Due diligence, fearless decision-making and a clear vision of IT infrastructure are required for successful public sector mergers, according to a Source report released on 9th April 2010.

The Source report, commissioned by Xantus Consulting, which follows recent NAO research (see footnote 1) claims there are ten key lessons from successful private sector restructuring which will reduce public sector technology costs and deliver greater efficiency to newly formed government departments. The report identifies technology as one of the three biggest areas of cost in departmental restructuring alongside people and property.

With the NAO finding over 90 government departments restructured between May 2005 and June 2009, and little in the way of value delivered from the £780million investment, (see footnote 2) Source interviewed restructuring experts and identified lessons learnt from private sector mergers or acquisitions. The report acknowledges that not every private sector merger or acquisition is a triumph, (see footnote 3) but valuable lessons can be learnt.

The report identified the number one priority as due diligence of IT systems before restructuring, along with other critical lessons that could be learned from the private sector and adapted for public sector mergers.  The report’s Top Ten recommendations are:

1. Carry out due diligence of the IT systems before restructuring.
2. Undertake a detailed review of all systems once the immediate IT issues have been resolved.
3. Start from the premise that this is a new organisation: only put back in those systems which will add value.
4. The IT procurement team will play a fundamental role: make good use of them.
5. Find smart ways to share some of the efficiencies in the new structure with your top-performing IT suppliers.
6. Save substantial costs amalgamating processes, not just the hardware.
7. Ensure that the most senior people in the organisation fully understand the scale and complexity of any technology issues.  Don’t be tempted to deliver only good news.
8. Involve staff directly delivering IT services.
9. Accept that some people will resent decisions and decision-makers, especially in the short-term.
10. Plan carefully, but act quickly, decisively and fearlessly.

The findings show that during restructures the expected cost benefits associated with IT are not always realised.  These fall into two main categories: additional set-up costs and failure to deliver savings. According to the report, additional set-up costs can be reduced significantly by migrating to one technology solution, although this requires a clear vision and decisiveness.  Delivery of savings can be ensured by empire-conscious managers conceding that there is inter-departmental common ground and accepting change in the way they use IT.

Dave Yip, Co-Founding Director of Xantus Consulting and sponsor of the report commented:  “Whichever party is in power after the election, there will be a strong temptation to restructure either departments or public bodies to cut costs. But with the NAO clearly illustrating the failings, a strong business case with clear objectives will be a critical starting point."

“Technology has the capacity to make or break any government restructuring”, Yip continued. “The problem doesn’t lie in incompatible systems – if anything, this is the comparatively easy part – but in governance, decision-making and any suppliers involved.”

Ben Barry, Associate Director of Xantus Consulting added: “You have to carry out a complete review of IT, not only of the applications you have, but also of the data that lies behind them. What information do you want? What interfaces will be needed to give you access to it? The danger is that you switch off one application without realising that it creates data vital to another, more important application.”

The report is available by emailing Joy Burnford or by telephoning 0845 293 0990.