Shared Services is the convergence of a company’s essential business functions to an internal service provider as opposed to outsourcing it. Shared Services Organizations (SSO) or Shared Service Centers (SSC), as they are often called, ensure the delivery of required services to the business as effectively and efficiently as possible. The most common business support functions integrated to Shared Services are Human Resources, IT, Finance, Procurement, Office Services and Legal.
2. Cost and Quality
Shared Service is more than just centralization and is different from outsourcing (or the use of an external third party). Some successful Shared Services Organizations are managed as a business – providing efficient and effective services at a cost and quality better than other alternatives.
3. Business Value Creation
Traditionally, the development of a Shared Services group within an organization was a result of the need for cost reduction through economies of scale, centralization and standardization of processes. Businesses nowadays drive even more value creation from its Shared Services out of other functions like process management, knowledge management, product and service innovation, customer solutions, project and portfolio management, and business performance solutions among others. This allows the business to focus on its core activities.
4. Integrated Business Systems
Most Shared Services Organizations rely on an integrated set of electronic business processes, technology and IT applications – usually anchored in a major piece of enterprise resource planning software. This integrated business system standardize and automate Shared Services processes, thereby increasing reliability, decreasing operational cost, and ensuring quality.
5. Organizational Transformation
Shared Services implementation entails significant executive management sponsorship to carry out needed process and organizational transformation as its implementation may require changes in processes, roles and work practices.
6. Service Level and Performance
Shared Services make use of Service Level Agreements (SLA) to establish an accord with internal customers. SLA quantifies the target quantity, quality, and cost of services in a period of time. Shared Services make use of benchmarking and measurement of strategic, tactical and operative key performance indicators to drive performance improvement.
If you are looking for a book about Shared Services, I would recommmend Shared Services: A Manager’s Journey By Daniel C. Melchior. This book is a fantastic and a very enjoyable read with its unique story-like style. The dialogue between the characters explains many concepts and allows readers to understand why take certain decisions. It presents the realities of living the journey of implementing a shared services organization. It provides excellent insights into the methodology behind managing day-to-day Shared Services operations.
I’m home! I thought it would be appropriate to write about the Philippines while I’m in town. It’s been 2 years since my last trip here. A family occasion gave me the opportunity to visit home this close to Christmas. I surely miss the vibrant colors, vitality and noise of the streets filled with jeepneys. I miss the company of friends and family. I am currently at a local coffee shop right in the heart of Metropolitan Manila’s business district – Makati. Like so many others, I come here mainly to connect to the internet and the coffee is just secondary.
I am part of a Shared Services organization based in Florida. Due to a scheduling conflict, I am tasked to work during the first two weeks of December even though I am in a different time zone (13-hour difference). Indeed, technology has broken the barriers to work and collaboration. Something that – decades ago – one can hardly imagine doing. I work nights (usually until 1am) to catch-up with the US Eastern Time zone.
It is not as if I am the only one working the night shift in Metro Manila and in many major cities in the Philippines. I am comforted by the fact that I work at the same time as thousands of service agents and consultants providing services to the US and Europe. In Makati, it is pretty common to see heavily lighted high rise buildings at night. After all, the Philippines is one of the main centers of business process outsourcing (BPO) and shared services in the world.
The Philippine BPO industry provides a wide portfolio of services that not only include traditional voice and IT services but also higher value services such as finance, IT programming, engineering, medical transcription and architectural services.
Business Process Outsourcing
According to Tas, J. & Sunder, S. in a journal entitled Financial Services Business Process Outsourcing published in 2004.
“Business process outsourcing (BPO) is a form of outsourcing that involves the contracting of the operations and responsibilities of a specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain.”
BPO can be categorized into two types—front office and back office outsourcing. Front office outsourcing is typically related to customer services and contact center services while Back office usually refers to support and administrative functions such as human resources, finance and accounting.
Based on service location there are two types of BPO—Nearshore and Offshore outsourcing. For example, relative to United States, BPO service providers in Mexico can be considered a nearshore outsourcing as compared to BPO services provided to US companies from Asia Pacific countries, like the Philippines.
Why Philippines is a First-rate BPO location
Amid the global economic crisis, the BPO industries in the country have remained strong in 2009. Industry experts in the Philippines expect 35% growth this year. According to the Business Process Association of the Philippines (BPAP), the biggest organization of outsourcing providers in the Philippines, the outsourcing industry will earn about $12 billion to $13 billion and employ close to 900,000 people in 2010.
The Philippines has remained one of the most ideal locations for companies who outsource business processes and services. Filipinos are known to be highly skilled, hardworking, dedicated and loyal. There is a known Filipino trait called “malasakit” (in local Filipno language) that means genuine concern and care. Filipinos are known to exhibit this quality in the workplace. Skills and hardworking attitudes guarantee strong performance and productivity, while on the other hand, dedication and loyalty translates to better talent retention, less training costs and experienced service personnel. The Philippines is also considered as the location of choice due to its less expensive operational and labor costs, as well as having an English-speaking workforce (the result of English being the main medium of instruction in schools and universities in all educational levels). The Philippines, with the help of the Government and private sectors, has also developed a competitive infrastructure in terms of telecommunications, information and technology.
UK body proclaims the Philippines as World’s Best BPO destination for the 2nd time. The Philippines has won the 2009 Offshoring Destination of the Year category at the 4th National Outsourcing Association (NOA) Awards held October 15 at Park Plaza Riverbank in London. The Philippines bested Egypt, Malaysia, Russia and Sri Lanka among others. This is the second time that the country bagged the prestigious award category. The first time was in 2007. This was reported in a press release by BPAP last October 2009.
A lot of top multinational companies have service centers in the Philippines—Caltex, Citibank, HSBC, Procter and Gamble, Deutsche Bank and Dell, to name a few. It’s common for an individual to have at least one close family member who works in BPOs and services centers. It’s just that so many Filipinos nowadays work in BPO-related industries across the Philippines. My new sister-in-law, for instance, works in HSBC service center and my brother used to work there too— it’s where they met. This goes to show that indeed, business process outsourcing, offshore call and service centers are now part of Filipino lifestyle of service. We are known for our service— not just in BPO industries but in many industries— not just in the Philippines but around the world.
Image of Makati Skyline courtesy of Wikimedia.org
Typically, big companies invest one percent to four percent of revenue in IT. This investment is usually spent on integrated business model implementations, continuous innovations, and day-to-day IT operations. There must be a way to assess and take full advantage on the return of these investments; otherwise, IT organizations cannot move from being cost centers to value centers. Optimizing the value of IT is a top priority in today’s tough economy. Companies rush to reduce IT operating cost and IT capital expenditures mainly because of falling revenue sources.
Many companies are so focused on evolution in order to always be steps ahead of competitors. They, at times, push themselves hard through IT implementations and afterwards, fail to take advantage of the benefits. They resort to old habits, making change process difficult to achieve.
Once you implement new systems and processes, you need to aggressively drive value creation from it. Peter Weill, in his book IT Savvy wrote, “The firms that are best at this start driving value early. If you start driving value early as you take the first small steps towards building it, you will reduce the disruptions of major transformation. The goal should be—build a little, benefit a lot; build some more, benefit some more; and so on.” 1 In other words, keep it simple! Now is probably the best time to resort to this time-tested principle where investment is placed only on IT solutions that are cost effective and that deliver better value and greater performance for the business. Below are just some key initiatives that can help organizations maximize value of IT in a company.
Define Clear Strategic Vision
The first step is to have clarity of strategic vision for each of your IT portfolios. Executive managers in Steering Committees have the responsibility to clearly define the main business objectives of projects and portfolio of projects. They are the ultimate architects for the organizational transformation that will happen. The objectives that they define will guide IT project leaders in their decision making and will help them prioritize business requirements.
Maximize ERP systems
Most big firms implement a digitized platform anchored on a major piece of purchased enterprise resource planning software such as SAP and Oracle. Implementation should be kept within the standard configuration as much as possible. This is a difficult challenge though. Of course, some business requirements cannot be addressed by standard functionalities. They will have to be developed or coded to change standard functionalities of the application to suit business needs. The challenge is to keep the balance between benefits and costs of these developments. Keeping solution within the platform configuration standards will reduce consulting cost, configuration and development effort. In the long run it will reduce cost of IT operation and application support. Additionally, companies can leverage on continuous evolution of those ERP platforms whenever new releases and versions become available. They can change to the new version without lengthy and costly upgrade process.
IT Infrastructure Consolidation
Data center consolidation is a major focus of many organizations today. According to Computer Economics, in 2008, 76% of organizations had some level of activity in the area of data center consolidation. It is one of the most essential ways to lower the cost of IT operations. Bigger data centers are simply more cost-effective on a per unit basis. Therefore, for many organizations, consolidating multiple data centers into a single facility should be a primary strategy for cutting cost. Additionally, this consolidation effort can also result to mitigating risk and improving service levels. Concentrating computing resources into one or a small number of physical locations can boost the productivity of IT assets and personnel. It will also simplify IT operations management. Most organizations will realize quantifiable returns from such efforts.
1 Weill, Peter. IT Savvy: What Top Executives Must Know to Go from Pain to Gain. 2009.
- Shared Services is the outsourcing of essential business functions to a centralized support organization.
- Most successful Shared Services run its organization as a business, providing efficient and effective services at competitive prices to its internal customers.
- Shared Services relies on an integrated set of electronic business processes, applications, information and technologies usually anchored in a major piece of purchased enterprise resource planning software.
- Shared Services implementation requires significant executive management sponsorship.
- The most common essential business support functions outsourced to Shared Services are Human Resources, IT, Finance, Procurement, Office Services and Legal.
- Shared Services focuses on value improvement more than cost reduction and on deliverables more than activities. Shared Services values customer service and alignment.
- Shared Services uses Service Level Agreements (SLA) to establish an accord with internal customers. SLA quantifies the target quantity, quality, and cost of services in a period of time.
- Shared Services makes use of benchmarking and measurement of strategic, tactical and operative Key Performance Indicators to drive incremental performance improvement.
- Shared Services locations can be on-shore, near-shore or off-shore although near-shore and off-shore are more associated to outsourcing.
- The value of Shared Services for an organization grows over time – from short-term to medium-term benefits of cost reduction and reengineering for productivity enhancement, to long-term continuous improvement and integrated strategic service delivery.