided mainly through a corporate team at Kingston whereas it is a largely devolved function at Sutton

• Kingston has Business Partners to manage the relationship with services but Sutton does not have this role

• the project management and enterprise architecture disciplines at Sutton would benefit Kingston

• Information Governance is managed corporately in both Councils but in Sutton a supporting post is part of the ICT function

21. These are not seen as insurmountable differences and would not hinder a shared services

approach. In fact, addressing them will deliver a stronger service.

KEY FINDINGS WHICH WILL SHAPE THE WAY FORWARD

Customer Feedback

22. Customer views regarding ICT Services in both Councils have been ascertained through an

on-line survey and feedback from departmental Management Teams. The full outputs from the surveys are in the Full Business case but the following charts indicate the type of information and feedback being collected which is helping shape the way forward.

ICT and the Commissioning Council 23. As Commissioning Councils, it is of fundamental importance that any future ICT Shared

Service can facilitate and operate within this framework. Indeed, although ICT Services will need to meet the requirements of commissioners of services across the Council, ICT will also be the commissioner of services to provide the underlying ICT infrastructure required and enabling technology to achieve service improvement. The following will be taken into account when planning the ICT Shared Service:

• Those planning services for the future will need access to business intelligence regarding demographics, service and supplier performance and demand analysis. With the changing shape of Councils and varying models of service provision, this is likely to mean the fragmentation of information sources and ICT has a role to ensure information is available where required and can be interrogated by commissioners and providers.

• Information will also need to be accessible/transportable across partner and council provider boundaries to ensure seamless services particularly for social care with the different agencies involved, the passage of children to adults and the increasing need for a single view of customers

• The Commissioning Council will accelerate the growing demand for flexible/mobile working, coupled with a cultural change towards device independent access to information and

services, means that the underlying ICT infrastructure needs to be delivered to facilitate this

• ICT will need to be better placed to provide advice and guidance to commissioners (and providers) as to how technology can facilitate more innovative approaches to service delivery

• With the increasing number of service delivery models, ICT will need to ensure that efficient working is possible across organisations in practical terms. For example, the ability to share calendars across organisational boundaries and to be able to access emails from different sources without having several mobile devices which is currently the case

• The requirement of commissioners to drive down costs while maintaining the quality of services will require ICT services to ensure the infrastructure is available to enable customer self-service

• The organisational structure for the ICT Shared Service will need to reflect a commissioning approach with relevant skills and posts clearly defined

Organisation & Delivery

24. There are a number of fundamental issues around the way ICT is viewed and organised in both Councils which will shape an ICT shared service going forward. These are summarised in the paragraphs below.

25. ICT is viewed predominantly as a support service rather than one that can facilitate transformation. Supporting comments:

• The organisational structures reflect this with the skills and level of resources being focused on support roles to keep the infrastructure and business systems running rather than any transformation activity. When the use of ICT to transform is recognised, external resources are often commissioned to manage delivery because the capacity is not available internally; for example, introducing citizen self-service in Kingston

• Customers are increasingly asking for guidance around the application of new technology and nearly 60% of staff think that ICT is not proactive enough

• There is an underlying lack of confidence in ICT Services to deliver transformation because there is limited visibility of any activity in this area

• Services sometimes view ICT as a barrier because of attitude, processes and security policies that are followed which again creates a relationship which is not always conducive to inclusive working between ICT and Services

• Opportunities are lost for Services and ICT to work closely together on process reviews to drive down transaction costs. Preparation of the Kingston Annual Governance Statement identified through feedback from Service Management Teams that ‘ICT is not viewed as an enabler to transform services and generate savings and efficiencies’

26. ICT is not involved in the whole life cycle of business delivery from strategy through to implementation and support. Supporting comments:

• In Sutton, and to a lesser extent Kingston, ICT tends to become involved in business projects late in the cycle when hardware/software needs to be installed. Often there is an urgency for delivery and the full extent of what is required from the ICT perspective can place agreed timescales for implementation under pressure. Early involvement and planning can avoid all this

• The situation in Sutton is compounded by the lack of a relationship management role to link ICT and Services together

• Solutions tend to emanate from a reactive approach

27. Some key ICT functions are not covered/partially covered in existing ICT structures. Supporting comments:

• In Kingston, there are no in-house roles for ICT project management, strategy, technical architecture and problem management. In order to fill the gap, contract staff tend to be

employed which increases costs. Almost 77% of respondents in Kingston felt that a dedicated ICT Project Management resource would be beneficial

• In Sutton, the complete lack of a relationship management role has resulted in a gulf between the business and ICT and this is being fed back strongly through the customer survey with 93% of staff wanting improvement

• In both Councils, the following essential functions are missing or under-resourced – innovation delivery; ICT security; systems integration; supplier management and database administration

• These functions are covered on a best endeavours basis or expensive contract staff are recruited to perform them

28. Many applications are unsupported, particularly in Sutton where it is estimated that 34% of applications fall into this category. Supporting comments:

• Many applications can run with minimal support until an upgrade is required or there is a systems problem. Where there is no systems administration resource in Services, the tendency is to call the supplier or core ICT services. The latter has not been organised to provide any applications support or to manage supplier relationships. Where possible some help/advice is provided but often this is not possible and Services perceive a lack of ownership by ICT

• Initial work indicates that the shortfall in cost to support unsupported applications in Sutton is around £600k per annum

• The full extent of functionality in some applications is not appreciated and therefore not used in supporting service delivery

• The Customer Survey has identified that over 58% of respondents in Sutton expect applications support to be available through core ICT Services but this is not part of the core service

• The reorganisation of ICT Services in Kingston has brought together all applications support under the core team and, to a degree, supplier management; this has improved applications support and resulted in a multi-disciplinary team better focused to meet the needs of Services

29. Both ICT teams are small and struggle to provide a resilient and fully functional services. Supporting comments:

• Both Councils have amongst the smallest ICT teams in London where the range is from around 45 to 200 staff with both Councils around the 50 mark

• Resources are spread very thinly across functions making it difficult to provide adequate out of hours support and sickness and holiday cover

• This is further compounded in Sutton with the devolved approach to application support spreading the skills base even further

• Feedback from the customer survey results for Sutton, and through the preparatory process for the Annual Governance Statement in Kingston, indicates that internal customers consider the ICT Services are running at capacity and requirements often exceed resource

• Maximum utilisation of ICT skills is more difficult in Sutton because they are spread across the organisation

• The teams are too small to justify individual roles for specialist functions like dedicated technical architects

• Being small also means the career progression for staff is fairly limited

30. The devolved nature of the ICT organisation in Sutton presents a number of issues for service delivery and resource utilisation. Supporting comments:

• Separation of responsibilities is not conducive to an inclusive approach to resolving an issue

• Nobody has an end to end view of issues so there is a tendency for ownership to be ‘bounced’ about which can be confusing for customers and can slow down resolution

• Problem management is aimed at fixing common issues that might reoccur but this is a difficult role to perform without a complete view of the chain of events

• Conflicts can arise where planned changes to the core infrastructure do not dovetail with what the local systems team is doing particularly where the change management process is not followed

• Results in a lack of succession planning

• The organic approach to ICT has given rise to increasing costs due to duplication and under utilisation of skills and hardware

Applications Development & Support

31. Like most organisations the complete applications landscape across the two Councils is not fully identified, but there are at least 500 applications in use (52% in Kingston and 48% in Sutton). Just maintaining the existing application estate incurs costs of £2.5m for staff support and £2.3m on licensing. These applications can be divided into three groups:

1. Enabling applications which support the line of business applications and are usually invisible to the end user

2. Desktop applications which are generic applications used by most of the Council, applications such as Microsoft Word

3. Line of business applications, which are the main systems used by the Councils to deliver their services and make up nearly 80% of applications identified

32. Approximately 15% of applications across the Council are common and a further 34% are

applications used to support services where Sutton and Kingston are considering creating a shared service. The latter are a prime target for consolidation if a shared service is pursued. 30% of line of business applications are common so there is an opportunity for consolidation at an early stage.

ICT Infrastructure

33. ICT infrastructure includes: servers; desktop; service desk; ICT security; voice and data networking and disaster recovery arrangements. The following summarises the current position:

• Sutton’s server architecture is largely managed by Steria & the contract ends in June 2013 (1 year extension possible)

• Kingston needs to replace its current server platform as many servers are very old

• Sutton’s server hardware is end of life in 12 months

• Kingston's Server team spend a lot of time keeping the hardware running and reacting to capacity issues

• Un-tested disaster recovery is provided at Kingston but the Steria contract provides tested cover in Sutton

• Changing business requirements (flexible/mobile working) require an updated infrastructure in both Councils because existing solutions do not provide the full functionality required

• Microsoft will no longer support the desktop software beyond April 2014 so it will have to be replaced

34. The infrastructure is a key risk and needs replacing/upgrading as a priority. The pressure for replacement is also linked with the Steria contract where an appropriate break point is June 2013 otherwise a full year extension may need to be considered.

Governance

35. The following governance structures are in place:

Kingston Sutton

36. There are variances in the governance approach between the Councils. Kingston has :

• A model built around an ICT Governance Board which includes senior managers from across the Council

• ICTGB agrees priorities for ICT investment across the Council. The ICTGB reports to SLT (as Commissioning Board)

• ICTGB agrees the go ahead for all systems implementations >£50k and any system to be used corporately

• ICTGB acts a project Board for ICT infrastructure projects

• ICTGB acts as a Scrutiny Board for the ICT Shared Service Project

• All ICT purchases are agreed by the Joint Head of ICT as Category Manager for ICT

37. Sutton has a slightly more fragmented approach to ICT governance which reflects the more devolved organisational structure:

• Discussion of ICT projects through Programme Boards attached to Directorate Management Teams

• A new Corporate Procurement Board to agree all ICT commissioning and procurement activity

• A Major Projects Board to govern all major change projects including those involving ICT work streams

• A Support Functions Review Board which amongst a wider remit acts as scrutiny regarding the ICT Shared Services project

Finance

38. The following points about financial arrangements are pertinent when shaping the way forward:

• Kingston has a single ICT budget covering the Council with only a small percentage residing with Services. Sutton has a core ICT budget to cover the services of the corporate team, including the Steria contract, and individual services retain the budget for their business systems

• Neither Council has a cost model that enables activity costs to be determined (eg email) in order that decisions can be made regarding the best sourcing approach

• Both Councils have an agreed programme for savings in the ICT budget: Sutton £270k in 2012/13 & Kingston £194k excluding any savings from a shared service

• The Sutton ICT team does charge for some activities which are defined as being outside the core service

PROPOSED WAY FORWARD

39. It is clear that there are many areas to be addressed and a shared service offers the opportunity to solve these and strengthen the service to both councils. As separate ICT teams, it is unlikely that achieving the delivery of services that have the scale, capability and flexibility to meet the needs of the organisation and adapt to the significant changes taking place, can be realised to an acceptable level. Crucial to securing the way forward is to organise ICT services in a way that gets the maximum effectiveness and efficiency out of the resources available, addresses the high drain on capacity created by the bulging applications portfolio across the Councils and replaces and upgrades the ICT infrastructure which is at end of life and presenting an increasing risk to business as usual.

Delivery Model

40. A number of delivery models have been considered for a shared ICT service:

41. In evaluating these options, it was clear, that although 1 and 2 offered the opportunity to start a process which could move towards a shared service and formative collaborative work could be undertaken, there would be little chance of achieving a step change in service delivery, little opportunity to make significant financial savings and would present on an ongoing management pressure as two separate teams remain in place.

42. Options 4, 5 and 6, are models which deliver services through an externally sourced approach although the Councils would need to retain a strategic and commissioning function. They could all present the opportunity to remodel and improve services. These options have been ruled out at this stage because;

• There is a significant risk in handing over existing services in their current state to an external organisation and expect them to deliver improvements and efficiencies for both Councils in a contracting environment

• The business acumen, organisational arrangements, a working team and operational processes will take time to deliver and need to be in place before options 4 & 5 can be seriously considered

• Delivering an external approach could take up to eighteen months to deliver & with implementations costs >£600k to cover the project team and legal support

• Senior ICT managers would be focused on getting this model in place and business as usual could suffer as a result

• Making a decision to externalise now might marginalise ICT when other models for back office services are being considered

• Some financial benefits might be lost and others take longer to materialise

• VAT might be a complication & limit opportunities to reduce costs

• The market for cloud services is still maturing

The proposal is to implement a fully integrated ICT Shared Service on an in-house ‘hosted’ basis with Kingston as the Host

43. The development of the shared service is viewed in two phases:

Phase 1 (2-3 years) - develop an integrated ICT Service including roles that support applications which for Sutton is a fundamental shift away from a devolved approach and resolve the immediate pressures with service delivery. Basically, get the house in order to create a strong platform for moving forward.

Phase 2 – review and implement the best delivery model for the way forward with a clear and consistent corporate commissioning structure and an approach based on securing ICT services from the most efficient and cost effective source which may include: ‘cloud’ services for infrastructure and software; delivery through an external organisation; enlarged ICT service with other councils/NHS; shared commissioning service with other public sector bodies or service provision through a back office services’ hub.

44. The principle of a hosted approach was agreed by a joint management meeting of CMT and SLT on 18 July 2012. Under the approach there would be a single and fully integrated team responsible for all ICT functions in both Councils including applications development and support services. All staff would transfer under TUPE to Kingston as the Host but service delivery and management responsibility would be on a shared basis and not Sutton commissioning services from Kingston. The management of the service would be through strong, shared governance arrangements as outlined in paragraphs 67 and 68.

45. Adopting a ‘hosted’ approach would facilitate the delivery of the following benefits:

• Make the primary focus of ICT resources on mitigating the significant risks in current service arrangements rather than focusing on procuring an external service delivery model taking around 18 months

• Maintain a focus on the delivery of current key projects

• Enable an early impact on improving services to customers through combining best practices from across the councils and making best use of a wider skills base

• Enable some early savings through collaborative working & shared applications and infrastructure which over time will exceed £1m per annum

• Improve the resilience of the ICT infrastructure through adopting a shared approach with more reliable hardware, a disaster recovery solution for both Councils and to investigate support coverage for longer hours

• Enable early reorganisation and re-focusing of ICT Services to meet the changing needs of the business

• Provide time to fully understand the cost of each ICT service so that decisions can be made on the best sourcing solutions

• Avoid making a decision about ICT Shared Services in isolation from other back office services as the Councils consider future back office integration

• Provide time to look at alternative delivery models

• Give time for ‘cloud’ services to mature

46. Why Kingston as the host? Kingston is recommended as the host mainly for existing practical reasons in that the Joint Head of ICT post is already located with Kingston and, although staff will be working on both sites, the team needs a base and the best opportunity to achieve a co-located service is at Kingston where existing space can be extended to locate more staff. Sutton is stretched for usable and effective office space. However, it is planned to locate the integrated ICT infrastructure at Sutton Civic Centre. Other factors that could be used to make a judgment such as size of current service, quality of service and will to provide the service, are all finely balanced.

Organisation of the ICT Service

Proposal:

• that the functional model shown below is used to help develop the full organisational structure for a shared ICT Service

• further work is undertaken to determine the extent of applications support resources that should be included in the ICT Team and how the reorganisation should be implemented

47. Bringing the two services together would create a team of around 90-100 staff which is the median for an average London Borough. The exact number would be determined from further work to look at an organisational structure and the number of applications support staff that are needed in the team following the further review outlined below.

48. At this stage, as part of developing the Target Operating Model, a functional structure (see below) has been created to form the basis on which a full organisational structure can be developed as part of the shared service implementation programme. The purpose of the functional model is to ensure that all functions required in the shared service are identified and to aid the development of workflow and high level process design. A preliminary review of all the budgets available indicates there is sufficient funding to cover a structure which encompasses the functions identified. Although not seen as a function of the ICT Shared Service, ICT training for staff is an important function to enable an efficient workforce. In future the ICT Service would work with each Council’s Organisational Development team to ensure appropriate training is available for core ICT skills and for relevant business applications.

49. In order to deliver the shared service without impacting on business as usual, a transition team would be required for the first two years. This team would initially drive through the implementation of a single organisational structure and the shared technical infrastructure. The team would not be static but would change to provide the necessary skills to reflect the implementation demands at any one time. There will, however, need to be a permanent lead for the transition team for the two year period.

50. Further work is required to determine the extent of the applications support roles currently devolved in Sutton and, to a lesser extent Kingston, becoming part of the ICT Shared Services Team. It is clear that bringing all applications support skills together within a single team can:

• make better utilisation of the resources available

• enable a wider range of support to cover some of the applications currently unsupported

• give clear ownership and view of the end to end ICT process which will enable improved customer service through better problem resolution

• provide greater flexibility in supporting change.

51. A lot of work has already been done to identify ICT roles in Services but further work is required to identify numbers of full time equivalents, associated budgets and how to reorganise within Services given that many staff have an ICT role that also includes some non-ICT duties. At the current time it is anticipated that around 30-35 full time equivalent posts will be brought into the shared service. Once the decision to proceed with the shared service is made, it is proposed that the Project Team continue to work on this detail with individual Services as part of the of the implementation programme.

52. In some instances, it is sensible to defer a decision until other, related business decisions have been made; for example, making a decision regarding how systems support for Agressoin each Council is delivered is best left until a decision has been made about a potential broader sharing of financial services between the Councils.

53. As part of the work to deliver the Outline Business Case for an ICT Shared Service, it was decided that the Schools Support ICT Team (23 staff), which operates on a fully traded basis, would not be in scope. Neither Council is seeking to operate back office services on a traded basis so the original decision may stand after further review.

Applications

54. A shared service offers a significant opportunity to drive out costs from the current applications platform across both councils in respect of both staff and non-staff expenditure. The potential for reducing staff support costs will be addressed by the review referred to above in paragraphs 50. Proposals for improving application services and reducing non-staff costs are outlined below.

Proposal:

A review all of our applications is undertaken to ensure that they are delivering good

value, are capable of supporting the required innovation in service delivery and to

reduce spend by:

– Consolidating where we have more than one application delivering the same

functionality;

– Changing the way that we support applications to reduce the cost of support (by

moving them to a more cost effective support environment for example), or;

– By retiring applications where they no longer deliver value and removing the

cost

– Moving the business towards standards-based packages

55. When considering the best approach for a particular application, a number of technical and business factors would need to be taken into account to decide upon the best outcome. But to ensure that the objectives of this strategy are achieved, and consistency between decisions, the decision should also be made within a framework of principles. These principles are:

• Where one Council has an application that is delivering poor value and the

equivalent in the other Council is delivering good value, it will move to the better application.

• Where Councils have more than one application delivering the same or similar functionality then they will seek to consolidate on the application that delivers the most business benefit.

• Where a Council has an application that is providing functionality that could be provided by a module of an existing application then the Council will seek to replace the application with the module.

• Where an application is superseded or no longer needed it will be retired and any data, that must be kept for compliance or legal reasons, migrated to the new application or exported and low cost provision made for access.

• The best place and mechanism for hosting the application will be considered on a case by case basis, there is no inherent preference where an application resides.

56. By reviewing each application the following savings could potentially be achieved.

The majority of the savings in the first two years are through savings on licensing and reduction of hosting costs through consolidation. These are gross savings as some implementation costs may be incurred in Year 1 of any changes made. Additional savings in later years will depend on the extent of consolidation on joint applications across services, which in turn will depend on the ability and willingness of services to adopt common business processes following business process re-engineering. These figures do not take into account

any savings in the applications support teams. Any such savings will be detailed in a part of the proposed organisational model.

Year 1 Year 2 Year 3 By Year 6

Total

Desktop £36,000 £10,000 £46,000

Duplicates £225,000 £150,000 £375,000

Shared £100,000 £100,000

Others £200,000 £200,000

Grand Total £261,000 £160,000 £100,000 £200,000 £721,000

57. The approach meets the ICT ‘test’ through:

• The ability to improve services to customers through selecting the best application available

• Increasing the resilience of services through improving/removing applications with inherent problems

• Creating a platform for the sharing of other Council services through demonstrating a functional model of running a range of applications across services

• The ability to deliver increasing savings over time

Infrastructure Opportunities

58. The shared service presents an opportunity to address the significant risks and pressures associated with each Council’s ICT infrastructure with the current desktop no longer being supported by Microsoft beyond April 2014, server environments at the end of life and the Steria contract ending in June 2013 (although there is a possibility to extend for one year).

59. A significant amount of work has been undertaken to determine the best way forward. The options explored include:

• Leave the infrastructures separate

• Outsource/Cloud

• A fully integrated shared infrastructure

60. Running two separate infrastructures takes little advantage from having a shared team:

• More support staff are required

• More hardware is required

• Separate design costs

• Likely higher contract support costs

• Disaster recovery arrangements are more complex

• Licensing costs will be higher

61. Regarding outsourcing or buying in on a service basis through ‘cloud’ services, this is an option but best considered for the next cycle of refresh in three years time. At present:

• We do not fully understand the costs for both Councils in running the infrastructure and therefore might not achieve value for money from an external arrangement

• Some opportunities for cost savings might be lost or reduced

• Implementing the contractual arrangements will take up to eighteen months and following that the contract will determine the flexibility we have to adapt to changes

• Focus will be taken away from delivering other services within scope, like the applications review and delivering an integrated organisation, which will slow down the delivery of savings and delivery of the shared service

• Implementing a shared service and outsourcing parts of the service at the same time will present a high risk to the continuation of business as usual

• Implementation costs are likely to be >£600k to cover the project team and legal support

Proposal:

That a fully integrated & portable ICT infrastructure serving Sutton & Kingston is

implemented through:

• A single, virtualised server platform for both Councils

• Shared disaster recovery and business continuity arrangements

• A server based approach to the desktop (VDI)

• Shared network arrangements

• A common security architecture

• An integrated support team

62. This approach provides significant benefits and meets the ICT Shared Service ‘Test’ through:

• Providing a solution that can be implemented in the timelines necessary to reduce risks and contractual deadlines

• Enabling a better quality service to ICT customers with improved availability & response times

• Improving resilience of service through the application of better technology, improved disaster recovery & underpinning security arrangements

• Providing a platform for the sharing a range of Council services and applications

• Reducing investment & running costs against each Council doing things separately with a saving in capital funding of £2.6m and a reduced revenue staffing cost of nearly £500k.

• An agile & flexible infrastructure to meet the needs of a Commissioning Council & emerging shared service relationships across other parts of the business

• An environmentally friendly approach which reduces power consumption and reduces the need for ICT staff to travel to sites across the Boroughs

• Transparency of costs for services to the business

63. The anticipated cost of delivering the infrastructure outlined above is £6.2m following discussions with a range of organisations and an itemised budget profile. Both Councils already have some capital funding available (£1.5m each) to upgrade the current infrastructures. If the proposed strategy is agreed, capital bids will be made to both Councils for the funding balance of £3.2m spread over two financial years.

64. A shared approach reduces the investment profile by £2.6m, avoids the need to recruit extended in-house support teams at a cost of nearly £500k and will enable revenue savings of around £180k in reduced support costs.

Project Management

65. Three options were explored for the delivery of ICT project management:

• A contracted service to meet corporate demand

• A client managed service with a Client Manager procuring through a managed service arrangement

• A core in-house service with the use of contract staff to meet additional service demand or a requirement for specific skills

66. Both the contract and client managed approaches are expensive proportionate to the in-house/external combination. Against the annual profile of projects selected across both Councils, these options were over 50% more expensive.

Proposal:

A shared ICT Service should adopt a delivery model for Project Management based on a combination of in-house and external resources. The ratio of in-house to external being agreed through the ICT Governance structure proposed

Governance

Proposal:

To adopt the Governance arrangements as shown below with a review once the ICT Shared Service is live

To establish sub-groups of the Project Board for Finance and HR to make recommendations regarding establishing the financial framework for the shared service and delivery of the organisational structure

67. It is the governance arrangements that will drive all the decision making regarding the shared service. The ‘host’ organisation has administrative responsibility for the staff and associated support but all strategic and key operational decisions would be agreed through the structure above with the Shared Services Management Board playing a key role. The Joint Head of ICT would liaise with the Strategic Director – Resources (Sutton) and Director of Place (Kingston) regarding day to day service issues that need attention.

68. In Sutton it is proposed that a corporate ICT Governance Board replace the individual ICT Directorate Boards. This will provide a balanced governance structure between the Councils and enable decisions to be made within a corporate framework with an overview across all ICT activity.

69. The following table provides and outline of the representation for each group and their responsibilities.

IMPLEMENTATION

70. The following Outline Implementation Plan is proposed for the delivery of activity through to July 2013. Once the decision is made to implement a shared service, the appointment of a Joint Head of ICT will need to be progressed in order that the person appointed can start in time to inform the way forward. The aim is to have the first phase of the new organisation in place for April 2013.

FINANCIAL CONSIDERATIONS

71. There are a number of issues that need to be considered regarding the finances associated with the ICT Shared Service and it these which will considered by the Finance Sub-Group within the governance structure:

• Creating a single budget within each Council to cover all the staff and service costs for the shared delivery of ICT

• No internal trading arrangements for services

• Establishing an activity based financial model for ICT so that the real cost implications of a multi-sourced approach can be determined

• A mechanism for sharing investment and savings across the Councils

• Developing the detailed financial bid to meet the shortfall in capital funding for the proposed new infrastructure and a business case for the benefits and return on investment

72. Preliminary work indicates that there will be insufficient funding within the combined revenue budgets to support the transition team which it is estimated will cost approximately £250k per annum for the first two years. The exact shortfall will not be known until there is a proposed organisational structure which can be costed precisely (October 2012). The indication is a shortfall around £60k - £90k per annum for the two years of the team’s existence.

73. The following profile of total gross revenue savings is indicated by the work done to date:

Saving 2013/14 (000s)

2014/15 (000s)

2015/16 (000s)

2016/17+ (000s)

Total (000s)

Applications 261 160 100 200 721

Infrastructure support 39 100 50 - 189

Joint Head of ICT 60 - - - 60

Transition Team (75) (75) 175 - 25

Total 285 185 325 200 995

These are gross savings because there may be some set up or implementation costs

associated with achieving the profile above. These will not be known until the programme of implementation is clear.

74. The comparison of the investment required for the updated infrastructure is shown in the table

below:

Infrastructure (000s) Desktop (VDI) (000s) Total (000s)

Independent 5529* 3778 9307

Shared 3235 3008 6243

Variation 2294 770 3064 *includes £500k staffing cost

75. There will be some set-up costs for accommodation (c£35k) and travel (c£30k). There may be other transfer liabilities associated with TUPE but until the detailed organisational arrangements are finalised these are unknown.

FINANCIAL IMPLICATIONS

76. The business case has considered a range of options, with the proposed approach being one that reduces the financial risk to RBK whilst aiming to deliver significant anticipated savings.

77. These savings are in addition to those already delivered by RBK ICT as required in the medium-term financial plan. The approved budget assumes only modest further savings from the shared service arrangement of £100k per annum by 2014-15. The Business Case evaluation undertaken to date indicates that there should be savings significantly in excess of

this that can be built in to budget proposals for 2013-14 onwards. The most significant element of the savings should arise from the review of applications reflecting the economies of scale and rationalisation that can occur within a shared service approach. All of the savings will be evaluated and firmed up by the Finance Sub-Group as the project progresses.

78. Capital growth requirements will be evaluated based on a business case and return on investment prepared by the Finance Sub-Group, and included in budget proposals for 2013-14 onwards as appropriate.

79. It is important that the cost of the transition team is appropriately resourced by contributions

from both councils, and the Kingston contribution has been allowed for on an invest to save

basis within the investment requirements to deliver the One Kingston programme.

LEGAL AGREEMENT

80. The ICT Shared Service will need to operate within a legal framework between the two Councils. There are now a number of legal frameworks in place for other shared services across councils and it is proposed that these are used as a basis for this shared service. The Legal Framework will need to be in place in early 2013.

81. As previously mentioned, an Inter-Authority Agreement In respect of a Shared ICT Services Partnership has been drafted, and informally been agreed between the London Boroughs of Sutton, Richmond, Merton, Wandsworth and Kingston. The key objectives of this agreement are to:

• Facilitate the sharing of expertise to enable and co-ordinate the improvement and efficient and economical discharge of the Councils’ ICT functions

• Maximise efficiencies, aiming to achieve high quality collaborative and co-operative provision of share ICT Services between the council

82. The Framework will be encapsulated in a shared service agreement between the two authorities which will set out their respective rights and obligations during the course of the agreement as well as upon termination. In view of Kingston being the proposed host Authority it is anticipated that Sutton ICT staff would upon contract commencement transfer to Kingston under their current terms and conditions of employment due to the application of the TUPE Regulations. Once this has been agreed by each Council’s Legal Service, it is proposed that this is signed-off as a Delegated Officer Decision by the Director of Place and Strategic Director - Resources.

83. The delivery of any collaborative work between Sutton and Kingston, such as preliminary work on the shared infrastructure, can be undertaken under this agreement pending the development for the Shared Service Legal Agreement.

PROJECT RISKS

84. A full Risk Register has been updated throughout the project. Some of the key risks are outlined below.

Risk Probability Impact Mitigation

Service quality is interrupted as ICT

staff focus on the ICT Shared

Service (particular relevance to high

profile project work)

High Medium Seek to clarify target operating model quickly & ensure staff

are involved in shaping the way forward.

Agreement cannot be reached on the most appropriate legal structure and division of investment and benefits

Medium High Gain agreement on merits of shared ICT services and take

early sounding of any preferences amongst senior officers or

members.

Service requirements vary widely across the two boroughs.

Low Medium Allow sufficient time for definition of shared service standards

to enable full consultation where significant impacts will be

felt.

Different cultures & processes in each Council slow down decision making

High High Discuss at the Project Board when relevant HR/Finance

professionals present.

There may be insufficient funding for the transition team from current budgets

Medium Medium Offset against savings in years 1 and 2