Shared Services – Boon or Bane?

With the financial year 2010 – 2011 drawing to a close, corporations who have not scaled their performances are looking to vertically integrate internal services to create a pool of shared services to run an internal horizontal and this is done with the perception of reducing costs thus. The major areas of such an alignment is very true if organization does not have a industry spread and rather sticks to one direct LOB [Ex: Legal Firms, Pharma etc.,]., it simply means ensuring that resembling functions are grouped together and thus an opportunity for cost savings, services consolidation, unified governance etc., are achieved.

The reality that emerges is a stark contrast to the ‘dream’ of shared services that a CIO, CEO, CTO or the board has. In the current dynamic business environments this is bound to become a curious case of debacles, a ready candidature for worst practices. The entire activity of service team integration to achieve horizontal spread with the varied competencies are complex, expensive, and hard to reverse. Any internal mergers and fusions of services sets the top brass drooling over imaginary prospects today; in fact this in todays business dynamism completely a ‘penny wise – pound foolish’ strategy. This ‘like services’ integration motto proves that the proposer exists in a prehistoric world, where this idea will suit a mass production environment and during times of industrial revolution.

Business dynamism of today involves node level skill based revenues, operational environments, industry process and workflows, domain centricity, COE & Practice Blocs, etc., and in today’s scenario its always “Economies of flow are superior to economies of scale”. Economies of Scale applies to a mass production and industrialized service design. There is however play for Shared services models in a closed industry bloc and lets take an accounting firm; the HR will only focus on recruiting MBA’s and CA’s, if they open a Financial consulting BU the same HR role is diversified to seek analysts and statisticians. If it moves into a systems perspective then introduction of new ‘sniffing’ skills addressing this bloc is needed. This is addressed by adding new skill in the form of resources. Now if this micro transaction is a macro in its millions of dollars worth of PA transactions then the need is directed  in having a dedicated resource augmenting HR rather a shared services bloc.

Economies of flow are superior to economies of scale

Economies of Scale: More the Quantity of output; lesser the average cost. Successful environment for SSO.

Economies of Flow: More the Value, More the revenue and More Agility. Risky Environment for SSO.

In a complex technology environment supporting a dynamic business unit dealing with complexities like multi tenancy client and product eco system, industry specific workflows and addressing diverse industry stack, technology spread across varied functional requirements, distributed niche services,etc., there are a host of mushrooming communities of practice that exists each focused on their direct pattern of work. Here a shared resource for ‘anything’ becomes a nightmare with huge sacrifices that need to made over business agility, business TAT, quality of niche services.

However this does not rule out any scope for shared services as there are indeed a few areas where a SSO [Shares Service Organization] model will yield results and optimize business across a given Sharing services can go either way. Performing analysis over the services organization, introduce best practices, eliminate waste and failures, perform analysis and identify work that can be shared and pursue optimization.

Jesu Valiant – 2011