Prabh Singh

DOCuivif.NT - From: Carsten Larsen Sent: Monday, 10 February 2014 3:30 PM To: Louise Harkness Subject: FW: Presentation - Potential Shared Services Final (2).pptx [SEC=UNOFFICIAL] Attachments: Presentation - Potential Shared Services Final (2).pptx

From: Carsten Larsen

Sent: Thursday, 6 February 2014 5:24 PM

To: DL - General Managers; Chris Chapman; Richard Bean; Chris Cheah

Subject: Presentation - Potential Shared Services Final (2).pptx [SEC=UNOFFICIAL]

Hi All,

Attached is the draft Shared Services presentation. The numbers have changed a bit over the past few days as more

information has become available — mainly from DoC. This has resulted in lesser savings in year 1 — down to $0.9M from

$3.0M. Nevertheless, the long term potential remains the same.

Please don't hesitate to let me know if something needs to be corrected or changed before our Tuesday EG meeting.

Regards,

Carsten

1

16/09/2014

THE POTENTIAL FOR SHARED SERVICES BETWEEN THE DEPARTMENT OF

COMMUNICATIONS (DOC) AND THE AUSTRALIAN COMMUNICATIONS AND MEDIA

AUTHORITY (ACMA)

Presentation to the Secretary DoC and Chairman ACMA

Dominic Staun FCPA MIIA 12 February 2014

PRESENTATION OUTLINE

• Terms of Reference

• Background

• Approach

• Potential Shared Services

• Summary

• Next Steps

TERMS OF REFERENCE • Heads of Corporate DoC (Simon Ash) and ACMA (Carsten

Larsen) have discussed possibility of shared services • Dominic Staun (former CFO/C10 of Department of Finance)

engaged to broadly explore opportunities in • Accounting • Human Resources • Information Technology • Facility Management • Other Corporate functions

• Purpose of today is to present findings and seek your joint approval to undertake detailed studies of five proposed shared service streams

• Objective: Implementation of 4 streams by 1 July 2014 and the ICT stream by 1 March 2015.

• Future scope to include further services and increase savings

BACKGROUND

• What are shared services? • Benefits

• Reduced cost • Economies to scale • Effectiveness, specialisation, adding value

• Risks and Risk Mitigation • Loss of control • Poorer service • Implementation • Risks for DoC/ACMA of not implementing shared services

• Models/options • Examples

1

BACKGROUND FY 2013/14 1706 ALMA

Staff 633 627

Budget

• Staff $69.8m $67.4rn

• Contractors $4.2rn $2.37,

Total Staff/Contractors $74.0m $69.7m

Suppliers $38.5in $24.7m

Total $109.57, $94.47,

Locations Canberra Canberra

Sydney Sydney

Melbourne

A9er88ir Staff

Cost/Employee

$1301 $1301

AVeta.eSupplier

Cost/Employee

$66.61 $48.91

IT Cost/ Staff $21.6k $16.41

16/09/2014

BACKGROUND

• Shared services between DoC and ACMA:

• Staff Views

• Government and DoE initiatives

• Portfolio approach: A.Post/NBN, ABC/SBS, ACMA/DoC/TUSMA

• Compatibility of DoC/ACMA

APPROACH • Avoid the big bang approach — crawl before you walk before

you run

• Choose a manageable number of functions—five is a manageable number

• Go for the low hanging fruit — low difficulty and high returns • Seek processes that are generic, transactional (non-strategic),

have the most commonality between DoC and ACMA, conceptually easiest to implement, and have the greatest savings.

• Ensure WIN/WIN. It has to be worth it for both parties • Advantages:

• Gets runs on the board, start garnering savings • Builds confidence in both organisations • Opens the way for further collaboration/opportunities • Relatively easy to undo

APPROACH • Model for implementing shared services needs to be

considered:

• Two alternatives:

t. The DoC and ACMA agree which organisation will take responsibility for each function ills proposed be shared (Centres of Excellence)

2, A Shared Service Centre (SSC) is established in either DoC or ACMA with functions transferred into the SSC

Both have advantages and disadvantages

• Also need to consider how savings will be shared • Needs to be incentive for both organisations • Need to exclude current restructuring initiatives

• Focus on savings at this stage

• Lower value transactional processes in Stage 1

2

HUMAN RESOURCES

HUMAN flEOURCES Staff

DaL Ill

AOAA 23

.dget $.11m S3.7m • Staff $2 Om SS O! • SuPP,. S19,' S0.7m

Ammn ttense . 52S \ p a $1431qa.a

Pal,carrocessing Sta ff 25 Aullon ...led Staff Bud,et so.a so.,

16/09/2014

POTENTIAL SHARED SERVICES • There are five processes that meet the criteria for shared services, being transactional, common to both, relatively easy to implement, and with savings potential:

• Human Resources • Payroll processing

• Finance: • Facilities Management • General ledger processing, accounts payable and receivable • Procurement

• Information Technology: • Infrastructure Support - Service Desk, Desktop Support, Server

Maintenance and Communications (including data, VC and Phones)

APPROACH TO COSTINGS

• Big picture, back of the envelope

• Savings: • Staff savings are based on a target of 20% (UK Cabinet Office) • Supplier savings are best guess based on current expenditures

(Finance — SAP, Payroll —Aurion) or targeted based on past experience (IT)

• Costs: • Predominantly staff time and materials— assume can be managed

as part of the day job • Allowance has been made for Finance conversion SAP to T1 • Redundancy costs excluded from individual functions. Allowance

will need to be made in years 1 and 2 savings

HUMAN RESOURCES

• Annual Savings $100K p.a.

• Minimal Costs

• Issues: • First step to build confidence and collaboration • Potential in Recruitment and On-line Performance Reporting and

Training systems

• Understanding of payroll staff in each organisations terms and conditions is critical to be able to provide good advice

• Scope to included further services and increase savings

3

FACILITIES

• Annual Savings $300K p.a.

• Minimal Costs

• Issues: • Target 20% may not be achievable due to separate location of

buildings and ACMA Melbourne Office

• ACMA finished two successful moves — capacity available?

FINANCE —Transaction Processing 111ANSAC1I013 P1106.SSING DoC MU

Staff 7 7

Budget Sum $110,

I. Staff Slim $0.7m

I. Suppliers loom $03m

• Savings: • Staff $0.4m, SAP $0.3m: Total $0.7m p.a.

• Costs: • Allow no savings year 1 to cover cost of move from SAP to Ti

• Issues: • Analysis and reporting still undertaken by each organisation

• Revenue Assurance Branch remains outside shared service

16/09/2014

FACILITIES

FOLIYMES pac ACM Sun 7. Bud,e1 54,m 510 3m

• St,

$3 00 $1031 • Croputy costs $7.5m 509m • 0100 73033 Slam 37 4,,

FINANCE

71•71334CE OoC ADM

RAI

MOM SA.. $42rn

1 Staff $33m $33m

2 StmoTters $0.97n $037n

Sal license and Support $030

Technology 1 licenm and Suppo71 $0.25m

Other01I2Exce0141ed.Comn/Com404) $0.63,,

• ACMA excludes Revenue Assurance Branch

4

FINANCE - Procurement

18100/88411EXT 04C ACM

Staff 4

Bucket $03m was

1. Staff SCUM 20.333

2- Sawskers

• Annual savings 1 staff $130k p.a.

• Minimal costs

• Issues: • Potential for further collaboration and joint tendering

INFORMATION TECHNOLOGY

14208.81.1110117200SOLOGT 09C AM% Staff 42 42

• PS Staff (1) 37 • WS en ii0Of staf f 121/14sa telm

Contaastaas 12

• M_Srn MWM 5.409 • Staff/rontrac3on(3) 55Th, %Om • Computer3/s033433541383 36241 23333 • Offses sapia8a0 50.133

• Notes: I. DoC excludes Facilities records and Security

2. ASG dedicated staff added to DoC staff numbers

3. Long term contractors are common in IT, added to staff numbers

INFORMATION TECHNOLOGY

MAJOR CONTRACTS: DoC ACAlA

MG KT Managed contract) 51.733

Alatwarie/Verlaw None, data,

ilatta011 $1.41n $0.09

711.0 Mdeo. confeeence, vaata) 21-4ns

0033s ONsoft kerne, 5AS04, levraark, etc)

Wen $1.2m

IfJ8ASTRUCTURE SUPPORT/IT SENICTV

Dot AC18.4

Staff (.1.W563saff) 18 19 1341545 $5333 Sills Stalf/Contaastors $0.741 $44.11 Sust.10s 55Th

16/09/2014

INFORMATION TECHNOLOGY

• Savings: • Difficult to determine — DoC outsourced to ASG. ACMA insourced

• ACMA supplier cost of $3.3m approx. 50% of DoC $6.3m

• Adopt 20% target for combined staff and DoC suppliers costs, but increase suppliers savings target to 50% over 3 years; • DoC Suppliers: $1.0m pa. rising to $3.0m p.a.

• Staff: 8 @ 5130k approx. $1.0m p.a.

• Total Savings in excess of $2m p.a. rising to $4.0m p.a. could be expected.

• COStS:

• Minimal, mainly staff time and materials in implementation

• May be costs associated with terminating ASG contract

5

SUMMARY 3.11.11T Yr. 1 Tr.1 Yr. 3 Tr.4 Total

Savins (Millioas)

Itaon

Iteseurces • .1 0.1 0.1 0.1 0.4

facilities 9.3 0.3 9.3 0.3 1.2

finance 0.4 9.7 S. 9.7 7.5

Procureoent 4.1 0.1 0.1 9.1 0.4

inforeostion Technolooy

2.8 3.5 4.0 9.9

TOTAL 0.9 3.2 4.2 5.2 U.S

Staff lavITI5s(13.5)

9.9 1.9 1.9 2.9 6.6

Supplier Savings

• 6.3 2.3 3.3 6.9

16/09/2014

INFORMATION TECHNOLOGY

• Issues: • Key importance - no diminution in service levels

• Useful to compare current DoC/ASG and ACMA benchmarks • Cross Agency Benchmarks 2012-13

• Capex excluded

• Potential further economies to scale and rationalisation

• However, ASG contract option for two years exercised in February 2013- further 1 year option in 2015 • Hence, this analysis assumes no savings in the first year • May be opportunities to renegotiate ASG contract and/or review other

computing/communications contracts

SUMMARY • Issues:

• Savings in region of $3m to $5m p.a. are achievable • Redundancy costs excluded from above analysis

• Based on recent DoC/ACMA experience, could approach $1.0m • Savings in years 1 and 2 correspondingly reduced

• Fees each agency charges the other will need lobe determined • As well as SLA's including benchmarks and targets

• Key issue is how savings will be split between DoC and ACMA • Suggest simple 50/50 split for 3/5 years • DoF will have a view! Including whether savings can be retained!

• Understand DoC is considering a significant reduction in corporate staff • May Impact on above savings if potential shared services are targeted • Savings from restructuring outside shared services should be excluded

NEXT STEPS

• With your approval, DoC and ACMA will now explore these potential shared services in detail

• The project will be led by the two heads of Corporate • Secretary and Chairman could consider appointing a senior

executive from each organisation to assist the two heads of Corporate

• Three teams will be established - Finance, IT and HR - co-chaired by the two CFO's, CIO's and HR managers, supported by two to three members of each organisation

NEXT STEPS

• Each team to examine the proposed shared service • Precise specification of the process to be shared (in scope/out of

scope) • Where the service will be located and who will manage • The budgeted cost of the service and how services will be priced • Recommended benchmarks for inclusion in Service Level

Agreements • Activities in establishing the service and associated transition-in

costs • Change management processes and communications • Time frame for implementation • Budgeted savings and agreement on how savings will be shared • Governance arrangements including monitoring and reporting • For IT, the potential and issues in renegotiating contracts

NEXT STEPS

• Reviews to be complete in 8 weeks

• Reviews to be presented for consideration by Secretary DoC and Chairman ACMA by end April

• Stage 1 — Target implementation 1 July 2014

• Stage 2 — Target implementation 1 March 2015 (ICT)

• Stage 3 —

16/09/2014

7