Byon January 11, 2017
The 1st December marked the end of almost a decade of partnership between Somerset County Council and IBM. This much discussed and questioned relationship which formed the collaborative entity Southwest One is now over, but the questions keep coming in its wake and are set to rumble on for some time.
Numerous audit reports have appeared on Somerset’s website which reportedly highlight that with the transfer of staff and IT assets may also come a variety of risks and uncertainties, including:
- A lack of clarity over exactly what IT assets the council will now actually own.
- The legitimacy of some software asset use has been called into question.
- How much public money may have been wasted on software not used or not needed which could lead to fines from central government.
- Questions have arisen as to whether hardware has been disposed of securely, or whether confidential data will turn up in the public domain, as a lack of proper documentation on the process has been identified.
- Uncertainty over the accuracy of information on IT assets maintained in the Asset Register as some hardware is recorded as having the same value, despite many years’ gap between them.
So, why did the aspirations of “Greater choice for residents, more control, sustained improvement of services, improved efficiency, tens of millions in savings and enhanced job prospects for staff”, enthusiastically promised in 2007, apparently not materialise? And why do some believe that Somerset will be £2m a year better off now that the Southwest One relationship is over?
Background story on Southwest One
In 2007, Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police joined with IBM to form Southwest One in order to outsource a number of services. This £400m deal was revolutionary – a collaboration between the private and public sectors to offer shared services to councils that signed up to it. Improved services, significant cost savings and money reinvested into additional services for the community were all promised, but it was reported by various media sources that two fundamental issues arose almost immediately and remained at the heart of the problems the parties faced:
- A feeling among the public sector partners that their private sector compadres were more interested in profit than innovation, or even in delivering services to agreed levels.
- A lack of interest from other councils to join the scheme, and a realisation that overestimating take-up put a greater strain on those who were already involved.
It seems that a lack of internal alignment between the partnership and IBM and falling service levels were reportedly the result, and as early as 2012 people at the top were publicly suggesting that the partnership was ‘failing’ (the word used by Ken Maddocks, Somerset Council Leader). Legal action ensued and despite attempts to bring things back on track, issues reportedly went from bad to worse, projected savings became actual losses and then all that was left was to decide how to exit the agreement that brought the parties together.
According to Freedom of Information (FOI) and Southwest One campaigner David Orr: “End of SW1 contract costs are projected to be £1.743m, but it’s expected to save Somerset County Council £2m a year to have taken these services back in-house.”
Somerset County Council Audit Committee published a report in 2014 which highlighted nine primary lessons learned:
- Overly complicated 3,000 page contracts will create confusion
- The need for an incentive-led culture is clear
- Contractual and service level flexibility needed to manage real-world change
- The vital importance of maintaining an adequate Intelligent Client Function team resource
- KPIs should be business-objective led
- A one-size-fits-all contractual approach to multiple services and clients does not work
- Placing public and private sector staff together on separate employment contracts can cause animosity
- Cultural differences – public sector striving for cost-savings, public sector for profits
- Learn from successes and failures alike
This commendable public review of this relationship’s lack of alignment though was not enough for some and due to complaints of a lack of detail in the first report, another was prepared later that year. This too highlighted some further lessons, six in total:
- An internal audit can shine a healing light on even the most troubled project
- Competing perceptions of cause in a disagreement will hinder the identification of a solution
- Even the pursuit of a solution can be complicated by poorly aligned reparatory expectations
- Overarching performance reporting proved difficult due to conflicting confidentiality priorities
- Ambiguous data security rules made reporting laboriously complex and data ownership confused
- Adequate due diligence on any major element of a project should not be underestimated
When the National Audit Office (NAO) looked into the question of shared services they cited three lessons:
- The vital importance of a clear and agreed business case for shared services must be evident
- Effective transformational management is essential for a successful shift to shared services
- Transformation without true stakeholder buy-in at the earliest possible stage is a recipe for trouble
The vital importance of ‘planned’ innovation
As we stated in a previous article: “Innovation should be at the core of any successful strategic outsourcing partnership.” And because of this, it is important to recognise Somerset County Council for their foresight and to praise them for their intent – and subsequently, for their openness and willingness to thoroughly assess what did not go well and the lessons they have learned from this.
To drive innovation to save money and improve services, and to do so in a way which was, at that point, seen as less than conventional, is both brave and industry leading. But it seems it was the execution that left them vulnerable to the issues that in the end saw the relationship break up in a very public and costly way – costly in both financial terms and for both sides’ reputations.
And this was despite a significant amount of independent and professional advice from both experienced advisors and lawyers. It was very diligent of the Council to seek such professional advice, but it seems either the advice was misaligned from the advisors or it may be that the Council did not act on the advisor’s advice in the manner anticipated. Only the parties themselves know what really happened.
It should be noted that many innovative strategic partnerships do not achieve their expected outcomes. This is the nature of doing something new and untested. But it’s what we learn from these innovations in a controlled information capture process and that we subsequently act upon, that will differentiate an organisation and make future innovations successful.
Successful innovation is often in the hands of management, where priority should be given to:
- Building collaborative teams
- Running disciplined experimentation
- And developing true commercial trust
However, in the case of Southwest One, it seems there was some significant misalignment in the development, creation, implementation and management of the correct processes. With the right execution of processes in place, you can ensure that opportunities are maximised and risks mitigated in your relationship. It will be interesting to see, as the relationship ends and all is passed back to Somerset, to what degree any uncertainty over what they will find when they look ‘under the hood’ has been justified.