Providing high-quality services while maintaining cost efficiency is the top goal of organisations – both public and private. Achieving this goal has been a huge challenge to growing business, but it is now relatively easier by adopting a shared services approach.
The shared services delivery model is rising in popularity as many of today’s companies adopt it for their finance, human resource management and IT operations.
What is Shared Services?
The concept of shared services is straightforward: similar back-office tasks used by different departments are centralised into one division to eliminate redundancy and reduce operating costs. For instance, rather than having data encoders in each department within a company, a separate business unit for encoders will be created to centralise all encoding tasks. This autonomous business unit is called a shared service centre (SSC). A SSC typically start as a single-function unit that provides mainly transactional services such as accounting and bookkeeping. Later, it may evolve into a multiple-function unit that provides different services such as procurement, HR and IT.
A SSC shares accountability of results with the business unit from where the work is migrated and ensures the results are delivered based on agreed measures (e.g. cost, quality, KPIs, etc.).
Shared services operates on three fundamental capability levers: people, process and technology.
Benefits of Shared Services
Businesses primarily benefit from the shared services model through economies of scale. Because they don’t have to procure infrastructure and train people for different departments, they are able to reduce their operating costs. Replacing multiple dispersed IT infrastructures with a centralised one also often mean the company can afford the latest technology, which contribute to improving service levels and efficiency. Additionally, each department within the company is able to specialise or focus on its core function, resulting in higher overall productivity.
Beyond streamlining operations, the shared services model also allows a company to gain efficiencies with the standardisation and continuous improvement of processes and systems. Consequently, a shared service organisation also benefits from reduced cycle times, lower error rates and improved quality of existing services.
Moreover, the shared services delivery model allows a company to scale its systems with relatively low incremental costs. Improved cooperation among business units also enable strategic development of support services.
Shared Services vs. Outsourcing
The shared services model is different from outsourcing, wherein a third party is paid to provide a service that was previously internal to the organisation. However, outsourcing may still be used in conjunction with shared services.
Typically, companies that have had initial success with shared services use outsourcing where there are inadequate internal resources. Outsourcing is cheaper than hiring skills or purchasing technology that the company lacks. The company may then assign its SSC to oversee their outsourcing partner to ensure process standardisation and optimisation.
Shared services allows organisations to do more with less. With rising operating costs, the need to maximise and optimise existing resources is highly critical to business success.