Slide 1

Ian Harris, Director, The Z/Yen Group

[An edited version of this article first appeared as "Double Act", Accountancy Age,  VNU Business Publications (1 December 2005) page 20.]

Charityshare is a joint venture initiative between NSPCC and The Children’s Society to co-source IT services. This award-winning initiative was conceived in 2003 and was formally launched in January 2005. It is hard for charities to provide IT services economically, efficiently and effectively. Even large charities are often too small to enjoy sufficient economies of scale. Hence many are looking at outsourcing and offshoring to attempt to reduce costs, but this is sometimes at the expense of quality. This co-sourcing venture offers the charities a best of both worlds; the economies of scale that outsourcing would provide while retaining the benefits of an in-house provider who really understands how to service the charities.

Ian Harris, from risk/reward managers Z/Yen Limited, who helped the charities bring Charityshare into fruition, explains the venture. He also explores the pros and cons of co-sourcing initiatives. Ian’s thoughts are not just relevant to charities; public sector and commercial organisations should take note of the opportunities co-sourcing initiatives of this kind might bring.

If The Kids Are United

Charityshare is a joint venture initiative between NSPCC and The Children’s Society to co-source IT services. The two charities, in a first for the charity sector, have merged all operating services including helpdesk, training, purchasing and technical support (both field and centrally based), but not confidential databases. The charities have set up a limited company called Charityshare to manage the joint venture.

As large national charities practicing in associated fields, NSPCC and The Children’s Society have administrative infrastructures with many points of similarity. Combining their information technology functions offers them advantages in terms of a greater ability to respond to changes in technology and a reduction in administrative costs (leading to greater funds being available for charitable objectives).

It is hard for charities to provide IT services economically, efficiently and effectively. Even large charities are often too small to enjoy sufficient economies of scale. Hence many are looking at outsourcing and offshoring to attempt to reduce costs, but this is sometimes at the expense of quality.

Hence the idea of Charityshare, a joint venture that co-sources IT services. This idea offers the charities a best of both worlds; the economies of scale that outsourcing could provide while retaining the benefits of an in-house provider who really understands how to service the charities. The initiative has been welcomed by the Charity Commission as demonstrating the sector's ability actively to collaborate for the benefit of those they seek to serve. In September 2005, the venture was highly commended for Best Use of Technology at the Charity Awards. The judges took pains to state that "the rest of the sector should take note of what has been done here". In fact, all sectors should take note of this approach.

Stacking Up The Numbers

The combined Charityshare budget at the outset was £3.26M. This budget, which included the cost of 56 full-time equivalent staff, serviced 2830 desktops across the two organisations. The breakdown was roughly: NSPCC 2/3rd , The Children’s Society 1/3rd of the budget, staff and desktops.

But the charities can save more money and better improve IT service quality by sharing IT services than either could by operating separately. There is an estimated 25 per cent saving achieved over three years equal to £800,000 per annum across both charities, once achieved. This will mean more money to spend on children and young people. In summary, from joint input costs of c£3.26M per annum, we estimate that the resulting co-shared service organisation will have costs of c£2.4/2.5M per annum at current scale and prices after three years.

Several months into the venture now, the anticipated savings are significantly ahead of schedule; Charityshare now hopes to achieve those savings within 18 months to 2 years of launch.

Savings have been achieved by upgrading to broadband and eliminating duplicated IT infrastructure and telecommunication links. This has been combined with the merger of services and reducing staff levels.

Importantly, measurable service quality indicators are improving, as the benefits of combining forces enables the use of better tools and techniques for service delivery. Charityshare is currently undertaking user satisfaction research to test whether the service quality is well received. Initial research and informal feedback so far is largely very positive and encouraging. Indeed, the strongest message from the users in the most recent survey was that they wanted to know more about Charityshare. Imagine!

Pros and Cons of Co-sourcing

Outsourcing and/or co-sourcing are difficult decisions which depend on the particular circumstances of your company or organisation. The table below sets out the key points that informed NSPCC and The Children’s Society and that might serve as lessons or tips to anyone considering co-sourcing or outsourcing.

The Pros The Cons

Co-sourcing enables you to achieve the desired economies of scale without losing the benefits of an in-house feel to the IT service

It is more time consuming to plan, establish and get right a co-sourcing venture from scratch than it is to outsource – important if you seek a speedy route to quality improvement.

Charityshare’s co-sourcing structure, carefully planned and agreed specifically with HM Revenue and Customs, is VAT neutral between the parties, whereas conventional outsourcing creates a VAT charge.

The process of agreeing a co-sourcing structure which has the desired business and fiscal outcomes requires up front investment of time and money, probably to a greater extent than outsourcing.

Co-sourcing requires management to retain an active interest in the venture throughout its life. This might sound like a “con” rather than a “pro”, but in fact outsourcing arrangements often go awry as a result of management indifference once the deal is done. A properly constructed co-sourcing requires you to manage properly and build collaboration into the governance structure.

It is usually far harder to extricate yourself from a co-sourcing arrangement than from an outsourcing deal; a problem if the arrangement is ill-conceived or goes sour. However, both outsourcing and co-sourcing arrangements should be well conceived and should only be entered into with a good stock of goodwill for future use.

It should be easier to win over the hearts and minds of staff who will TUPE into a co-sourcing venture than when you TUPE staff in conventional outsourcing.

It can be harder (and/or slower) to achieve culture change and business change amongst staff transferred in a co-sourcing than in conventional outsourcing.

Conclusions and Lessons For Everyone

Charityshare is managing to achieve significant savings and service improvements using a co-sourcing model. In Charityshare’s case, this means more money and better IT services to support children and families who need help. In commercial organisations an equivalent venture would mean cost savings and better IT services for the business.

Co-sourcing is not a quick fix. Quite the opposite, it is a medium to long-term commitment and you need to be in a position to take time to structure it and plan it right (both NSPCC and The Children’s Society had good IT services before; now they are better and cheaper) and you need to choose your co-sourcing partners carefully.

Several charities and indeed other organisations have been monitoring Charityshare with a view to either joining Charityshare or forming a similar consortium. Charityshare itself is willing and able to have other charities join the venture. It is restricted by its objects to partner with charities only. But other types of organisation, including commercial organisations, could form similar ventures. Co-sourcing is still very rare in the UK, but not so rare in other countries (e.g. Canada). Perhaps on this occasion charities are leading the way and others will follow the innovative lead taken by NSPCC and The Children’s Society with IT co-sourcing.


Ian Harris is a Director of Z/Yen Limited, a risk/reward management practice, dedicated to helping organisations prosper by making better choices (www.zyen.com).  Z/Yen clients include blue chip companies in banking, insurance, distribution and service companies as well as many charities and other non-governmental organisations.