Courtesy of SAP's Aura Bhattacharjee, below is a transcript of his speaking session on 'Enterprise Architecture in Mondelēz, one of the largest snack ...
Shared services is the provision of a service by one part of an organization or group, where that service had previously been found, in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key here is the idea of 'sharing' within an organization or group. This sharing needs to fundamentally include shared accountability of results by the unit from where the work is migrated to the provider. The provider, on the other hand, needs to ensure that the agreed results are delivered based on defined measures.
What Differentiates Shared Services from Centralization?
Shared Services has the mindset of a business and views the rest of the organization as their customers. As a service organization, their accountabilities are delivering value (balancing cost and service levels), as well as identifying ways of further leveraging their operating model. The operating model is built on three primary capability levers: People, Process, and Technology. While centralizing the services may be a component of Shared Services, the broader objective is to gain efficiencies beyond consolidation through a methodology of continuous improvement that results in more efficient and standardized processes, with much of the activity automated through enabling technology.
Generally, Centralized Services tend to be heavily focused on compliance and control while Shared Services have added accountable of value creation through a leveraged model as well as managing to agreed service levels.
What are some of the Primary Benefits of a Shared Services Model?
What has been the Evolution of Shared Services?
The typical evolution of a Shared Services organization has followed a track similar to the one below:
Is there a Difference between Shared Services and Business Services?
As Shared Services organizations matured and continued to integrate broader services that crossed front, middle, and back office, as well as included decision support services, many integrated Shared Services organizations re-branded themselves as Business Services. Much of this re-branding was a result of overcoming existing impressions that Shared Services related primarily to transactional activities as it did in its earlier stages.
Today, many Shared Services organizations are providing higher-level services that would be considered by some as Business Services and there are many Business Services organizations that provide only transactional services.
Where Does Outsourcing Fit in to the Equation?
Outsourcing spans from a large strategic company initiative to a purely tactical sourcing decision for selected activities.
Companies that would like to move to a model that brings the benefits of Shared Services quickly but lack adequate internal resources (some combination of human, technology, capital) may choose a strategic “lift and shift” strategy. This can bring large immediate and guaranteed benefits to the company. Outsourcing providers are usually located in low-cost regions so benefits come primarily through labor arbitrage, as well as through gaining greater scale from the provider. Companies that opt for a “Lift and Shift” solution may have a Shared or Business Services organization that will oversee the provider and continue to work on process standardization and optimization in conjunction with their outsourcing partner.
Companies that generally have had initial success with a captive Shared Services organization tend to view outsourcing as a selective tactical sourcing decision. These are usually more mature Shared Services organizations or those that have the resources and scale to improve their current model internally through the capability levers of People, Process, and Technology. The timeline for benefits realization is usually slower, but provides greater value creation over time as activities can be “improved and moved” when the optimal time is determined, if moved at all. Detailed methodologies for end-to-end process improvement are critical for these Shared Services organizations, as well as one or more outsourcing business partners who are ready and willing to integrate the activities while the Shared Services organization shifts the sourcing seamlessly from internal resources to an external provider.
With the proliferation of excellent outsourcing providers, it is critical that a company and their Shared Services organization choose their sourcing strategy wisely depending primarily on an assessment of their current state of capability levers as well as their economic needs (immediate short-term return versus longer-term residual benefits). The best-case scenario is to have the option of multiple delivery models using both internal and external resources and choosing what is best for a given set of circumstances and objectives.
What do the terms Captive, On-Shore, Near-Shore, and Offshore refer to?
One of the benefits of Shared Services is the flexibility of being able to move work where it can be best sourced based on a combination of variables (cost, service levels, and skills required, etc.).
Regardless of where the work is located and who the resources are employed by, it is critical that Shared Services maintain accountability for service delivery, cost, and overall process ownership and be the operating unit responsible for overall coordination and results.
What are some of the Biggest Issues Faced When Implementing Shared Services?
What are the Key Success Factors for Shared Services Organizations?