Shared services

From Wikipedia, the free encyclopedia

Shared Services are the convergence and streamlining of an organisation’s functions to ensure that they deliver the organisation the services required of them as effectively and efficiently as possible. This often involves the centralising of back office functions such as HR and Finance but can also be applied to the middle or front offices. A key advantage of this convergence is that it enables the appreciation of economies of scale within the function and can enable multi function working (e.g. linking HR and Finance together, where there is the potential to create synergies). A large scale cultural and process transformation is often a key component of a move to Shared Services. This transformation often results in a better quality of work life for employees.

Shared Services are more than just centralisation or consolidation of similar activities in one location. Shared Services mean running these service activities like a business and delivering services to internal customers at a cost, quality and timeliness that is competitive with alternatives.

1 Commercial Structures
2 Location Variations
3 Benchmarking and Measurement
4 Shared Services in the Private Sector
5 Shared Services in the Public Sector
6 New Trends in Shared Services
7 External links
8 See also

[edit] Commercial Structures

A Shared Service can take a variety of different Commercial Structures. The six basic Commercial Structures include:
Unitary - A single organisation consolidating and centralising a business service
Lead department - An organisation consolidating and centralising a business service that will be shared by other organisations
Joint Initiatives (Internal) – Agreement between two or more organisations to set up and operate Shared Services
Strategic Partnerships (External) – Contractual arrangement with third party provider for a range of services which include Shared Services
Joint Venture (JV) – Joint Venture legal entity between organisation and third party provider
Outsourcing – Third party provider takes full responsibility for managing and operating the service

[edit] Location Variations

There are three basic location variations for a Shared Service including:
On-shore – Work is carried out in the same country but at a different location
Near-shore – Work is carried out in a close location (e.g. Europe to the UK)
Off-shore – Work is carried out anywhere in the world that is not on-shore or near-shore

This is not just to take advantage of wage arbitrage but to appreciate the talents of particular economies in delivering specific service offerings.

[edit] Benchmarking and Measurement

In establishing and running a Shared Service, benchmarking and measurement is a necessity. Benchmarking is the comparison of the service provision usually against Best in Class. The measurement occurs using agreed Key Performance Indicators (KPIs). Although the amount of KPIs chosen differs greatly it is generally accepted that fewer than 10 carefully chosen KPIs will deliver the best results.

Benchmarking can be used to achieve different goals including:
1. To drive performance improvements using benchmarks as a means for setting performance targets that are met either through incremental performance improvements or transformational change.
- Strategic: with a focus on a long term horizon; and
- Tactical: with a focus on the short and medium term

2. To focus an organisation on becoming world class with processes that deliver the highest levels of performance that are better than those of its peer group.

[edit] Shared Services in the Private Sector

The Private Sector has been moving towards Shared Services since the beginning of the 1990’s. Large organisations such as the BBC, BP, Bristol Myers Squibb, Ford, GE, HP, Pfizer, Rolls-Royce, and SAP are operating them with great success. According to the English Institute of Chartered Accountants, more than 30% of U.S. Fortune 500 companies have implemented a shared service centre, and are reporting cost savings in their general accounting functions of up to 45%.

[edit] Shared Services in the Public Sector

The Public Sector has taken note of the benefits derived in the Private Sector and continues to strive for Best Practice. The United States and Australia among others have had Shared Services in government since the late 1990’s. The UK government under a central drive to efficiency following from the Gershon Review are working to an overall plan for realising the benefits of Shared Services. The Cabinet Office has established a team specifically tasked with the role of accelerating the take up and developing the strategy for all government departments to converge and consolidate. This enables not only the benefits from within the departments but also for the synergies between departments to be realised. As part of this structured meetings for all departments to communicate to each other their operations and what is Best in Class are being conducted. The UK move to Shared Services not only works with Public Sector departments but also the Private and Provider Sectors to gain the greatest input from the most diverse groups of stakeholders and experts. The savings potential of this transformation in the UK is estimated at being up to £40bn over ten years if HR and Finance alone were implemented optimally (Shared Services Forum and Advisory Group).

In the Republic of Ireland, the health service nationaly has been reorganised from a set of regional Health Boards to a unified national structure, the Health Services Executive. Within this structure there will be a National Shared Services Organisation, based on the model developed at the former Eastern Health Shared Services, where Procurement, HR, Finance and ICT services were provided to Health agencies in the Eastern Region of Ireland on a business-to business basis. The former CEO of EHSS, Valerie Judge, who developed the concept and is recognised internationally as a leader in this field, now operates as independent consultant to a number of public sector bodies in Ireland and the UK, while incoming National Shared Services Director Laverne Mc Guinness takes the model forward.

[edit] New Trends in Shared Services

Organizations that have centralized their IT functions have now begun to take a close look at the technology services that their IT departments provide to internal customers, evaluating where it makes sense to provide specific technology components as a shared service. E-mail and scanning operations were obvious eary candidates; many organizations with document-intensive operations are deploying scanning centers as a shared service.

Many large organization, in both the public and private sectors, are now considering deploying enterprise content management (ECM) technology as a shared service.

The exponential growth in the amount of unstructured content is making ECM a priority within many organizations. Where previously content management may have been deployed to meet departmental needs, in certain niches within the organization, it is now being recognized as an enterprise-wide need: an infrastructure investment rather than a niche application. Many CIOs have concluded that if ECM functionality is to be offered to the enterprise, it makes sense to offer that functionality as a shared service, as a way of cost-effectively meeting the content management needs of large user bases, with potentially diverse requirements for various components of ECM functionality (capture, document management, workflow, etc).

In addition to cost-effectiveness, the ECM shared-service model also allows an organization to make better use of limited IT resources – particularly when many upcoming IT projects tend to require one or more components of ECM functionality.

One of the most compelling forces driving ECM shared services is the economics of addressable seat costs versus utilized seat costs. ECM remained a niche application within many organizations because organizations purchased enterprise licenses that were then underutilized. Addressable seat costs (if IT were able to deploy ECM to everyone), are likely to be relatively low. In most companies, ECM has tended to be rolled out to only a subset of the potential user base, which means that the addressable cost per user may actually be considerably higher – resulting in prohibitively high utilized costs per seat. Under these circumstances, few organizations could cost-justify enterprise deployment of ECM.

In contrast, a shared services approach to ECM allows IT to define appropriate levels of functionality for various segments of the potential user base. IT and business units work together to define various packages or tiers of ECM functionality (for example, ranging from a package with basic store-and-retrieve capabilities, to a more advanced package offering revision-control and automated workflow capabilities). A chargeback model is then associated with the various tiers. The packages can then be rolled out to the various business units using a “factory” approach. Overall, such an approach helps an organization to cost-justify an enterprise-wide investment in the technology, thereby maximizing the economies of scale.

Like other types of shared services initiatives, rolling out ECM as a shared service is a complex undertaking, presenting a number of practical challenges. Best-in-class organizations seek to involve both IT and the business units to develop a strategy for moving to a shared-services environment and for ongoing program management, once ECM shared services have been deployed.