Alternative service delivery options (see "Alternative Delivery Models: The First Taxonomy") provided by high-tech vendors in the areas of software as a service (SaaS) and business process outsourcing (BPO), intertwine with shared services to offer small local councils new options to manage their applications.

In fact, during recent conversations with U.S., Australian and European cities and townships of less than 20,000 residents, a common challenge was highlighted by Gartner clients: The authority must provide a minimum set of services, such as code enforcement, parks and recreation, utility billing, tax assessment, and, in some cases, fire, police and court services, but can rarely count on more than 200 employees, which usually means less than 10 IT staff. As a result, managing all horizontal back-office and industry-specific applications on the premises can become ineffective from two points of view. First, the IT staff might not have the time, budget and skills to support all applications maintenance and upgrades, or the underlying infrastructure. On top of that, the few line-of-business employees, rarely dedicated full-time to a single task, do not have the time to acquire complete knowledge of the applications; thus, they cannot not leverage them to their utmost potential, making the return on investment even harder to achieve. Local small authorities are thinking outside the box to solve these challenges.

Alternative delivery of applications through application hosting or SaaS are being considered to reduce the burden on resource-constrained IT departments; however, the business users need to consider thoroughly the implications in terms of organizational and process change, as, especially in the case of SaaS, there is limited ability to customize features and functions to specific requirements (see "Getting ERP into Small Governments and School Districts"). Furthermore, market offerings are not always mature in terms of breadth and depth of functionalities, such as fund control and grants management. As a result, local governments are considering these options for fairly standardized processes, such as accounting and billing.

Purely outsourcing the application, though, does not solve the other side of the challenge: the lack of critical mass and focus of business users. BPO can help counter that. In fact, instead of dedicating one or two line-of-business full-time equivalents to standardized tasks, such as property tax collection, utility billing, payroll, and accounts payable management, local councils can buy the service at a fraction of the cost from external providers. In this case, careful analysis must be done on how much control of performance levels, relationship with constituents, and privacy of data is desirable to give away; or on determining the cost of acquiring skills to manage the relationship with the vendor so that the loss of control does not materialize.

Last, but not least, shared services can help tackle the whole critical mass issue, by creating an organization jointly owned by multiple small authorities. The unit can dedicate line-of-business and IT resources to the specific task, increasing productivity, effectiveness and innovation while ensuring that councils have direct control over performance, constituent relations and privacy. Unfortunately, a lack of political commitment, poor governance and weak project, change and risk management skills often hamper the success of shared services.

In essence, because application sourcing is not a tactical matter for small local governments, a clear strategy must be formulated that considers total cost of ownership, availability of IT and business skills, political attitude toward outsourcing, contract management and collaboration across agencies.