Cost cutting is an ongoing requirement for organizations, yet keeping service levels high while cutting costs is a challenge. One way to approach this is by utilizing a Shared Services model for various functions. Shared Services is a model wherein support for functions like IT, HR, Accounting, etc. is shared across multiple organizations — sharing the overhead. Leaders of today are recognizing that success in the digital era requires rethinking existing operational models to take advantage of innovation and drive value.
What is a Shared Service
A Shared Services team or department can reduce overhead expenses while increasing quality of services. In the case of internally consolidated services, like a municipality might do, the best procedures and the brightest employees can be focused on these shared functions, freeing up other resources for larger tasks. In some cases, it may mean an overall reduction in the number of people required to support a particular function. In other cases, it may mean better quality of service. Instead of each department having to support their own IT infrastructure and staff, in a Shared Services model, the departments interface more as a client obtaining services from the services provider. In this case, they can obtain what they need, without having the departmental overhead of supporting the entire infrastructure.
Way back in 2011, IBM Global Process Services detailed this shift in their white paper, Today’s shared services operating models: The engine behind enterprise transformation. In the white paper, they detail that the “integrated” shared services model creates an “entirely new joint ‘hybrid’ organization (encompassing internal and external provider shared services scope) led by a newly created C-level executive.” Taking service delivery to the next level and enabling a stronger growth strategy at a pace that is right for each business. Shared Services sets the stage to optimize and better leverage business insights, enabling enhanced decision making and making the entire business smarter and more resilient.
Benefits of Shared Service
One of the real value propositions coming to fruition with this model is that a company or municipality can utilize the services as much or as little as they need, with ready access to experienced and expert staff whenever needed. This avoids either having to maintain the expertise in-house full time or risking sub-par service being provided by someone that only touches on the subject occasionally. In today’s regulatory and legal world, it is good to have experts in roles dealing with IT and HR, but hiring and sustaining that expertise is expensive. If you do not have sufficient volume to warrant a full-time staff in these areas, Shared Services can be a good solution.
Fundamentally, consolidating back office functions to a shared services model within an organizational structure like a municipality is a good way to improve quality and control costs. Small private sector companies do this through functional services providers as a means to obtain required expertise without the overhead of maintaining in-house support for all functions.
From the same IBM white paper: “A shared services model is a global, centralized organization built on the principles of consolidated technologies, embedded analytics, end-to-end process optimization, global process ownership and global integration.” As more and more enterprises tackle this model and the value of services sky rockets, shared services may be joining your organization in the very near future.