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Charityshare is a joint
project of the NSPCC and The Children’s Society launched on 2005
to co-source IT services. Charles Bartlett, John Graham, Ian Harris,,
and Charles Nall explain how the venture evolved and its benefits. They
also offer advice for others who intend to trek the same venture.
It is not easy for charities to provide economical, efficient, and
effective IT services. Even most large charities hardly benefit
substantial economies of scale. Outsourcing and offshoring usually
becomes an option for many in an effort to reduce costs; the drawback
however, is that it often times compromises the quality of services/
output rendered.
NSPCC and The Children’s Society faced the same dilemma on IT
infrastructure in 2003: both charities wanted to reduce costs while
maintaining or improving the quality of their services, apparently, both
charities were just as nervous about outsourcing their IT
infrastructure.
NSPCC and The Children’s Society then benchmarked their IT
infrastructures. The two shared similar business models. Both IT
operations were reasonably efficient and well run, making outsourcing
out of the option, and in order to keep up with a realistic status quo
on the economies of scale from outsourcing.
Co-sourcing then became an alternative that would offer the best of both
worlds. For that reason, we drew up a business case for the two trustee
boards, addressing the scope of the proposed venture, the business
model, governance system, risks, mitigation of risks, costs and
benefits.
Scope, structure and governance
The scope of the venture includes all operating services including user
hardware, standard user software (e.g. Windows and Office), local and
wide area networks, server farm, helpdesk, field support, training,
purchasing, quality assurance and technical support, but not
confidential databases and strategic applications. Structuring the
venture purely for the benefit of charities and ensuring that the
venture did not create additional taxation burdens on the charities
involved was a tricky problem to solve.
Charityshare Limited’s sole purpose is to act as a nominee for its
owners (members). The Memorandum of Association disclose membership to
the company as exclusive only to registered charities, and the use of
the word “charity” as its official name. The member charities own equal
shares in the entity but divide service costs equitably based on use.
The venture has also been structured flexibly to enable other charities
to join Charityshare in the future.
The finance directors of the charities involved are the formal directors
of the venture, but the governance works through a strategic governance
board and an operational governance group, comprising the directors,
information systems representatives from each charity, the Charityshare
head of service delivery and some external expertise (e.g. Z/Yen
Limited).
While Charityshare has its own legal personality, it is, to all intents
and purposes, merely a legal shell that provides the only workable
solution to the problem of charities wanting to pool their information
technology functionality. On the basis of these arguments, HM Customs
and Excise has agreed to the principle of Charityshare’s VAT neutrality
between its members.
We carefully planned the implementation in 2004, and agreed on the legal
structures, governance and business models. There was a live pilot mode
in November 2004 and full implementation in January 2005.
Stacking up the numbers
The combined budget of the venture was £3.26 million, covering the cost
of 56 full-time equivalent staff and serviced 2,830 desktops across the
two organizations. NSPCC comprised roughly 2/3rds and The Children’s
Society 1/3rd of the budget, staff and desktops. This setup guaranteed
both charities significant financial savings and improved IT service
quality than either could by operating alone.
We estimate 25 per cent saving achieved over three years equal to
£800,000 per annum across both charities, once achieved. This will mean
more money to spend on children and young people. We also estimate that
from joint input costs of £3.26 million per annum, the resulting co
shared service organisation will have costs of £2.4/2.5M per annum at
current scale and prices after three years.
Anticipated savings came significantly ahead of its schedule, and we
hope to achieve the targeted savings within 18 months to two years of
launch. Savings have been achieved by upgrading to broadband and
eliminating duplicated IT infrastructure and telecommunication links.
This has been combined with the merger of services and reducing staff
levels.
Measurable service quality indicators are improving. We conduct regular
user satisfaction research to test whether the service quality is well
received. Initial research and informal feedback so far is largely very
positive and encouraging.
The best of both worlds
The venture was highly commended for Best Use of Technology at the UK
Charity Awards in September 2005, with the judges identifying it as
something “the rest of the sector should take note of what has been done
here.”
Many charities could benefit from the cosourcing approach, and
Charityshare itself welcomes other appropriate charities into its fold.
Otherwise, consortia of charities could use the same or similar
structure for co-sourcing their activities.
Charityshare took nearly two years from concept to implementation. After
doing much of the structural ground work, which need not be repeated, we
believe a similar venture starting from scratch might be up and running
within a year. A charity choosing to join Charityshare itself might need
six to nine months to formulate business case with us and then see it
through due diligence to implementation.
Co-sourcing is no quick fix. It entails medium to long-term commitment
in order to be able to structure it, plan it right and choose your
co-sourcing partners. However, co-sourcing is easier than outsourcing.
In short, the venture has demonstrated that it is possible to achieve
that best of both worlds situation; economies of scale together with an
in-house quality and culture. ﺕ
John Graham is director of finance at the NSPCC; Charles Nall is
corporate services director of The Children’s Society; Charles Bartlett
is head of service delivery at Charityshare; and Ian Harris is charity
sector director of Z/Yen Limited
www.charitytimes.com fifty nine news columns features IT co-sourcing
January - February 2006 best of both worlds 58-59.qxd 20/02/2006 14:26
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