In recent one-to-one conversations and roundtables with Italian, U.K. and U.S. local governments, Gartner discussed sharing and centralization of IT services. Especially when governments have little money to burn, the business case seems a no-brainer: consolidation generates economies of scale, which will increase productivity and ability to deliver standard quality of service - provided that you can make shared service governance happen (see "Shared Services in Government: Getting It Right").

But what about the ICT companies supplying services to the government? Centralization means - at least in the first phase - the insourcing of activities that separate government business units (now the shared service unit customers) might have previously sourced from external providers, and in the long-term it surely means more consolidated bargaining power that will squeeze suppliers' margins. Suddenly the CIO (or whoever is leading the shared service program) finds herself/himself trapped between the political mandate to reduce IT costs and the political mandate not to harm the economic health of the private sector. In an ideal world, politicians would have built a solid business case, by identifying a scenario where the political return generated by private sector economic development is much higher than the operational efficiency and constituent service gains (see "How to Measure the Public Value of IT"). In a less than ideal (and real) world, politicians often put pressure on CIOs for the wrong reasons, such as:

• Favorable attitudes towards outsourcing. Elected officials and executives might have a strong view about ICT not being the core business of government. They purport that by outsourcing ICT services to external contractors, more government resources could be redeployed to front-office tasks that directly add value to the citizens. Even assuming the external contractor has the government sector expertise necessary to deliver IT solutions that support the desired business outcomes, the argument may be weak from a strict economic point of view. If an ICT shared service or centralized unit is more efficient and effective than an external supplier, the lower cost of delivering the service will free up resources to be invested in better services for the citizens, whereas the outsourcing contract will waste them. A rational decision can only be made by comparing, on a case by case basis, the total cost of ownership and the quality of service.

• The "next Silicon Valley" dream. Politicians often have a view that public procurement can provide enough market opportunity to prompt local entrepreneurs to start up ICT SMEs that will blossom into successful multinationals that they can champion in their next electoral campaign. With the exception of some domains, where public procurement is not a "big enough" market, but is the "only" market - such as defense, public safety or healthcare - governments are rarely the leading-edge buyers that can stimulate ICT innovation. And even in those rare cases, public procurement alone is not enough: it must be complemented by a lively academic research community, venture capital and low level of bureaucracy in order to establish and finance new ventures.

• Political agenda. In some cases, elected officials might not be able to understand the value of managerial efficiencies generated by shared services, because they are solely focused on their political vision. In other, less fortunate, but not less frequent cases, elected officials want to protect their political turf and gain electoral support from large companies and local associations of SMEs.

In the long-run, supply-side innovations such as cloud-based services, that are transforming the service consumption models and fee structures (see "Shared Services in Government: Obscured by the Cloud?"), or demand-side innovations such as social communities, that will prompt constituents to consume services from organizations outside of traditional public administration boundaries, will determine the destiny of what will be delivered by shared services units, or by external providers. But, as John Maynard Keynes used to say,"Long run is a misleading guide to current affairs. In the long run we are all dead." Insourcing or outsourcing won’t kill anyone, but might well shake government CIOs' careers!

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Your statement that "governments are rarely the leading-edge buyers that can stimulate ICT innovation". Is very true. This is also coupled with the fact that the procurement processes in place in government seems to be much more protracted and as such is often prohibitive for smaller organisations.