Dear Tim,

I enjoyed our belated New Year lunch. A vigorous discussion as you challenged me on the points I raised in my Xmas letter. So let me capture here the essence of the strategic observations I made.

This vision of cost savings through government shared services that you are suddenly now so enthusiastic about: the sceptic in me says, a recession-driven deathbed conversion. The informed observer in me says: a half-decade of apparent departmental commitment to shared services has crystallised into one simple reality of 'You come and share my services' - and little actual progress.

My first challenge has to be to your attitude that there is something special about the majority of the services that government consumes and delivers. I recognise that many frontline services will be distinct in their requirements, supporting the work of social services teams in the UK's inner cities for example. But much of the underlying machinery of government is very little different from the underlying machinery of the modern corporation: means for effective real-time communication, document and case management, collaboration and team working tools, HR services including record keeping and payroll, a range of operational financial services...

The challenge lies in the phrase 'my services'. Fifteen years ago I was completing a major outsourcing of ICI's telecoms services infrastructure. The pharma business had been floated off as Zeneca. My inherited IT management team was all for maintaining the existing (ICI) shared telecoms services model at an estimated investment of £1.5m for dividing the systems in two between ICI and Zeneca, and a consequent increase in tariffs of 20 per cent. But by going to the newly competitive telecoms services markets we were paid £3.5m for what we handed over as a going concern, and tariffs dropped by 20 per cent.

Your defensive feint is always security. There is an assumption that government alone has to work with secure operations. As an experienced senior in the private sector I take genuine offence.

I told you the story of Bechtel: global engineering major, 45,000 employees and the same number of contractors on the payroll as it builds dams, airports and motorways. They work to reward stakeholders in a very competitive environment, and with Chinese and Russian rivals a growing threat, security is an absolute necessity for survival.

Join Bechtel as a contractor on Project A and your sign-in identity to its extensive internal systems defines your rights and responsibilities precisely. Access to what you need to deliver Project A - fine. Access to special Bechtel IP to better deliver on Project A - fine. Attempt to copy it to your laptop - blocked. Access to what is happening with Project B or D - blocked. Contract ends midnight April 30, 2010? Just try accessing it at 00:01 on May 1.

In contrast, a private-sector colleague, on returning to HM Treasury three years after last working there as a contractor, was able to breeze in on his original pass.

It is not that security is not a very real issue; it is that UK government security needs are in no way unique. Google was fighting off attacks by the Chinese government as we lunched the other day. We are all in the same boat. We are all committed to delivering secure operations. The tools we all need in this increasingly virtualised age are there, and are being continually developed and strengthened.

I have two concerns with the objective of shared services.

Why invest such effort (=cost) and time (=delay) in creating shared services when so many of the services required are already available for direct sourcing? The 'underlying machinery' I listed earlier, from effective real-time communication to HR and financial services, are all available as services on demand off the web.

Also, the transactional volume of government operations is not that large. Creating shared payroll or desktop services within the boundaries of HMG will yield significant volumes for rationalisation now there are real economies of scale, and offer major reductions in operating costs.

You challenged me with the view that the major element of government services are about 'serving the citizen'. Your implication was that this segregated such services into a special category.

My response was to observe that the decade just passed has seen an explosion in private-sector delivery of online services to the consumer. These consumer services folk know plenty about 'serving the citizen' where that citizen is their everyday client.

Rather than focus on a vision of shared services developed within the narrow boundaries of HMG, look to the wider marketplace already there, ready to serve - and the potential of partnering with firms that have already pioneered the best ways to create and deliver effective consumer and enterprise services.

With my best wishes,