First UC-CSU Shared Services Conference Thursday , July 11, 2013 UC Irvine Campus BREAK-OUT SESSION Management Trac

1. First UC-CSU Shared Services Conference Thursday, July 11, 2013 UC Irvine CampusBREAK-OUT SESSIONManagement Track 11.10 to 11.55 am What’s Next in Shared Services: Future Trends

2. Break-Out Session Purpose • This session will examine shared services trends over the past 20+ years, with a special focus on trends in the public sector (including Higher Education). • Content will include a look at broader trends in shared services, both in the US and other countries (e.g. Canada, UK, Mexico, Ireland, Other EU Countries), and what can be derived from correlations in these trends and the relative maturity of operational shared services models. • Based on these observations and some “lessons learned”, we will examine what the future looks like in shared services, how we are likely to get there from here, and why this is so important. • Session will include open Q&A time.

3. Agenda • Some General Trends in Shared Services • Trends in “Public Sector” Shared Services in Last Few Years • Examples of Shared Services in the Public Sector in Last Few Years • Examples of, and Comments on, Shared Services in Higher Education in US • Lessons Learned • What Does the Future Look Like? • Q&A

4. Some General Trends in Shared Services

5. General Trends in Shared Services • Shared Services Concept started in mid 1980’s.Concept initially driven by private sector multinationals • Shared Services and Outsourcing initiatives typically result in "cost savings of 20%-50% on processes in scope” (Hfs-PWC report June 2011) • "In today's business environment, nine out of every ten enterprises have shared services". (Hfs-PWC report June 2011) • Mainly Finance driven early on in Europe/HR driven in North America • Multi-process Shared Services much more a reality today

6. General Trends in Shared Services • Now much more end-to-end process focused • Data privacy and security an issue that always needs to be considered • Shared Services moving up the Value Chain • Technology options continue to grow (e.g. document management, workflow approvals, user self service, ERP, open architecture, software-as-a-service, “cloud computing”, etc)

7. Trends In Shared Services In The Public Sector In The Last Few Years

8. Trends In Shared Services In The Public Sector In The Last Few Years • While the private sector has embraced shared services over the past 20 years plus, the public sector has, until recently, been slower to do the same. • With the deepest downturn in the economy since the great depression, Government, Higher Education and Healthcare are facing short falls in revenue and funding and cuts to their spending. • The budget issues in the public sector are global in nature. As an example Canada's population, as in many other “developed” countries, has an aging population that requires increased health care, as well as public expectations to improve the efficiency of the National Health system. • US, France, UK and many other European counties as well are seeing spiraling health care costs.

9. Importance of Business Objectives for Public Sector Finance ExecutivesSource: HfS Research and ACCA Global, 2012; N = 26 public sector organizations

10. Finance and Accounting Operating Models in the Public Sector Source: HfS Research and ACCA Global, 2012; N = 37 public sector organizations

11. Outcomes of Shared Services and Outsourcing Programs in the Public Sector Source: HfSResearch and ACCA Global, 2012; N = 14 public sector organizations

12. Examples of Shared Services In The Public Sector In The Last Few Years

13. Examples of Shared Services In The Public Sector In The Last Few years • In the United States the President’s Management Agenda directs federal agencies to fulfill goals with maximum efficiency. The US office of Management and Budget (OMB) issued directives advised turning to shared services to meet these directives. • Australia and New Zealand have Shared Services operating at the federal and local government levels. For example, Auckland Health Board consolidated back-office function that supports major hospitals. • In Mexico, the Ministries of Public Service, Agrarian Reform and of Agriculture, Livestock, Rural Development, Fisheries and Food joined in a program in mid-2009 for the implementation of a Shared Service Centre that included the redesign of processes and the development a GRP (Government Resource Planning - ERP for Government) that will support all in scope processes.

14. Examples of Shared Services In The Public Sector In The Last Few years • UK Home Office and the UK Ministry of Justice are saving budget through their Shared Service Programs. The Home Office has reported savings of £13m per annum and Ministry of Justice reports £20m per annum. • In the UK up to 40% of local authorities (in 2011) were bringing forward their plans to move to a shared model. At the end of 2011, 219 councils across the country were engaged in 143 shared service arrangements resulting in £156.5 million of efficiency savings. • US large Federal Agencies that have either completed or are in the process of creating shared services include the United States Post Office and the National Aeronautics and Space Administration (NASA). NASA is saving more than $12 million per year in back office services in order to move funding to mission-critical space exploration.

15. Examples of Shared Services In The Public Sector In The Last Few years • The US Department of Heath and Human Services (DHHS) Shared Services “Program Support Center” (PSC) provides support services to all components of the U.S. Department of Health and Human Services (HHS) and other Federal government agencies worldwide. PSC has a broad range of nearly 60 services and products, which include: administrative operations, health resources, information technology support, financial management, and strategic acquisitions • The National Business Center of the Department of Transportation (DOT) is providing IT services to the DOT and other federal agencies. • The U.S. Department of Agriculture’s National Finance Center (NFC) in New Orleans, La., has implemented shared services to streamline the provision of payroll and human resources for 60,000 government employees in 174 civilian agencies.

16. Examples of Shared Services In The Public Sector In The Last Few years • The Government of Ontario launched its IT transformation initiative in 1998. It reports that at maturity it saves $100 million annually, representing 10% of the total IT spending, and between 20–25% of IT infrastructure spending. • The Government of British Columbia began its IT consolidation in 2002 and has reduced its data centers from over 100 to 2 in 2011. It further reports that energy costs are expected to be 50% lower. • The Government of Australia has developed a data centre strategy to consolidate data centers, which support over a hundred agencies, from 2010 to 2025. Anticipates avoiding $1 billion in future costs • The Government in Ireland is actively pursuing Shared Services for the Public Sector, as outlined in its Public Sector Reform White Paper, November 2011

17. Shared Services-Canadian jurisdictions (Deloitte, November 2008)

18. Examples of, and Comments, on, Shared Services In Higher Education in the US

19. Examples of, and comments on, Shared Services In Higher Education in the US • The recession/slowdown impacted both Public and Private Universities, but the impact has to some extent different for the Public Universities. The recession/slowdown and the accompanying revenue decline at the state level has left less money to fund education • The private institutions, except for grants provided by the federal government for research, are to some extent less dependent on government funding. However, many private institutions saw their endowment values decrease as a direct result of the recession, and the private institutions also responded by increasing student fees. • Increasing student fees alone has not been sufficient to close the budget at many Universities and Colleges, and these institutions are looking to shared services to help them close the budget gap, increase efficiencies and provide better service.

20. Examples of, and comments on, Shared Services In Higher Education in the US • Accenture reports in their December 5, 2011 article “Shared Service Government and Education Break the Status Quo”, that over the last five years a few forward looking education institutions have used shared services to gain greater efficiencies, improve service, enhance compliance and improve worker experience • Shared services already underway pre recession at many Universities, e.g. Yale University, Harvard College, University of Michigan, University of Illinois & Cornell. • UC Berkeley administration division began in 2008 to move to a shared services model for HR, and successfully opened its center on July 1, 2010. In 2012the University approved a project to implement shared services for finance, research, information technology and human resources. • As part of its Synergy Initiative, CSU’s Procure to Pay (P2P) Shared Services Initiative seeks to leverage the success of implementing CSU’s Common Financial System and improve the efficiency and effectiveness of processes to purchase and pay for goods and services.

21. Examples of, and comments on, Shared Services In Higher Education in the US • The University of California has begun implementation of a University System Wide Shared Services center called UCPath for HR and Payroll. • The Yale Finance shared service center was formed in January 2010, to take repeatable common work out of departments. The center was formed through the consolidation of three pre-existing service units. The center provides Financial Management and transaction processing for procurement, accounting, accounts payable and client accounts. • Lawrence Berkeley National Laboratory has had an HR Service Center since 2011, and is looking to expand scope of services provided. • Accenture predicts that the next wave of implementation in higher education will see a broadening of the functional areas that are in scope for shared services.

22. Lessons Learned • Strategic • Structure • Business Case • Implementation

23. Lessons Learned • STRATEGIC CONSIDERATIONS • Shared Services is no longer a radical idea in the public sector as the concept has been operating and proven in the private sector for 20 years • Shared Services is moving from an opportunity to a necessity(US, Healthcare, Higher Education) • Make It Mandatory and High Profile (Canada, UK) • Shared Services Can Work Across a Large Geography and Multiple Jurisdictions (Canada, Latin America) • Opportunities are “Borderless” (US, Canada, Private) • Core Challenges Unchanged (Private) • Not Just Transactional (Private) • End-to-End, Not Functional (Private)

24. Lessons Learned • STRUCTURE • Independence is Important (UK) • Governance Matters (Canada, Private, UK) • Create Durable Structures (Canada) • BUSINESS CASE • Prepare Business Cases (Canada, UK) • Recognize Need for Funding (Canada, US, UK) • Infrastructure can be Enabler and Barrier (Canada, Private, Latin America) • Taxes Matter (UK)

25. Lessons Learned • IMPLEMENTATION • Do that which is easier … first (Canada) • Co-Locate Staff (Canada) • Operate as a Business (Canada) • Benchmark Relentlessly (US, Canada, UK) • Adapt rather than Adopt (Canada, UK) • Changing Culture is challenging (US, Private, Europe) • Multifunctional Enabled by New Technologies (Private) • Outsourcing and Off-shoring Risks (Private) • Delivery of Shared Services is Not a Core Government Skill (UK)

26. What Does the Future Look Like?

27. What Does The Future Look Like? • The Public Sector, and of course, Higher Education, has a huge opportunity to leverage Shared Services to meet today’s very significant challenges. It is therefore likely to continue to expand and grow. • Public Sector organizations will start to embrace standardization, as they become more centralized under shared services, and IT continues to make it easier to move toward standard solutions. • Technology will increase productivity with more automation in transaction based processes. Impact of “the Cloud” • The budget and funding challenge in higher education is accelerating the use of shared services. • Will likely be much more collaboration for Shared Services across “indepenent” organziations. Just like CSU-UC.

28. What Does The Future Look Like? • Change Management vital. Universities need to overcome resistance from departments, whose leaders are not necessarily familiar with shared services and may be dubious that shared services can meet the needs of individual departments. • University leaders need to convince their faculties that Shared services can assist Universities to free up resources for the academic and research mission of a university.   • Interest in Shared Services illustrated at conferences and events, such as two Public Sector Shared Services events in Chicago in 2011 and 2012, and upcoming 2013.

29. Q&A