Shared services: why is the higher education sector so late to the party?

There has been plenty of recent trumpeting of the benefits of shared services in higher education. Ian Diamond of the Universities UK efficiency and modernisation task force stated that "shared services could save millions" while Steve Butcher, head of procurement and shared services at the Higher Education Funding Council for England (Hefce), was reported as predicting a "first wave" of shared services projects this summer.

Of course, shared services have been around in higher education for decades. JANET, the joint computer network for the research and education communities, is co-owned by the Association of Colleges, GuildHE and Universities UK; the Higher Education Statistics Agency (HESA) was set up by agreement between government, the higher education funding councils and the universities and colleges in 1993; and the four English university regional purchasing consortia are each co-owned by their member institutions.

All fulfil the classic definition of shared services.The multimillion pound savings estimated to be delivered by the UK research councils' shared services vehicle over the next 10 years also include significant savings. But shared services don't have to be grand projects to be beneficial. One higher education institution we know of is planning to contract repair and maintenance services from a housing association, along with two further education colleges, saving the university alone up to £300,000 per year.

So there are some genuine savings to be made and this latest 'relaunch' of shared services in higher education has seen £1m of a £20m university modernisation fund earmarked for shared services pilots, identified in feasibility studies by Hefce.

Outside higher education there is a long and chequered track record for shared services in the local authority, health and – increasingly – the secondary and primary years education sectors. These projects have had a variable rate of success but by and large they have been put in place during a period when the higher education sector stood still. So why are we so late to the party?

A traditional problem has been the VAT treatment of services provided by a shared services venture. Often these services attracted VAT which the universities could not recover. The good news: the clarification of the VAT rules in the 2012 finance act should not only avoid shared services arrangements in the higher education sector giving rise to irrecoverable VAT, but also provide an opportunity for universities to save VAT that is currently being paid for certain services and which cannot be recovered.

Further legal issues have arisen around staff becoming the liability of the service provider under the Transfer of Undertakings (Protection of Employment) or TUPE regulations, which affect not just employment terms and conditions, but also pensions rights and liabilities.

Coupled with union concern over transfers, these issues put an end to many prospective shared services projects in the past. There have been practical concerns too, with loss of control, a mismatch of objectives and the complexity of the process also seen as obstacles.

Perhaps the true differentiator between higher education and early adopting public sectors is the increasingly competitive marketplace in which universities operate. This marketplace is international in its reach and covers competition for students (both home and international), research funding, infrastructure funding and various other increasingly scarce resources.

While the latest comprehensive spending review has been relatively benign to the Department for Business, Innovation and Skills (BIS), its share equates to a reduction of more than 3%. Graeme Bond, head of research funding at BIS, may still report the perception within government that higher education is "well-funded", but we can be sure of continued pressure on Hefce and the public research funders from Whitehall.

As it stands, universities compete increasingly both locally and worldwide, and with the public and private sector. Metrics of performance are measured and reported like never before and have a genuine impact on the financial viability of the institutions concerned. If there is pressure to become more efficient in a marketplace, it would be uniquely bizarre for competitors to share functions that differentiate them from their peers.

Maybe these cultural issues are the ultimate obstacle to wider-scale shared services collaboration in the higher education sector. But this same competition should also be the motivation for smart institutions to examine the best opportunities to reduce costs. With careful judgement and planning, shared services can do just that.

Martin Vincent and Vincent King work in the education team at Weightmans LLP and Andy Davies is director at the London Universities Purchasing Consortium

This content is brought to you by Guardian Professional. To get more articles like this direct to your inbox, become a member of the Higher Education Network.