Companies and government agencies alike are moving their activities online. The rising curve of online service delivery adoption has raised expectations of service levels. Yet many transactions in the public sector are often still provided by systems that were not intended, designed and built to support the exponential user and data growth. Subsequently, the rise of online service delivery not only requires new investment but also adds new risks in making these systems secure for an online world with its increasing levels of cyber crime. Both the private and the public sectors are under pressure to reduce the costs associated with delivery of transactional services. But since our last paper on the topic was published, three significant trends have emerged: - The increased urgency to reduce fraud and non-compliance - The changing nature of Business Process Outsourcing (BPO) and Shared Services strategies moving away from pure cost reduction to transformational outsourcing - The rapid rise of Cloud technology, with dramatic changes to delivery models Read our paper to learn more about how government can learn from the private sector in order to tackle these issues.

1. Public Sector the way we see it
Rising to the New Challenges
of Transactional Services in
the Public Sector

2. © 2012 Capgemini. No part of this document may be modified, deleted or expanded by any process or means without prior written permission from Capgemini.
2

3. Public Sector the way we see it
Contents
Introduction: A Fresh Perspective 4
Setting the context: twice as good,
in half the time, for half as much 6
Public Sector
Transactions 8
Leveraging Private
Sector Experiences 10
Summary 18
Rising to the New Challenges of Transactional Services in the Public Sector 3

4. Introduction: A Fresh Perspective
In 2008 Capgemini published a public sector are often still provided
paper on financial transactional by systems that were not intended,
services in the public sector1. In it we designed and built to support the
explored the general trends regarding exponential user and data growth.
transactions in the public sector and Subsequently, the rise of online
compared these to the private sector service delivery not only requires new
to see what lessons might be learnt. investment but also adds new risks in
This is an updated version of the making these legacy systems secure
earlier paper as we felt the need to an online world with its increasing
refresh our views on how the public levels of cyber crime.
sector could learn from the financial
services industry. Both the private and the public
sectors are still under pressure to
Our close relationship with the reduce costs associated with the
financial services industry has shown delivery of transactional services. But
it has comparable challenges with since 2008 three other significant
the public sector. For example, the trends have emerged. The first is the
financial services industry has the increased urgency to reduce fraud
challenge of multi-channel customer and non-compliance. The second
interaction and shareholders seeking is the changing nature of Business
efficiency. In the public sector Process Outsourcing (BPO) and Shared
there is pressure from the public Services strategies, moving away from
and the politicians to cut budgets pure cost reduction to transformational
and spending while improving the outsourcing. The third trend is the
customer interaction and experience. rapid rise of Cloud technology, with
Both sectors have industrialized dramatic changes to delivery models.
processes with transactions that are In the following sections we will briefly
replicated for billions of events, with introduce these three trends and
a similar need to reduce the cost of explore them in further detail in the
these processes. ensuing chapters.
Since we published our paper in In the wake of the financial crisis
2008, much has changed. Due to the the concepts of risk and fraud
financial crisis and the subsequent prevention have moved much higher
austerity measures, governments in up the agenda in both sectors. Banks
the developed countries now need to and other financial institutions are
balance cost cutting with maintaining faced with increasing regulation to
or even improving service levels. minimize systemic risks and stricter
Developing countries face the growing requirements on capital and liquidity,
challenge of having to deploy new, while public sector organizations are
complex and scalable transactional under increasing political pressure
service capacity for their citizens. to scrutinize tax yields and benefits
Companies and government agencies payments. In developing countries the
alike have continued to move their need to reduce fraud and increase tax
activities online. The rising curve of revenues is equally great, although
the online service delivery adoption this is driven more by the need to
1Rising to the challenge of Financial Transactional has raised expectations of the service increase revenues to fund government
Services in the Public Sector, Capgemini, 2008 levels. Yet many transactions in the services in a rapidly growing
4

5. Public Sector the way we see it
environment. The changing economic private finance and accounting This paper examines how private
conditions have also influenced sector the trend of offshoring and transactional service providers
customer behavior. For instance, outsourcing business processes (banks, other financial service
according to a UK survey in 2009, the has continued. What has changed providers, insurers) have responded
number of people who considered it following the global financial crisis to these three trends in order to
acceptable to file a fraudulent claim is that the strategy has moved from find commonalities and transferable
during a recession rose by 27% as offshoring and outsourcing for lessons to benefit transactional service
compared to 2008.2 reasons of costs and compliance provision in the public sector. We do
control to more comprehensive not believe that the nature of both
As a way of tackling fraudulent business outcomes. Sourcing sectors and their challenges are fully
and non-compliant behavior, both strategies, whether implemented interchangeable. Yet we do think that
the private financial sector and the internally through shared services providing cost efficient and effective
public sector have begun to invest in or through an external partner, transactional services is vital in the
advanced fraud detection solutions. need to imply cost reduction and public sector and that private sector
Moving away from manual fraud standardization as well as creating experiences can be leveraged in order
detection processes that largely added value from the back office to enhance public sector delivery.
depend on the personal expertise of processes to drive insight beyond
staff, new investigation solutions are transaction processing.4 Similarly
based on risk scoring and predictive in the insurance sector, there is a
analytics to identify fraud patterns. growing realization that outsourcing
decisions need to shift from a pure
Increasingly this means that fraud cost saving focus to a more holistic
detection is moving to the front of business transformation approach.5
the process through the use of risk
scoring models that combine rule- Cloud technology has not only seen
based engines, data mining, database a rapid rise in adoption, but has
searches predictive modeling and moved well beyond the technological
(social) network link analysis.3 perspective. More and more Cloud
By applying these methods, client conversations are about how it will
behavior can now be modeled and change business models instead
predicted more effectively. There has of just the IT estate. For financial
been a growth in variables that are institutions Cloud can offer a
now part of the analysis, such as the number of advantages, including cost
economic climate, unemployment savings, usage-based billing, business
rates, geography, demographics, etc. continuity, agility and Green IT. Cloud
These environmental variables in technology in the financial sector is
concert with specific empirical and witnessing a gradual transition from
historical collection and payment on-premise to Cloud-based services. 2Insurance Fraud More Acceptable During
history create more and more holistic This is especially the case for general Recession, Insurance Daily Article, 2009
behavioral models that significantly business applications such as customer 3Global Trends in Life Insurance: Claims,
enhance the ability to detect and relationship management (CRM) and Capgemini, 2011
prevent fraud and/or non-compliancy. enterprise resource planning (ERP).6 4The Finance Transformation – The Outsourcing
The public sector has also started to Perspective, Capgemini, 2011
In our 2008 paper we explored how explore Cloud, realizing that new 5Global Trends in Life Insurance: Policy
BPO experiences from the private approaches are needed to deliver Administration, Capgemini, 2011
sector could benefit transactional services that are ‘twice as good, in half 6Cloud Computing in Banking, Capgemini, 2011
service delivery in the public sector. the time, for half as much’.7 7The Government Cloud: Time for Delivery,
What we have seen is that in the Capgemini, 2011
Rising to the New Challenges of Transactional Services in the Public Sector 5

6. Setting the context: twice as good,
in half the time, for half as much
For this paper we will use the agencies are transforming themselves
definition of a transaction as defined in an attempt to keep up with the
by Graham Walker. In his paper expectations of the modern citizens
“A Quiet Revolution: Government’s around rapid, customized and
Transactional Services”8, Walker sets secure online transactions with the
out a simple generic mapping of the government.
transactional process. Transactions
can be readily mapped on to this Yet this transformation needs to take
process and typically take place in the place at a time when revenue streams
public sector for three main reasons: that are open to governments have
become tighter. The fiscal situation of
n Where the citizen fulfils financial almost all the advanced economies has
obligations to the state—for deteriorated and economic downturns
example, the payment of income are now limiting how much the tax
taxes, municipality taxes, sales taxes, burden can be increased. So, the
excise duties, road taxes, fines and taxpaying public is shrinking as
penalties, health and social insurances. populations are aging worldwide. This
has resulted in the multiple challenges
n Where the state fulfils financial of delivering services better, faster and
obligations of the citizen—for cheaper.
example, payments of social security
benefits, unemployment benefits, Efficiency & Effectiveness
agricultural payments and pensions.
This challenge can be turned around
n Where the state acts as a service and the opportunity seized to
provider (in some instances a transform the way that governments
monopoly service provider) and deliver services. The public sector
the citizen purchases products has to look at how it can take out
or services from the state—for cost and drive efficiencies. For
example passports, visas, discounted example, staffing typically takes
municipal travel passes and student up a high percentage of the costs
loans. for running government services
and there is an opportunity to take
While on the conceptual level advantage of this by:
these processes have remained the
same, public sector organizations Re-examining the current business
n
are now faced with changing processes that support transactions,
customer expectations and new for instance the back office
technologies at a time of political functions;
and economic strain. The rapid
growth in the use of the internet Looking at how embracing new
n
and social media means that the technologies can reduce the costs
customer requirements regarding per transaction and improve the
the exchange of information, customer experience;
accessibility of the government
services, data re-usage and so forth Looking at how standardizing and
n
8Graham Walker, A Quiet Revolution: are fundamentally different than sharing of business processes and IT
Government’s Transactional Services, IPPR, 2005 what was a decade ago. Public sector
6

7. Public Sector the way we see it
can create economies of scale with insurers to lower administration cost-
other government agencies; and per-policy compared to insurers with
in-house operations. Additionally,
Looking at the option of outsourcing
n outsourcing has allowed insurers to
certain routine tasks so that efforts convert from fixed costs to variable
can be redirected to more costs, which can further lower overall
specialized, effective tasks. operating expenses. By outsourcing
back office functions such as
Higher value through policy administration, insurers are
specialization able to focus more on their core
competencies of sales and marketing,
Given the pressures that governments underwriting and asset management.10
are faced with, it is possible to foresee In our section on BPO/Shared Services
a fundamental change to the way and Cloud delivery we explore how
government services are structured. public sector agencies can benefit
In essence it will be a move from from these specialized experiences in
government agencies ‘doing the private sector.
everything’ to a new role consisting of
‘being focused, efficient and better’.
Specialization allows for a level of
investment in creating high quality
services for users that is difficult to
achieve when governments need to
operate multiple smaller services. This
multiplicity results in a dilution of
investment for any particular service.
A similar role change can be
observed within the private sector.
Many banks have found that the
efficiency of the traditional integrated
‘produce-to-deliver’ or ‘doing
everything’ payments model is no
longer optimal. Traditionally, banks
handle everything, from developing
propositions to producing payments,
managing client relationships and
offering a whole series of other
services to their clients. Through a
number of procedures (regulation,
liberalization, commoditization and
technological development) banks
now adapt their business models by
specializing, outsourcing or sharing
certain services.9
9World Payments Report 2011, Capgemini, 2011
Global sourcing has also allowed 10Global Trends in Life Insurance: Policy
Administration, Capgemini, 2011
Rising to the New Challenges of Transactional Services in the Public Sector 7

8. Public Sector Transactions
Pooling and Sourcing of administered and processed by
Services separate government entities, are
increasingly being pooled and
In the UK, the Netherlands and soon blended together. In some cases
the US the tax agency is now the transactional services are being
provider of social security benefits, sourced to the tax agency, handling
tax credits and other payments. In payments that used to be paid out
Denmark the tax agency is responsible by social security agencies. This is
for vehicle registration and the in line with the broader trend of
associated road taxes, while France is providing a joined-up government to
currently preparing a vehicle tax to be the citizen. What has changed is that
collected by the Ministry of Ecology. technological developments (such
The UK has recently announced the as Cloud) now allow a fundamental
merger of around 50 separate social acceleration in the delivery of joined-
benefits into one Universal Credit up transactional services.
system, while also merging the
operation of income tax and National Types of Transactional Services
Insurance Contributions.
Looking across the public sector we
All these examples show that have found that there are significant
traditional transactional services, overlaps in the back office functions
Figure 1: Mapping of Transactional Services in the Public and Private
Sectors by Repetitiveness and Frequency
Simple
homogeneous Internet
banking
Tax
Benefits payment
payout Inter-bank
Invoicing
2 3 clearing
Payment Loan Receivables
of fines management & payables
Records
Passport management
Repetitiveness
application
Finance &
Debt mgt & accounting
enforcement
Barth/ death
registration Benefit Tax return &
application validation
1
4
Business
Tendering
intelligence
Colour coding:
Financial Sector
Risk Public Sector
management
Complex,
variable
Far fewer than Annual Frequency Far greater than
national population (order of magnitude) national population
8

9. Public Sector the way we see it
responsible for transactional share information, it will be inevitable jointly) seeking to boost transaction
processes. There is commonality that citizens will have to submit their volumes and scale to expand existing
among the transactional services personal information over and over businesses and generate additional
operated in some of the key delivery again when transitioning with their revenues and/or facilitate new
units of the government and it is government. business models.11
clear that there is a great potential for
sharing and aggregation of services. Moving towards Standardization Breaking down transactional services
This would naturally result in cost into their basic building blocks
efficiencies and economies of scale. Government transactional services shows that they are standardized and
have more in common across common in organizational and process
Their position within the framework countries than is thought. In many terms and that their lowest common
in Figure 1 will vary between countries governmental agencies denominator is information and its
countries, but the question is how involved with transactions have processing. An information-centric
to select suitable business areas already taken the business approach approach to optimizing an organization’s
and processes for improvement. of standardizing and merging their people, processes and technology
In those that occur frequently underlying processes. is the only way to guarantee that
(quadrant 1) preventing waste is the structures and processes will be able to
business driver, since inefficiencies As shown earlier, some governments drive the performance and efficiency
are multiplied. Conversely, the are in the process of merging improvements in both the financial as
potential for economies of scale lies payment processes by making the well as the public sector.
here. The more repetitive processes tax agency the principal payer of
(quadrant 2) are those that could social security benefits. But it is not
most easily be industrialized leading only financial transaction processes
Capgemini is the partner for
to reduced costs. So those financial that are merging. For a long time,
the French Ministry of Finance.
transactions that make the best Belgium has been successful with
The multi-year change program,
targets for improvement are areas ‘authentic registrations’, making the Copernic, has delivered:
such as invoicing and tax and benefit basic information components such as
payment, both of which are highly user and authorization management • Online tax declaration
repetitive and occur frequently systems, citizen identifiers, digital capabilities for up to 11
(quadrant 3). The transactional signature cards and secure electronic million citizens;
services that qualify for industrialized mailboxes transferable across • Simplification of citizens’
pan-government solutions (when government. France has successfully tax affairs and transactions
looking at cost efficiencies) are those created core business data for its through different channels;
that are repetitive and undertaken by citizens and businesses, leading to • A system which has better
interoperability, scalability
multiple agencies. a single and universal data view of
and business alignment,
the taxpayer. The single view has
while also being much easier
The scale of the transactional processes allowed the tax agency to be data to maintain; and
operated by advanced industrialized hub for citizens, businesses and other • Authentic registrations,
nations is enormous and growing government agencies. allowing taxpayer and civil
rapidly in developing countries. servants with fresh, accurate
At this level, any imperfections in Standardization and merging of and consolidated data -
individual processes are amplified transactional processes can also be reliability of business data
by numerous factors. When observed in the financial sector, the national and transversal
multiple agencies replicate financial reasons include improving efficiency, repositories.
transactional departments, there are reducing costs and streamlining the
vast opportunities to be more cost more automated elements of the
efficient and effective. And when payments value chain. Standardization
11World Payments Report 2011, Capgemini, 2011
government agencies do not effectively is fueled by banks that are (sometimes
Rising to the New Challenges of Transactional Services in the Public Sector 9

10. Leveraging Private Sector Experiences
Transactional services in the private BPO and Shared Services
sector have a lot in common with
those in the public sector. Both are The pooling of business functions
about handling transactions on a into silos for greater standardization,
massive scale, seeking to balance automation and control is an ongoing
cost optimization with customer trend in the private transactional
satisfaction. But apart from generic service sector. The rule of thumb has
observations, we can see that both been that, if tasks can be documented
the private and public sectors are to an 80/20 level or higher, if they are
reacting to the three trends we repetitive, and if they can be learned
described in our introduction. in no more than six weeks given a
BPO/Shared Services, Fraud and certain skill level, then they can be
Yield Management and Cloud outsourced. Private sector experiences
Computing are rapidly affecting have shown that sourcing can be
the way transactional services are applied to transactional activities, but
delivered. In this chapter we examine far less to high value-adding activities
private sector experiences with the such as decision making, strategy or
three trends to see how they can be policy. Private sector experience has
leveraged to enhance public sector also shown that transactional activities
transactional service delivery. account for 80% of the headcount.
Figure 2: Typical Division of Business Processes into those that can be pooled into Shared Services or Sourced, and those that cannot.
• Receive invoice
• Scan invoice
• Check invoice
• Automatic purchase order
based invoice matching • Receive payments
• Resolve invoice without • Match customer
purchase orders with customer payments with invoices
• Raise standard accruals • Identity disputes
• Maintain vendor master data • Identify collection
• Make payments ‘problem accounts’ • Book standard accruals
• Resolve vendor queries • Forward non-paying • Register assets • Close
problem accounts to • Manage back accounts • Depreciate assets • Reconcile general ledger
100% either a collection • Reconcile bank according to with sub-ledgers • Produce
agency or a lawyer statement depreciation policies • Prepare statutory accounts standard reports
50%
30% 30%
20% 20%
Accounts Accounts Cash and Fixed Financial Management
payable receivable banking assets accounting reporting
20% 30% 20%
30%
• Set credit policy • Communication of • Make physical • Post non standard accruals 50%
Shared activities • Resolve customer expectations regarding inventories and write-offs
Non-shared activities queries cash movements • Perform physical • Perform business reviews
tagging • Liaise with tax authorities
10

11. Public Sector the way we see it
Figure 2 provides a clear overview by the need to reduce overheads,
of the typical scope of private sector banks are also looking at other
Shared Services.12 aspects of their financial transactional
processes, including risk management,
Financial institutions usually follow asset management and securities. In
a structured decision matrix in order this environment, the imperative for
to qualify what would be best to keep payment providers going forward will
in-house and what would be best to be to distinguish their propositions
outsource. A typical decision matrix and demonstrate their value through
will look at the interplay of: increased specialization.
n complexity – the more complex a So the response to the changes in
process, the more likely it is to be the payment landscape has been
delivered in centers of expertise to reassess how services — back,
specialized in the processing of a middle and front office — are
single function; structured. But the underlying trend
has been towards BPO, Shared
n the relationship with the core Services and specialization.
business – the higher the strategic
impact of the process, the more n Similarly to companies in the energy
likely it should be retained and telecommunications sectors
in-house; (which have been responding to
regulation, liberalization,
n critical mass – the higher the commoditization and technological
volumes and the potential for advances), banks have specialized
standardization, the easier it is to their business models as
achieve economies of scale (see also underlying products and services
Figure 1); and have become more standardized.
n the local impact – the higher the n Many banks find that the efficiency
local impact (regulations, language, of the traditional integrated
flexibility of support), the more ‘pro¬duce-to-deliver’ payments
likely the activity is to be kept in model is no longer optimal. The
the country, rather than in a central traditional approach in which banks
hub.13 handle everything—from developing
propositions to producing payments
The irreversible move away from and other services—may no longer
cash and several national and supra- prove optimal when dealing with
national regulatory initiatives14 have the current industry challenges. As
forced banks to transform their the payments value-chain
payment services and the underlying disaggregates, a sourcing model
value chain.It is not a surprise that becomes more likely. 12The Finance Transformation – The Outsourcing
banks have particularly looked at Perspective, Capgemini, 2011
how they can take out cost in their n Following from this there is a long- 13The Finance Transformation – The Outsourcing
operations. The focus has been on the term trend in the banking industry Perspective, Capgemini, 2011
repetitive, highly manual processes to assume entire new specialist 14Such as SEPA in Europe and the Durbin
that can be automated to lower roles. As the payments industry Amendment that cap credit card swipe fees
overheads and protect profits. Driven progressively becomes more in the US
Rising to the New Challenges of Transactional Services in the Public Sector 11

12. Figure 3: A move to Specialized Transactional Service Delivery by Government Agencies
Policy & Policy &
Regulation As-a- Regulation
Service
Registry Registry
Assesment, fraud Assesment, fraud
management, management,
bespoke solutions bespoke solutions
As-a-
Managed
-Service
Transaction Transaction
From “doing everything”... ...to “being focused, efficient and better”
commoditized, some financial Fraud and Yield Management
institutions are transforming
themselves into Wholesale Transactions in the private financial
Payments Provider (WPP) or Retail sector closely resemble paying benefits
Payment Services Provider (RPSP), and credits in the public sector. For
which requires fundamental shifts example, as is the case in the insurance
in vision and propositions.15 sector, the processes of registry,
assessment and transaction (Figure 4),
If governmental transactional agencies are beset with a growing challenge of
apply a similar approach of BPO, fraudulent claims. The public sector is
Shared Services and subsequent under political pressure to protect or
specialization this would imply that: even increase the tax yield and to cut
(benefit) spending. So for the public
Core policy, regulation, assessment
n sector, it is worth taking a close look
and fraud management functions at how the banks and insurers tackle
will remain the core responsibility the similar issues of Fraud and Yield
of government agencies that provide Management.
transactional services,
As the adoption of non-cash payments
but instruments grows, so does the potential
for fraud in the financial sector. The
Citizen-based functions— registry,
n payments industry is pursuing various
transaction and all accompanying technological innovations to tackle
citizen contacts and interactions, can fraud and enhance more secure non-
be commissioned ‘as-a-service.’ This cash transactions—and thereby bolster
could mean sharing services with consumer confidence. The adoption
other parts of the government (registry of new chip technology on payment
services) and/or joining forces with cards (EMV chips) has already proven
the third-party providers to handle to be effective with a massive drop in
(bulk) transactions. This will free up fraud cases. Attention is focused most,
civil servants to focus and specialize on however, on e-commerce transactions,
core functions where they can add the especially as electronic thefts are
15World Payments Report 2011, Capgemini, 2011 highest value (Figure 3). increasingly hitting the headlines.16
12

13. Public Sector the way we see it
But it is not just technical innovations n Manual examination of claims to
and developments that change the identify fraud involves a high risk of
nature and propensity of fraud. In human error and does not offer
our introduction we mentioned that protection against new fraud
the economic downturn has changed techniques.
people’s perception to filing false
claims. Unsurprisingly, since 2008 n The legacy solutions remain difficult
the topic of fraud has gained more to integrate, making it hard to
attention within the private sector. detect suspicious activity across
According to a North American survey product lines.
in 2010, 50% of the life insurers
reported that fraud detection and n Older technologies result in poor
identification improvement were top data quality due to their inability to
concerns for them, compared to 29% of integrate third party data.
life insurers in a similar 2008 survey.17
New investigation solutions based on
Taking the example of life insurers, our risk scoring and predictive analytics
analysis has shown that they have long allow more granular analysis of data to
been using out-dated technologies with identify fraud patterns and thus allow
limited fraud detection capabilities. In for early fraud detection. The scoring
the past, the sector also demonstrated models use a combination of rules-
an overall low interest in the based engines, data mining, database
acquisition of new tools to help identify searches, predictive modeling, and
fraud through advanced data-mining network link analysis (including social
techniques. However, this started to media) to identify the possibility of
change in late 2008 and early 2009 as fraud in an insurance claim. Enterprise-
insurers were put under pressure to wide data warehouse systems that
seek new methods of reducing losses. capture historical information from
fraud cases and integrate information
The current challenges related to from third-party sources have made
fraud detection have driven increased the fraud detection processes more
implementation of advanced powerful.18 Better fraud detection
technologies in the life insurance processes (Early Fraud Detection)
industry for three main reasons:
Figure 4: Benefits of Early Fraud Detection at Insurance Companies19
Reduce
Reduced Fraud
Claim Cost Investigation
Time
Reduce
False
Positive
16World Payments Report 2011, Capgemini, 2011
Better control over premium 17Gartner, Inc.: “Insurers Must Become More
increases as losses are minimized
Aggressive at Addressing Underwriting and Claims
Fraud”, Kimberly Harris-Ferrante, June 2011
Low Premium Rates + improved Claims processing
18Global Trends in Life Insurance: Claims,
Capgemini, 2011
Improved Customer Satisfaction 19Global Trends in Life Insurance: Claims,
Capgemini, 2011 – Capgemini Analysis 2011
Rising to the New Challenges of Transactional Services in the Public Sector 13

14. Figure 5: Technology Aided Fraud Identification22
Customer Blacklists Risk profiles Validation
Legitimate Claims
All Claims
Validated
}
Suspected
Matched
✖ ✓
Fraudulent Claims
leads not only to lower claims of fraud that has already been
expenses, it also increases customer committed – so called downstream
satisfaction (Figure 4). activities. In downstream processes,
once repayment is made, recovery
Public sector agencies involved in of payment requires time and cost,
large transactional volumes also mostly for people concerned, and
need (near) real-time insight in may not result in success, especially
possible fraudulent or non-compliant in identifying the fraud cases.
transactions. Just as insurers and Keeping this in mind, it may be
banks, tax and welfare organizations tempting to take the radical approach
handle millions of transactions on a of ‘prevention being better than cure’
daily basis. Fraudulent transactions and limit investments downstream.
account for millions of Euros of However in the public sector this is
uncollected tax and unjustly paid out unlikely to be a successful strategy as
benefits. As an example, the HMRC many tax frauds (in contrast to many
states the UK tax gap to be around banking, credit card or insurance
€ 40 billion 20 while social benefit frauds) require a combination
fraud is estimated to be around € 1.4 of upstream and downstream
Billion.21 techniques in order to be successful.
In general, the private sector’s Drawing from the experiences in
main focus is on fraud prevention the financial sector, public sector
by identifying high risk activities organizations should implement new
and by refusing the provision of a technological solutions in order to
service or product, or by flagging execute their tasks around:
high risk cases for investigation
before a transaction is completed n Monitoring inbound citizen
20UK tax gap narrows to £35bn, says HMRC, – so called upstream activities. communication to identify
BBC, September 2011 This is in stark contrast to the fraudulent transactions through
21DWP Website, December 2011 public sector approach, which rules, heuristic measures and
22Fraud Detection in Healthcare from Capgemini is mainly focused on detection, forensics.
and Palantir, Capgemini, 2011 investigation and prosecution
14

15. Public Sector the way we see it
n Applying data in conjunction with Private sector experiences show that
agile business policies and business technological solutions can help staff Connect is HMRC’s strategic
rules across: to compile customer ‘black’ or ‘watch’ risking tool that cross-matches
lists and profile risks ‘upstream’. one billion internal and third
l Advanced data validation; Combining technology with skilled party data items to uncover
and focused staff will significantly hidden relationships across
organizations, customers and
l Predictive models and enhance fraud detection capabilities
their associated data links,
segmentation; (Figure 5). Private sector experiences
such as bank interest, lifestyle
show that better fraud detection indicators and stated tax
l Networks linking data items capability lowers the cost of service liability. It captures information
and customers; delivery and enhances customer from 30 different data sources,
satisfaction (Figure 4). and transforms the data into a
l Risk and propensity models. standard format for Connect
Cloud Computing analytical and ‘spider diagram’
n Using input from data and advanced visualization tools. HMRC
analytics to design and execute Financial institutions are moving statisticians produce target
outbound public campaigns aiming cautiously towards the Cloud, with profiles and risk and intelligence
investigators generate
at driving desired customer IT spending on Cloud technologies
campaigns and cases for
behaviors. expected to be €17 billion in 2012.23
investigation. Automated feeds
Although the private sector has into HMRC’s case management
In the public sector better Fraud identified the benefits of Cloud system allocate work to the
and Yield Management capability is computing (including cost savings, correct caseworkers, and
now more important than ever. The usage-based billing, business their feedback further refines
likelihood of fraud in those developed continuity and agility), there is no intelligence in Connect.
countries that are affected by the silver bullet for all the demanding
economic downturn is growing and business needs. Capgemini’s analysis
all governments desperately need the has shown that banks tend to adopt
uncollected tax yields. As we have a gradual evolutionary approach to
seen in the BPO/Shared Services Cloud computing services, evaluating
section, sourcing and specialization each project based on the type of
can free up staff to focus on applications and nature of the data.
assessment and fraud management. Lower risk projects that are likely to
Figure 6: Cloud Computing Adoption Propensity at Banks
Delivery Channels
Client Sales and Servicing
Customer Analytics and CRM
Enterprise Resource Planning (ERP)
Enterprise Content Management (ECM)
Corporate Functions
Core Business Functional Systems
Retail Banking Corporate Banking Investment Banking
Payments Asset and Wealth Management Funds Management
Treasury Reconciliation Collections
Enterprise Data
IT Development
Application Infrastructure
23Cloud Computing in Banking, Capgemini 2011
Cloud Computing Adoption Propensity High Medium Low
Rising to the New Challenges of Transactional Services in the Public Sector 15

16. move first to a Cloud model include Cloud solutions are also becoming
customer relationship management enablers for public sector agencies
and enterprise content management. seeking to introduce standardization,
Higher risk projects will involve core cost efficiency and increased service
business functional systems, such as levels. Typically, payments processing
wealth management or core banking. and underlying systems have been
Figure 6 shows Capgemini’s analysis designed and implemented in
of which functions within banks are isolation, all with their own separate
applicable for moving to the Cloud. applications and maintenance.
Cloud technology has the potential
In the longer term, Capgemini to reduce the cost of these business
expects banks to have an application processes and the IT that supports
portfolio mix of on-premise and them by disaggregation, consolidation
cloud-based services delivered across and sharing.
a combination of private, hybrid,
and public cloud-based deployment Public sector agencies can enhance
models. We believe the share of the transactional and citizen-facing
Cloud services will gradually increase services of the banks by adopting
in the service mix. Private clouds Cloud. Using (private) Cloud
are expected to increasingly become technology to transform separate
the deployment model for Cloud transactional processes into a pan-
services among banks, giving financial government function is about:
institutions full control through
ownership and operations of their n Streamlining the current application
Cloud systems.24 and process landscape;
24 Cloud Computing in Banking, Capgemini, 2011
16

17. Public Sector the way we see it
n Smooth migration, maintaining software management and
Launched in 2002,
reliability and consistency; infrastructure.
eProcurement Scotland (ePS) is,
in essence, a private Cloud.
n Maintaining service levels within the The ‘as a Service’ concept is both With Capgemini as a long-time
same underlying process; the key enabler and, because it partner, ePS has evolved into a
also creates demand simply from scalable, ‘as-a-Service,’ multi-
n Moving towards virtualization, the potential benefits it offers, a tenant and partially
consolidation and potentially driver. Significant business benefits pay-per-consumption system.
outsourcing; and include reduced costs as a result Indeed it was a Cloud before
of the virtualization of the services the term was widely used. The
n Increasing the flexibility of legacy and a reduction in license costs ePS platform now processes
systems and reducing the cost of for software because most Cloud more than €4 billion per year,
representing about one third
introducing (legislative) changes. software and platform solutions are
of the total public procurement
sourced on a pay-per-use basis. The
influencable spend. According
Cloud technology also has the concept also reduces the amount of to Audit Scotland, the system
potential to make transactional infrastructure required because this generated annual savings of
services better and more customized too can be sourced from the Cloud, € 528 million in 2008/09. Over
by improving communications with which means saving potential on IT 1.6 million transactions go
citizens and other public sector maintenance capacity. through the system annually,
agencies. This can be done by: and it is used by over 65,000
Cloud solutions ensure flexibility registered users and more than
n Innovating with new delivery towards changes in legislation, 93,000 suppliers.
models; product portfolio and political This Cloud platform has enabled
ePS to take an evolutionary
demands. The improved reuse of data,
approach to replacing existing
n Engaging and enrolling the harmonization of processes through
procurement arrangements. The
customer in the service delivery standardization, and the easier sharing idea of ePS was revolutionary in
chain; of existing data ensure that fewer the way it reconfigured existing
mistakes are made. Massive cost practice, but wisely it did not
n Better response to user demands, reductions are also anticipated on data demand an instant revolution for
policy changes, and changing entry, whilst improving quality. all of the Scottish public sector.
customer behavior;
The ‘as a Service’ concepts can
n Enabling services that meet the facilitate the division between routine
customer’s desire to experience tasks and specialist tasks. This will
joined-up services from mean that for routine tasks, in which
government; process steps are standardized, the
agency can make use of reusable
n Enabling the blending of government data with little human interaction
services with social networks or other and intervention. As such, recurring
private services; and standard bulk processes (such as
registration and transaction, Figure
n Being agile in creating new solutions 3) can be transformed to a ‘Service’
using Cloud composing services and sourced from Cloud providers,
from existing elements.25 whether within government or
through commercial third parties.
Earlier we discussed how BPO and This will not only make delivery
Shared Services allow the public of the transactional service more
sector agencies to source and handle efficient, but will enhance assessment
routine tasks jointly or ‘as a Service.’ and overall quality. This will free the
The ‘as a Service’ concept of Cloud staff within the agency and they will
computing means that services, be able to specialize and focus on
platforms and storage/infrastructure compliance and other functions where
solutions are ordered, accessed and they can add the highest value.26
used over the internet, eliminating
the need for local implementations, 25The Government Cloud: Time for Delivery,
Capgemini, 2011
26The Journey towards the Tax Office of the
Future, Capgemini, 2011
Rising to the New Challenges of Transactional Services in the Public Sector 17

18. Summary
In this paper we have described how Although we do not believe that the
Fifty US states are seeking the three dominant trends of sectors are fully interchangeable,
affordable solutions for BPO/Shared Services, Fraud and Yield we do feel that experiences can be
modernizing their unemployment Management and Cloud are changing transferred for mutual benefit. As a
insurance legacy systems transactional service delivery. We have direct consequence of the difficult
to increase flexibility and examined the impact on the private fiscal situation, now and in the
efficiency. Our current solution—
sector, along with its response and foreseeable future, we believe that
Capgemini’s UI (unemployment
how the public sector can benefit from many public sector transactional
insurance) solution—is a shared,
hosted software solution
these experiences. service providers can benefit from
that optimizes fundamental private sector experiences. Capgemini
processes such as registration, The trend to source and/or share has the experience and capabilities to
benefits administration, tax business processes has been ongoing help the public sector agencies in their
calculations, appeals process since 2008, although the focus has journey to enhance vital transactional
management, overpayment shifted from pure cost savings to service delivery, and make their
processing, adjudication, tax more holistic business outcomes. services better, faster and cheaper.
audits, collections, accounting, Connected to this trend is the role
and reporting. This type of shift by financial service providers, Capgemini is one of the world’s
solution can be built upon and
moving away from doing everything foremost outsourcing providers
rolled out to multiple state
to more specialist roles. We foresee a and leaders in the BPO services. We
agencies simultaneously. We
are currently implementing the
similar evolution for the public sector have undertaken more than 60 BPO
Capgemini’s UI (unemployment delivery organizations, commissioning implementations for top companies
insurance) solution in the State common processes and bulk including Zurich Financial Services
of Nevada, for the Department transactions ‘as a Service’ while policy and HSBC. Our BPO services range
of Employment, Training, and setting and fraud detection remain the from traditionally outsourced
Rehabilitation (DETR). focal point of the agency. The topic processes to those at the core of
of fraud and yield management has the business. In the public sector,
become more important than ever, Capgemini has been responsible for all
both in the developed and emerging IT systems and IT-led transformation
countries. Since the public sector services at HMRC in the UK,
is facing fraud challenges similar to including managing a multi-sourced
the private sector, leveraging new environment. Capgemini is currently
technologies to enhance employee implementing the Capgemini’s
fraud detection and yield enhancement UI (unemployment insurance)
capabilities on urgent basis. Finally, solution in the State of Nevada, for
we observed that although adoption the Department of Employment,
is gradual, the promise of Cloud in Training, and Rehabilitation (DETR).
terms of enhancing transactional Capgemini’s UI (unemployment
service delivery is enormous. Private insurance) solution is a BPO
sector experience shows that customer solution that optimizes fundamental
relationship management and transactional processes, such as
enterprise content management has the registration, benefits administration,
most propensity for Cloud delivery. tax calculations, appeals process
Public sector organizations have a management, overpayment
huge potential to move their citizen processing, adjudication, tax audits,
interaction and transactional service to collections, accounting, and reporting.
the Cloud, using ‘as a Service’ models
for facilitating of cost efficiency and Capgemini has the offerings and
specialization.
18

19. Public Sector the way we see it
experience to help our clients design more relevant. Capgemini believes
their Fraud and Yield Management that enterprise systems should not
strategies – our business experts move wholly and rapidly into the
have deep knowledge of underlying Cloud, a view that is based on more
processes and compliance approaches; than five years of Cloud computing
our technology experts have the experience in the private and public
ability to master available solutions sector. Instead, we favor the adoption
and develop new state-of-the-art of hybrid models where enterprises
systems in partnerships with SAS, initially retain centralized IT systems
Oracle and Palantir. Capgemini but target services toward Cloud
is the partner of many banks and platforms. Capgemini offers its
insurers who face the challenge of clients a strategy and transformation
transactional fraud, illegitimate claims roadmap that highlights the
and money laundering. We also context and building blocks of this
enable healthcare providers and tax journey, encompassing the enabling
and welfare agencies to reduce their technology and the new systems and
exposure to fraud and to protect yield. infrastructure around the new delivery
concepts. We are able to leverage our
For businesses and organizations private sector experience (such as
today, the question of where, when with the Royal Mail Group) to public
and how to leverage the benefits of sector agencies that have the ambition
Cloud computing has never been to reap the benefits of Cloud delivery.
­­
About Capgemini
®
®
With around 120,000 A deeply multicultural organization,
people in 40 countries, Capgemini has developed its own way
Capgemini is one of the world’s foremost of working, the Collaborative Business
providers of consulting, technology and ExperienceTM, and draws on Rightshore®,
outsourcing services. The Group its worldwide delivery model.
reported 2011 global revenues of EUR
9.7 billion. Together with its clients, Learn more about us at
Capgemini creates and delivers business www.capgemini.com
and technology solutions that fit their
needs and drive the results they want. Rightshore® is a trademark belonging to Capgemini
Rising to the New Challenges of Transactional Services in the Public Sector 19

20. www.capgemini.com/public
Contact
Ian Pretty
Global Tax & Welfare Lead
Ian.pretty@capgemini.com
Jan-Jaap Harkema
Managing Consultant,
Capgemini Consulting
jan-jaap.harkema@capgemini.com
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