Insider Business Club: shared services

What areas are suitable for a shared service approach?

Niamh O’Brien, shared services advisor, IBM Global Business
Services

The most effective shared services are strategic assets within the business
and have built a capability for operational excellence and a commercial
competence that drives improvements to the bottom line, but it’s not just about
doing the same for less. It is about doing things better, more efficiently and
in a sustainable way. Companies are tempted by it as a quick fix to achieve cost
reduction – but it is not sustainable as a long term strategy.

In reality a shared service centre within an organisation should be compete
with the open market.

Outsourcing providers are getting better at delivering. You will be forced
out of business if you are not proving yourself competitive.

Whether it is outsourced or a captive shared service centre, you need to work
with your customer and get them to agree how they are delivering their parts of
the process because the benefits won’t come by just changing a fraction of it..

What approach to staff do shared service centres demand?

Angela Cha, partner, Pinsent Masons

Whether it is outsourcing or shared services, people are top of the agenda
from a legal and HR perspective. It’s about adopting a different approach to how
you manage and develop your people.

It is not just taking the same resources and putting them in a different site
or in a different team and expecting things to change. It’s about making people
focus on their processes areas, becoming experts around training, around
development, around accreditation and also build a competency within the shared
service centre where the skills are as important as the process that is
delivered.

Contracts for these arrangements have certainly advanced. The first
generation of outsourcing and shared service arrangements didn’t know about exit
schedules and exit management plans. Nowadays it’s key to deal with exit at the
outset. Contracts need to have flexibility to deal with change. Yes, you can
have that flexibility built in but that creates uncertainly in pricing and other
consequences.

Why should businesses use shared service centres?

Chris Tiernan, managing director, Grosvenor Consultancy
Services

There are four reasons for doing these things. One is to do with reducing
costs; another is improving quality; another is to alter the way the thing is
managed and the fourth is transforming the business model. But interestingly if
you look at the second third and fourth of those it still comes back to cost.

Benchmarking is not just about cost effectiveness, it’s also things like
having a good set of business metrics, to know how well you were doing things
beforehand and what your targets are.

What a lot of people miss out on is making sure that they have got enough
information from the supplier to enable them to decide whether or not they want
to terminate the arrangement or continue it or extend it.

Very often this critical information about what people are doing and is not
available, unless they specifically put it into the contract that it is to be
delivered as part of the monthly reporting package.

What are the key aspects you need to get right?

Tony Virdi, board director, National Outsourcing Association

You can’t really set up a shared services centre without proper
infrastructure and processes. There are two things people probably don’t get
right. One is that they lack the strategy and secondly there is a capability
situation; do you have the right skills, the right technology and the right
infrastructure?

You can do some things without much risk. So you can take a fairly generic
service like accounts payable and centralise that fairly quickly and achieve the
service levels that you need to. In core business areas you have to get the
balance right between what you’ve outsourced and what you have in-house.

Organisations are willing to spend a lot of money on transformation. They
quickly find three or four suppliers and then they go through a very short
procurement cycle. And really there are three things that they are looking for;
cost, quality and capability.

In the end shared services has got to work as part of the whole business
model. You can’t set up a shared services and not have buy-in from the rest of
the organisation.

Chaired by Rachel Fielding

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