Choose your shared-service model based on value
The term “shared service” is frequently used to describe a business processing center that services a number of different business units or departments. Shared services may be centralized in terms of physical location or virtual linkage of distributed business capabilities.
Consolidating common service needs with a centralized delivery model provides lower cost and economies of scale and scope benefits. The high-volume business processing of shared-service centers further drives process innovation, improvements in service quality including supporting specialized customer service roles, and even harmonization of operations and culture.
With so much promise, what typically goes wrong? Comparing examples of failed or aborted shared-service organizations, there are some striking similarities: lack of understanding of value before setup; lack of clarity about what’s in and not in during setup and evolution; poor governance and muddled management; and rotten execution.
If like many enterprises you are sold on the benefits of shared services, addressing this series of key questions can help you avoid the potential pitfalls.
The first burning question is why share? Clarify the business goals and expected benefits of embarking on a shared-service initiative. The important thing here is to manage for overall business benefits, rather than only concentrating on benefits most attractive to the CIO.
Services shared can run across all functional areas of the business. Based on their complexity and risks, shared services can be grouped into three generations:
- First generation: Consists of utilities and commodities that are required to do business, such as IT network and data center services, payroll and purchasing.
- Second generation: Are more embedded in the main supply chain of the business, such as logistics, strategic sourcing, customer satisfaction management, compliance and application development.
- Third generation: Must be created as new enterprise capabilities, such as process centers of excellence, innovation centers and advanced analytics services.
The order of implementation for these generations depends on the urgency of an enterprise’s business needs and the potential value to be derived. As a general rule, start simple with the first generation. If this fails to deliver value, advancing to the second or third generation will just further complicate and worsen matters.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.