Shared services have all the signs of being the next big thing.

Multiple public sector organisations sharing administration systems is central to plans to improve efficiency and exploit economies of scale.

The concept is core to the eGovernment Unit Transformational Government strategy. Permanent secretaries from up to 10 departments are discussing communal human resources systems under a proposal known as Whitehall2. And a Home Office programme including schemes for the Prison Service and Immigration and Nationality Directorate is already under way.

But shared services has been up and running in the health service since 2003, with some salutary lessons.

The NHS Shared Business Service (SBS) provides finance, accounting and payroll to 79 health service organisations. Another 21 will join in April.

But the scheme had a shaky start. Originally it was run by the Department of Health (DH), and although centres in Leeds and Bristol were successfully established, only 36 customers joined.

London School of Economics public policy expert Professor Patrick Dunleavy says shared services need commercial pressure to succeed. ‘I would be pessimistic unless it is part of a trend towards a mixed economy with good competitive tension to assure departments they will get a good level of service,’ he said.

The NHS is a case in point.

The turnaround came in April last year when the scheme was re-established as a joint venture (JV) between DH and supplier Xansa, with a 10-year plan to attract more than half of the 600-plus NHS bodies and save £224m.

In its first year the JV has attracted 55 new customers, taken over two locally run shared service centres in Hampshire, and expanded to offer payroll and eprocurement ‘purchase to pay’ facilities. The average customer saves 34 per cent and receives daily management updates and specialist advice.

The creation of a standalone body provides Dunleavy’s competitive pressure. And the more successful the scheme, the better for the health service: profits are split two-to-one between DH and the supplier, with the government’s double-share paid back to NHS customers.

The JV structure is critical, says Ovum analyst Tola Sargeant. ‘When it was just DH there were difficulties because it lacked the commercial edge,’ said Sargeant.

‘Equally Xansa would struggle without the department’s gravitas in talks with health trusts.’

But the model is not necessarily appropriate elsewhere – the Whitehall2 proposal, for example, has too many stakeholders. A JV only works where there is a central authority, says Sargeant.

But even those areas, like the police or schools, may prefer to share locally, with councils or education authorities.