Thanks to Sam for filling in for me while I was sick. This one comes from him.

Shared service providers are continuing to emerge across governments in Australia. From shared Financial and HR business processes to the provision of common ICT network and data centre infrastructure. However, a consistent issue that faces many of these organisations is the lack of a truly viable and self funding financial model.

Sure, the concept of user pays is often touted as a means by which service levels will be maintained and costs kept transparent. Unfortunately very few of these organisations are given the financial mechanisms that enable a sustainable financial model. Specifically, Treasury departments fail to see the shared service providers of ICT services as anything but standard departmental business models, when in fact they are stand alone businesses and should be operated much more like government owned corporations.

As an example, the default position of most Treasury officials is to not permit capitalisation of desktop computers, and only the largest of servers. Furthermore, they prohibit the accumulation of depreciation as working capital within a government entity. The net result of these two policies is to create internal government ICT businesses charged with delivering service using what all other organisations would treat as fleets of plant and equipment on an expense only basis.

When the inevitable and clockwork-like renewal cycles of desktops and servers (with typical useful lives of between 5-7 years) roll around, these organisations, no matter how accurate and well built their cost models are simply find they have no funds available and that Treasury has other priorities. This leads to degradation of services, loss of service levels and encourages grow back within agencies struggling to support their own service delivery outputs.

Governments seeking the benefits of shared services and business process outsourcing cannot expect to truly reap the benefits of charge back, if the entity providing the service does not have the prerequisite financial management model to enable the outcome. Instead, these shared services organisations will continue to beg at the budget bowl.

On the flip side, the shared service provider organisations themselves must recognise that the original investment provided represents seed capital and that they have an obligation to return this capital to Treasury at an agreed point in time based on economic models used in the water and power generation industry. Models that include the use of long run marginal cost and supported by the type of forward planning for capacity and growth that such models demand.

It is this type of change that will not only improve the chance of success for shared services, but also the needs of planning for agencies required to deliver accurate capacity information to providers unless they wish to be subject to premium charges for unexpected demand. And it is not like there isn't anyone to support these models. The Queensland Government has its own authority (the Queensland Competition Authority) whose sole purpose is to provide independent pricing advice for everything from water and gas to rail and ports and freight.

Indeed, the QCA provides detailed assessment of the cost of capital and use of long run marginal costs for a number of "utility" style organisations and internal government monopolies and shared services.

Delivery of ICT shared services is much more than merely the consolidation of staff and encompasses the provision, maintenance, growth and expansion of plant and equipment. As such it requires capital management policies that reflect the operation of commercial ICT service providers and recognised as inputs, not shoe horned into models better suited to traditional service delivery outputs.

There is a reason that water and power utility organisations are run as true government owned corporations and it is these very same reasons that internal ICT shared service providers should be given the same treatment.