Simulation and animation for adopting shared services: Evaluating and comparing alternative arrangements

Government Information Quarterly 26 (2009) 15–24

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Government Information Quarterly j o u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / g ov i n f

Simulation and animation for adopting shared services: Evaluating and comparing alternative arrangements Marijn Janssen a,⁎, Anton Joha b, Arre Zuurmond a a b

Delft University of Technology, The Netherlands EquaTerra, The Netherlands

a r t i c l e

i n f o

Available online 6 November 2008 Keywords: Adoption Simulation Animation Transformation Service Service system Shared services Shared service benefits Service-oriented government Shared service organizations Shared service centers

a b s t r a c t Although shared service organizations have the potential to improve government operations, the adoption of the organizational arrangements involved has been limited. Their impact may not be clear in advance and stakeholders may have conceptions about shared service arrangements. As such, there is a need for support for the adoption of shared services. In this paper, we develop and statistically validate simulation models to evaluate the impact of shared services, and in this way support their adoption. We analyze a case study involving municipalities that wanted to share services and found that simulation models facilitate discussions about alternative arrangements prior to implementation. The simulation models show that shared services can result in improved efficiency and service levels. However, the type of arrangement determines the level of efficiency, as high service levels can only be realized at the expense of efficiency, which means that the decision about the type of arrangement is not obvious. Decision-makers should understand the implications of shared service arrangement prior to implementation and make decisions with regard to key design variables. © 2008 Elsevier Inc. All rights reserved.

1. Introduction In a recent study, technical and organizational aspects of shared services are mentioned as a key research theme (Irani, Elliman, & Jackson, 2007). Shared services organizations (SSOs) or Shared Service Centers (SSCs) are becoming more popular as a service management and delivery option in industry (Bergeron, 2003; Ulbrich, 2006) and government (Grant, McKnight, Uruthirapathy, & Brown, 2007; Janssen, Joha, & Weerakkody, 2007). In many countries, the potential benefits of sharing services have resulted in the creation of SSCs as part of the national infrastructures, and a number of countries, including the USA, Canada, Australia, Ireland, and the Netherlands, have adopted shared services (e.g. Accenture, 2006). Other countries are also interested in establishing shared service centers to support and speed E-Government development, and the potential savings within the European Union are estimated to be substantial (KableDIRECT, 2007). The basic premise with regard to shared services is that services that are provided by one organization or department can be provided to users with relatively little effort (Bergeron, 2003). The design of shared services is often a trade-off, because not all objectives can be realized at the same time (Janssen & Joha, 2006). It is not clear which

⁎ Corresponding author. Delft University of Technology, Faculty of Technology, Policy and Management, Jaffalaan 5, 2628 BX Delft, The Netherlands. Fax: +31 15 278 3741. E-mail address: [email protected] (M. Janssen). 0740-624X/$ – see front matter © 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.giq.2008.08.004

approach allows organizations to make the most of shared services. In addition, because introducing shared services is a major decision that has a long-term impact on all the participants, it will have to be a conscious decision that is supported by all the stakeholders involved. Only a small portion of all services are shared (KableDIRECT, 2007). Ulbrich (2006) has found that adopting an SSC requires an extensive business process re-engineering approach whereby agencies will have to transfer the development, maintenance, and control of their information systems to a different organization and abandon their existing information systems. Government organizations often operate as independent and autonomous units without understanding other public organizations. Organizations that decide to share their services need to work together and make decisions concerning which services to share, as well as how to transform their business processes and standardize their services and systems. Currently, there are significant barriers to transforming structures and processes within local government (Beynon-Davies & Williams, 2003). Some of the frequently mentioned problems include the inability to predict the outcomes of a change (Meel & Sol, 1996), the lack of alignment between organizational goals and the information technology (IT) involved, the existence of multiple (sometimes conflicting) goals, individual interests, and associated behaviors which can generate resistance to change or create internal conflicts (GilGarcia & Pardo, 2005). The adoption of a shared service arrangements results in higher levels of interdependence across organizational boundaries and a need for supra-organizational connections. To adopt such arrangements there is a need to convince employees to change

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the existing organizational processes and management to give up some of its authority, as tasks are moved to a semi-autonomous business unit. This involves a major effort in terms of integration of systems and processes, business process re-engineering, and transformation. When it comes to attempts to redesign public management operations through the extensive use of information technology, there is still insufficient support for business process re-engineering and structural transformation (Stemberger & Jaklic, 2007). Many authors argue that one of the major problems is a lack of decisionmaking support tools that can be used to evaluate and show the effects of potential solutions before actual implementation (Meel & Sol, 1996). Correcting mistakes after a solution has been implemented is usually a costly and difficult affair. Business process modeling and simulation tools are often considered to facilitate organizational change processes and can be used to evaluate the effects of alternative solutions prior to implementation (e.g. Kettinger, Teng, & Guha, 1997; Stemberger & Jaklic, 2007). Simulation is one of the most widely used methods in operations research and management science (Law & Kelton, 1999). Business process simulation uses abstractions of processes to analyze and assess the impact of alternative arrangements quantitatively and qualitatively. Simulation can be defined as “the process of designing a model of a concrete system and conducting experiments with this model to understand the behavior of a concrete system and/or to evaluate various strategies for the operation of the system” (Shannon, 1975). Literature on electronic government, which is still being developed, would benefit from more focused studies to enhance our understanding (Beynon-Davies & Williams, 2003). In this paper, we focus on the role of business process simulation and animation in supporting the adoption of shared services by three municipalities. The aim of this paper is twofold. On the one hand, we attempt to investigate shared service arrangements and create a better understanding of the various arrangements and trade-offs necessary. On the other hand, we want to demonstrate the use of business process simulation in facilitating organizational change and for adopting shared services. We conduct a case study and use simulation and animation models to evaluate shared services arrangements from a quantitative and qualitative point of view. By developing two alternative models, we use simulation to model and compare the existing situation with two alternative shared service arrangements and to compare the various options from a quantitative perspective. In addition, we use animation to communicate the model to the stakeholders involved, to allow them to evaluate the quality of the models. The models show sharing arrangements and the simulated implications. 2. Literature background 2.1. Shared services Although services and service provisioning have been important topics in E-Government research, as yet no universal definition of services is available (e.g. Spohrer, Maglio, Bailey, & Gruhl, 2007). Grönroos (2001) has identified three main characteristics of services. To begin with, services are processes that consist of series of activities rather than things. Often, service providers and their clients have to interact frequently in the course of the service delivery process. Second, services are, at least to some extent, produced and consumed simultaneously, and third, customers in one way or another participate in the service delivery process. The more knowledge-intensive and personalized the service is, the more interactions are needed, resulting in a unique service provisioning process. System theory, which is interdisciplinary by nature, views a system as being composed of a group of interacting or interrelating parts that can be modeled systematically (Checkland, 1981). Modeling the dy-

namic behavior that is the result of the interaction among the various parts over time is a key element. Unlike products, services are intangible and can only be observed by investigating the dynamic behavior during the service provisioning process. The output of a service provisioning process is a new state, e.g. a permit is granted or a recommendation provided. Due to their intangible nature, services are often provided on the basis of predefined conditions or clear expectations to avoid a mismatch between the expectations of the service providers and their clients. Based on Spohrer et al. (2007), we adopt a systems perspective and define a service as “a series of interactions between the service provider and clients that result in an observable output”. The service provisioning process and the resulting output are the central elements of our service definition. A service is provided by a series of activities that are organized in a service system. In a service system, service providers (which could include a number of organizations) work together to provide services. A service system includes people and information systems. A shared service arrangement is a part of the service system in which a separate and accountable semi-autonomous unit is created that provides specific pre-defined services to the operational units within the (inter) organizational entity. Bergeron (2003) has stated that shared services involve a collaborative strategy in which a subset of existing business functions are concentrated into a semi-autonomous business unit. Based on the definition of a service and the basic idea of sharing services, we define shared services as “the concentration of dispersed service provisioning activities in a single organizational entity”. Shared services enable governments to focus resources on the primary high-impact activities at the core of their mission rather than on routine administrative functions (Accenture, 2006). Shared services free resources to allow departments and organizations to focus on their core activities and customer needs. The SSC business model holds promise for public administration for several reasons. Because budgets and expertise are limited, services often cannot be provided in a cost-efficient way by a single organization or department. In particular, smaller public organizations cannot develop all the services or information systems that are needed. Moreover, both small and large organizations possess various kinds of expertise that cannot be accessed beyond the organizational boundaries. Shared services may provide access to expertise that is otherwise out of reach. Finally, there is a promise that sharing services may help increase efficiency, generate value, reduce costs, and improve services for the internal customers of the parent corporation (Bergeron, 2003). However, expectations of SSCs are often high, and sometimes not entirely realistic (Ulbrich, 2006). Furthermore, it is difficult to realize all the objectives, because the introduction of a SSC often involves a series of complex, interrelated objectives and involves a large number of stakeholders (Janssen & Joha, 2006). Shared services may vary with regard to the type of services being shared as well as the extent to which they are shared (Bergeron, 2003). They may range from sharing simple IT services (for instance, a web page) to sharing complete business processes or functions (for example, human resources management). Complete end-to-end services may be unbundled or one or more part(s) of a service may be concentrated in an SSC, keeping the services that require customer contact within the organizations while sharing other services. 2.2. Simulation and animation Many simulation software tools originated from static process mapping tools, which map business processes and assign responsibilities (Law & Kelton, 1999). More advanced process modeling tools make it possible to assign attributes to processes and carry out basic calculations of process times. By adding dynamic elements and statistic distributions, simulation tools make it possible to carry out a ‘what-if’ analysis to support the decision-making process. Careful simulation scenario design and statistical validation can be used to

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understand and evaluate alternatives, providing insight into the tradeoffs involved. The purpose of a model is to reduce complexity by eliminating details that do not affect its relevant behavior (Curtis, Kellner, & Over, 1992). To ensure that what we learn from a model also applies to the system under investigation, it should resemble the actual system as closely as possible. Simulation models describe how the behavior of a system affects its performance. One of the main characteristics of the simulation analysis is that it incorporates variability and interdependence factors to obtain an accurate outline of the process performance for hypothetical future situations (Law & Kelton, 1999). The systems contain variability with regard to the demand on the system (e.g. arrivals of customer permit or information requests) and the duration of processes (e.g. the time it takes to check data or provide customer service). Simulation makes it possible to include statistical distributions, thus providing an indication of the range and variability of the performance of the process. This is important in systems in which not only the average performance is relevant, but queue length as well. The latter can be used to check whether the performance drops below/exceeds a certain threshold level (e.g. permits exceeding a certain time). In addition, simulation models a number of decision points, the interdependencies of which affect the overall performance of the system. Simulation can incorporate statistical distributions to model the likelihood of potential decision-making options occurring. An important aspect of simulation is the ability to experiment with alternative arrangements (Shannon, 1975; Sol, 1982). The idea is to develop a model of the existing situation and, based on a diagnosis, develop one or more alternative models and find improved arrangements using ‘what-if’ analyses (which can be used to determine the consequences of sharing services). Simulation can thus be used to test and analyze various scenarios and decide which scenario is most promising. Most discrete event simulation modeling software is supported by animation, which can be created by dropping icons visualizing simulation components on the computer screen (Vreede & Verbraeck, 1996). Pegden et al. (1994) view animation as a dynamic picture containing graphics that change position, shape, or color against a static background. Animation of time-ordered sequences of tasks can take place against a static background of the lay-out of an organization. In this way, simulation can be used to support the decision-making process by communicating the results to stakeholders in a manner that is easy to understand. In addition, this can help visualize alter-

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natives, secure the acceptance of one of them, and rally support, and thus facilitate the adoption of shared services. 3. Adoption of shared services 3.1. Case study background In this study, we focus on three municipalities that explored the possibility of sharing services in response to a budget reduction and the need to improve their customer service provisioning. The municipalities are located in the same area and are considered mediumsized, although one of them is clearly bigger in terms of the number of employees. In addition, the larger municipality has a reputation of being innovative and is considered a front-runner when it comes to adopting new technology. Because the employees of the three municipalities already exchanged knowledge, sharing services was considered a logical next step. Dutch public agencies have considerable freedom in terms of designing their business processes, and can buy their systems from a variety of software vendors. At the moment, most public organizations use product-oriented information systems. Each cluster of products contains business processes that are supported by a unique system. Many municipalities consider their business processes as individual because they have evolved over time and have been customized to fit their particular situation. At a higher level of abstraction, the business processes are often relatively similar, and only really vary with regard to a limited number of aspects. The main differences have to do with the different types of permits and the sequence of activities. Although most permits are determined by politicians at a central level, every municipality is free to have its own, local permits. For example, a permit for cutting down trees was only available in two of the three municipalities under investigation. As far as permits determined at a central level are concerned, they may be different in terms of their technology and implementation, but they have the same objective and often involve similar business processes. This means that there are opportunities to share services and realize economies of scale. The three municipalities started a process to unbundle their services with the aim of concentrating them in new, semi-autonomous service centers. After analyzing their business processes, standardizing their business processes and services, and investigating the opportunities for reducing the number of information systems, the researchers were

Fig. 1. Architecture of the current situation.

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Table 1 Overview of activities Main activities

Full sharing

Partial sharing

Website hosting Content management Forms for requesting standard permits Forms for requesting specific permits Authentication and identification Billing and payment Receive permit request Check data Make decision Provide answer Communication Dealing with (written) objections Enforcement of permits

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Yes No Yes No Yes Yes Yes Yes No No No Yes No

asked to investigate which shared service arrangements would be preferred. The municipalities were especially interested in the extent to which they might be able to share their services and in the implications of such sharing. Based on an overview of simulation packages (Swain, 1999), ARENA (a software package for discrete-event simulation) was selected (e.g. Pegden, Sannon, & Sadowski, 1994). ARENA is a business-process simulation package, with a simple user-interface, that supports statistical analysis and experimentation, and enables the creation of animation models. All models were built using ARENA and executed to analyze and compare their performance. We began by mapping the existing situation (without shared services) in a conceptual model and a simulation model. The architecture of the animation model is presented in Fig. 1. The activities and staff of the service departments that would possibly be shared were modeled and animated. An new infrastructure was visualized to show the municipalities connected via a shared infrastructure. Because the municipalities want neither their names nor the real data to become public, we altered the data. Rather than using completely fictitious data, we multiplied all the data (number of staff, processing time, lead time, etc.) by a certain number. The municipalities were interested in evaluating two options which differ primarily with regard to the number of shared services. We called the two alternatives ‘full sharing’ and ‘partial sharing.’ With the former alternative, all activities that can possibly be shared are unbundled and concentrated in a semi-autonomous organization. With the latter alternative, some activities are shared while others are not. Services that would not be shared involved activities that are needed to ensure a close relationship with the customers and that (to a large extent) were designed differently with each municipality. A summary of the activities to be shared in the two alternatives is presented in Table 1.

To be able to carry out a quantitative evaluation of an integrated system, we identified a number of performance indicators in cooperation with the stakeholders. The main performance categories consisted of efficiency-related and service-related criteria and are shown in Fig. 2. In all, we defined six performance measures, three of which had to do with efficiency, with the remaining three focusing on service levels. In this paper, we define efficiency as the degree to which outputs are achieved in terms of productivity and input (resources allocated), while service levels are defined as the extent to which a supplying resource satisfies the customer requirements (which can be expressed in terms of error rate, resource availability or accuracy in meeting requested times). 3.2. Model construction In Fig. 3 the process model including its process steps is depicted (Banks, Carson, & Nelson, 1996). Validation and verification are crucial steps in every simulation process. The empirical input for the simulation models was collected by investigating documents, conducting interviews with managers and administrative staff of the three organizations, and carrying out measurements within the organizations. Moreover, we collected processing times by following documents through the system and measuring the time at discrete points. The data collected involved the distribution of the arrival of permits, the time it took to carry out activities, and the number of permits in queues at the desks of administrative staff. After completion, the model was verified and validated. The aim of verification is to demonstrate that a model is sufficiently accurate with respect to its internal functioning (Sol, 1982). Verification was carried out via a structured walk-through, which was performed by repeatedly generating one permit request with different properties, and by checking whether the processing and directions of the process flow were complete and took place in the correct order. Validation analyzes the extent to which a model corresponds with a real situation (Sol, 1982). We checked the model using replicative and structural validation. Replicative validation was performed by comparing the output variables of the simulation model to the values found in a reallife situation. Structural validity was carried out by asking the interviewees (who may be considered experts) whether the model and its behavior accurately represented reality. Most interviewees felt that the model was sufficiently accurate. After one interviewee commented that it was sometimes hard to follow the process flow, we reduced the speed of simulation, enhanced the flowing element, and showed the model again. One important topic of the validation was the integration between the systems. The simulation model assumes that systems are integrated and that information is exchanged seamlessly. The quality of the information and of the systems was not modeled, which limits the study. Nevertheless,

Fig. 2. Overview of quantitative performance criteria.

Fig. 3. Process model (based on Banks et al., 1996).

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Fig. 4. Architecture of the partially (left) and full (right) shared model.

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Table 2 Comparing the options Performance indicator

Unit

‘As is’ St. dev.

Mean

St. dev.

Relative change(%)

Sign?

Mean

Full sharing

0.37

0.46

37.84

Y

0.35

0.71

0.43 0.31 0.26

17.07 20.52 50.50

Efficiency-oriented Utilization Operational cost (number of staff) Working time

% # Hours

62.45 17 8.53

0.53

86.08 11 8.59

Service-oriented Permit delivery time Information request lead-time Tardiness

Days Hours %

57.64 15.64 16.93

0.49 0.25 0.33

47.80 12.43 8.38

the models were considered sufficiently accurate and valid to carry out the experiments. 3.3. Evaluation of the alternative arrangements After validating the model of the current situation, the two alternative models were created by reallocating the activities. The models were based on the assumption that the statistical distributions for the alternative models were the same as for the original models. This assumption may not be accurate, because a change in structure may affect the statistical distributions. In the partially shared model, as shown on the left side of Fig. 4, some staff remained at the municipalities, whereas in the fully shared model, shown on the right side of Fig. 4, all employees were transferred to the semi-autonomous service center. Also, a number of new activities were introduced with regard to coordinating the dependencies between the municipalities and the SSC. We conducted experiments using the same treatment and collected the outcomes. We then carried out a quantitative assessment of the performance differential by comparing the outcomes of the empirical ‘as is’ model with the outcomes of the ‘to be’ model. In the ‘as is’ and ‘to be’ models, we carried out similar experiments using the same conditions. We performed a t-test with a confidence level of 5% to check whether the performance indicators listed in Table 2 were significantly better than the current situation. We then tested the null hypothesis Ho: µ1 = µ2 for the alternative hypothesis H1: µ1 ≠ µ2. The results are summarized in Table 2. Both the full and partial service options are more efficient and have a higher customer-orientation when taking the performance differential rated as significant into account. The number of employees is reduced from 17 to 13 in the partially-shared arrangement, and to 11 in the fully-shared arrangements. In both cases, the number of staff is reduced, which results in significant cost savings. The utilization increases by concentrating staff in a service center. However, with regard to the working time, there are no significant differences. This can be explained when we look at the design of the alternative arrangements. Although the processes are standardized, there was no complete redesign. A redesign could have resulted in less working

Partly sharing St. dev.

Relative change(%)

Sign?

Mean

0.49

22.03

Y

N

76.21 13 8.43

0.61

1.17

N

Y N Y

49.41 10.42 9.18

0.41 0.22 0.31

14.28 33.38 45.78

Y Y Y

time. This is an indication that it may not be easy to realize some of the expected benefits without an extensive redesign. From a service-oriented perspective, the permit delivery time was reduced significantly in both arrangements, which meant that services are provided more quickly. It was only in the partially-shared option that the information request lead-time was reduced significantly, which can be explained when we consider the distance between the users and service centers. In the partially-shared alternative, users are able to contact staff more directly. In addition, the percentage of permits delivered after 12 weeks or more was reduced significantly in both arrangements. The situation whereby all services are shared shows greater improvement than the situation in which not all services are shared. When we compare the two alternative arrangements, we see that there are lower levels of efficiency gains when not all services are shared (partial sharing). The information request lead-time improved significantly only in the partial-sharing arrangement, which indicates that, when all services are shared, efficiency gains are made at the expense of service levels, whereas in the other case the situation is reversed. In addition to the qualitative evaluation, we also conducted a workshop with representatives of the three municipalities. Seven people attended the workshop and the models of the alternative arrangements and the quantitative outcomes were presented. The participants were then asked to evaluate the strengths and weaknesses of each option. The results of their evaluation are shown in Table 3. The table demonstrates that both arrangements have their advantages and disadvantages. The main advantages of the full sharing arrangement are the high levels of efficiency, the simplicity of the governance structure, and the ability on the part of the municipalities to focus completely on their core business. The disadvantages are longer response time, reduction in perceived service levels, possible alienation of users, and the feeling of the municipal public managers of that they have less influence over the shared-service center. The main strengths of the partial-sharing arrangements are the combination of efficiency and higher service levels, while its weaknesses are that efficiency, standardization, and cost-efficiency cannot

Table 3 Evaluating the strengths and weakness Full sharing

Partial sharing

Benefits

• Maximum profit of possible economies of scale • One stop shop (no decentralized presence) • Simple to understand responsibilities • No discussion about creating local systems • Municipalities can completely focus on their core-business

Disadvantages

• Alienations from users • Less reactive to users • Long response time • Less perceived service levels • Less innovative as no direct user feedback • Less grip on the functioning of the service center

• Limited customizations to the local situation • Personal contact and dedicated attention • Short distance to users • Quick reaction time • Public managers have grip on the service levels within their organizations • Larger influence of individual municipalities on functioning of the service center • Extra resources necessary • Per organization a one-stop shop • Standardization is limited to shared activities • Different interfaces between SSC and users (municipalities) • More complicated control • Still need to manage local parts; less focus on core business

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be fully realized, and the municipalities continued to be responsible for managing the services and activities. The table clearly shows that the workshop participants expect both options to have both strong and weak elements. As such, the decision as to which type of shared service arrangement to select is not obvious. The scope and the number of services that can be shared determine the possible efficiency and service level gains. However, realizing the promised benefits is not easy because implementation requires considerable changes in organizational arrangements, coordination of mechanisms and processes, and the allocation of responsibilities (Janssen & Joha, 2006). Using a simulation model makes it possible to show clearly which conditions have to be met to realize the benefits, and also provides insight into the variability and interdependence of the factors affecting those benefits. Simulation makes stakeholders more aware of the arrangements necessary to realize the expected benefits of shared services. 4. Discussion 4.1. Animation and simulation supporting adoption of shared services The purpose of simulation is to support the decision-making process with regard to alternative sharing arrangements, while the goal of animation is to facilitate communication among stakeholder groups, with the aim of providing insight into the possible implications of the alternatives. Ultimately, this should facilitate the adoption process. The simulation study was a time-consuming exercise that took months of work and had a lead-time of six months. Most of the work involved in creating a simulation model has to do with the collection of the statistical data used as input to create the models. A major problem is collecting the right information, because using the wrong data would render the outcomes of the model invalid. As Robinson (2002) has shown, there is direct connection between the quality of the outcome, on the one hand, and the quality of the content and the process, on the other. As such, conducting a simulation study is not easy, and its benefits should outweigh the efforts. There are various benefits in using discrete event simulation for the adoption of shared services. The simulation is based on a model that includes actual business processes as well as the human and technological resources needed to execute these processes. Another advantage is that discrete event simulation makes it possible to incorporate variability and interdependence factors in order to obtain an accurate outline of systems performance. Our simulation was able to predict process performance based on a number of measures, including lead time, resource utilization, and tardiness. Another advantage is provided by the visualization of the business processes against a static background, which provides an overview of and insight into the business processes in alternative arrangements. The translation of the shared services idea into business processes helped make the shared-vision concrete. During the session, the participants indicated that the simulation helped clarify the alternative arrangements and provided them with more insight into the consequences of the trade-offs. The SSC arrangement will be laid down in a framework contract setting out the rules and responsibilities of participants. Although such a contract provides some certainty, it cannot specify all the relevant components, and the partnership among organizations in a SSC arrangement typically involves high levels of trust. By simulating the alternative arrangements in advance, a better grip on the implications can be obtained and trust created. Moreover, the simulation increases people's understanding of the rules needed to ensure the smooth functioning of shared services once they have been implemented. The simulation, and the animation on top of the simulations, helps to understand the benefit, to open discussions and at the end create trust in the concept and commitment to adopt shared services. One interviewee

stated, “Finally we felt confident … the discussions with our future colleagues in the service center, centered around the animation, helped to define action.” The showing of the implications supported the creation of commitment of the shared-service concepts and made them tangible. As a result, the participants could define what was necessary to make it work. They started discuss conditions including the need for integration, decoupling of process steps, and standardization of forms and processes. The interviewees involved in this process found that the use of simulation models resulted in more discussion than before the start of this research project. As one of the public managers put it, “We did not think that any trade-offs would be necessary at the start, we were simply thinking that sharing would involve no risks and disadvantages.” By interviewing and involving people, and showing them the models, they become more aware (and better understood) sharedservice arrangements and their implications. For some of the workshop participants, the main benefits were related to the facilitation of ideas, creating understanding, and discussing the results by viewing the animation, instead of using simulations for a detailed quantitative analysis. As such, simulation may be a useful instrument with regard to adopting shared services and facilitating change by providing insight and generating discussion about its effects and implications. The use of simulation for adoption might vary due to cultural differences (e.g. Carter & Weerakkody, 2008). Simulation can be part of the adoption process, included in change management, business process (re)engineering, and transformation methodologies, and it can be used to support change and transformation before starting the implementation process. It may result in conscious trade-offs and can support discussions about the desired outcome. More research is needed with regard to the use of simulation and animation in change management methodologies. 4.2. Benefits of shared services A comparison of the alternative arrangements shows that there is no single arrangement that is best in all aspects. As such, it is of the utmost importance to design the shared services in such a way that the various strategic objectives of the organizations involved are carefully chosen, and to align the design with these objectives. In our case study, the municipalities needed to negotiate the objectives because they did not agree on what was more important: maximum cost efficiency or customer-orientation and service levels. Insight into possible objectives and their implications can help create the right level of expectation and make the right trade-offs regarding key design variables. In literature (e.g. Bergeron, 2003), efficiency and customer-orientation are often viewed as complimentary variables that can be accomplished at the same time. The partial-sharing arrangement shows that efficiency and customer-orientation are competing variables that to some extent need to be traded off. Indeed, in both arrangements efficiency (as well as customer-orientation) are improved in comparison with the existing situation. However, our study illustrates that the level of possible benefits depends on the type of arrangements. Although a SSC can improve both efficiency and service levels, they remain competing objectives. In the partial-sharing arrangement, improved service levels are accomplished at the expense efficiency gains in comparison to the full-sharing arrangement. This indicates that some of the expected benefits may not be easily realized (or even impossible to realize), and that they require a greater effort. In our case study, the organizations decided to keep the business processes for the shared services as close as possible to the existing business processes. The rationale behind this decision was that it would make standardization easier, that it would not require new information systems, and that it would generate less resistance. However, it was a decision that limited potential efficiency gains. After realizing a sharedservice arrangement that is accepted by the people involved, a next step may be to reengineer the business processes, adopting an incremental

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approach to the implementation of shared services. Future research can investigate whether the nature of an SSC will change over time and how the chronology of the steps affects the benefits. Because the municipalities involved had different objectives, there were discussions about which arrangements were preferred over other arrangements. In this study, we only provided insight into the implications of the alternative arrangements. Research is needed to identify change-management methods to cope with different (sometimes conflicting) objectives, resistance to change, and to create trust and analyze which specific arrangements are most appropriate and effective under the given circumstances. Also, a comparison with outsourcing arrangements can be made. Janssen and Joha (2006) found that many of the decision-making criteria involved in outsourcing arrangements are also found in the shared-services arrangements. More research is needed to investigate whether the criteria we used are also useful for other arrangements. 4.3. Service-oriented government The creation of shared services may be a first step towards creating a service-oriented government (SOG). Shared services require a new governance structure, as the ability to share services in public networks and the realization of the objectives of individual agencies within a network are influenced by the type of IT governance mechanism that is chosen (Janssen & Joha, 2007). Janssen and Joha (2007) found that governance mechanisms need to deal with agencies' individual (and different) interests, and balance service customization and commoditization to realize the potential benefits. The concept of a service-oriented government can be introduced in analogy to the service-oriented enterprise (SOE) (e.g. Cherbakov, Galambos, Harishankar, Kalyana, & Rackman, 2005; Janssen & Joha, 2008). In the SOE, enterprises are decomposed into elements and reorganized by reconfiguring the different elements provided by a range of companies. An SOE is an organization that consists of a number of cooperating services. These elements can be invoked as services and they need to be orchestrated by the core company in the network. The core company is the network orchestrator. The services are loosely coupled to create dynamic business processes and applications spanning organizations and heterogeneous information systems, which nevertheless offer the flexibility to adapt quickly to changing circumstances (Cherbakov, Galambos, Harishankar, Kalyana, & Rackman, 2005; Janssen & Joha, 2008; Khoshafian, 2006). In our case study, a limited number of services are unbundled and concentrated in shared service centers. In the future, even complex and sophisticated services may be unbundled and concentrated in a shared-service arrangement. Analogous to the SOE, the future vision in our case study may be that municipalities become the network orchestrators creating new business processes based on services provided by shared service centers. The creation of shared-service arrangements has only just begun, and the vision of a service-oriented government may become realistic as more and more services are unbundled and shared or outsourced. Various aspects need to be investigated, especially with regard to which services can be unbundled, which capabilities the municipalities should have in their new roles as network orchestrator, and how such arrangements can be designed.

23

benefits. In this paper, we have used business process simulation to evaluate two alternative arrangements, one of which facilitates efficiency over high service levels, while the other creates high service levels at the expense of efficiency. The main advantages of simulation in this study are related to the inclusion of statistical variability and interdependent factors that affect the performance, conducting ‘what-if’ analysis, and animating business processes to provide insight into the implications of alternative arrangements to the workshop participants. The simulation, analysis and performance indicators provide insight into the performance differences of the alternative arrangements. For several participants, the true value was in the animation of the alternative arrangements, which showed them what changes needed to be made in business processes and what the impact was on users, processes, and the allocation of responsibilities to the municipalities and service centers. This allowed them to discuss the strengths and weaknesses of the alternative arrangements and supported the adoption of shared services. Our findings contribute to the debate on the advantages and disadvantages of alternative shared service arrangements. The main advantages of the full-sharing arrangement are the high levels of efficiency, the ability to save costs by reducing staff numbers, the simplicity of the governance structure, and the ability on the part of municipalities to focus completely on their core business. The drawbacks are an increase in response time, a reduction in perceived service levels, possible alienation of users, and public managers' feeling that they have less influence on the management of the shared service center. The main advantage of the partial-sharing arrangement is the realization of both efficiency and higher service levels. However, the higher service levels are created at the expense of efficiency and standardization when compared to the full-sharing arrangement. Moreover, the services still have to be managed by the municipalities. Government organizations are increasingly working together in service networks and shared services, which means that further research should investigate change-management strategies. Furthermore, the implications of decisions regarding organizational design and implementation should be investigated by analyzing a large number of shared-service arrangements and all the aspects of the vision of a service-oriented government. We need to understand its nature, the organizational and technological aspects involved, the way it is implemented, and the contextual factors influencing its adoption and diffusion. Moreover, it would be interesting to investigate to what degree our simulation model could be used to evaluate other SSC and outsourcing arrangements. Appendix A. Replicative validation Replicative validation was conducted by comparing the output variables of the simulation model to the values as found in reality. The test was carried out by using an unpaired t-test for small samples with a 95% confidence level on the difference between the means of the output variables and the empirical means. The results of the replicated validation are shown below. The table shows that there are no significant differences between the experimental and empirical values.

Performance indicator

Unit

5. Conclusions Attempts to create shared-services in government organizations have only recently begun to be made, and there are many research questions that need to be answered. Simply viewing a shared-service arrangement as a particular business model with particular implications is too deterministic. There are many variables that may influence the benefits and the resulting value. During the decision-making and implementation process, trade-offs need to be made that affect the

Experiament

Empirical

Mean

St. dev.

Mean

St. dev. 1.99 0.42

N N N

1.37 0.89 1.35

N N N

Efficiency-oriented Utilization Operational cost (number of staff) Working sitme

% # Hours

62.45 17 85.53

0.37 0.53

61.77 17 8.71

Service-oriented Permit delivery time Information request lead-time Tardiness

Days Hours %

57.64 15.64 16.93

0.49 0.25 0.33

58.04 15.43 15.92

Sign?

24

M. Janssen et al. / Government Information Quarterly 26 (2009) 15–24

Appendix B. Screenshot of Arena

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