Shared services: Why? How? What for and how long?

Process standardization, simplification, harmonization, cost management, achieving synergies, common systems, practices and ways of doing things, common technology – that is all what can be delivered using shared services. Let’s briefly analyze some statistics delivered by surveys undertaken on shared services

1 or 5? – How many shared service centers in use?

Almost 50% of international corporations with shared services use just one shared service center (SSC) and each fifth has five or more shared service centers. Each third corporation works with 2-4 shared service centers.

The optimal number of shared service centers depends on customer requirements regarding the process complexity and level of process standardization.

How long does the SSC implementation take?

For each second multinational corporation it has taken under 12 months to implement a shared service center. For further 20% it has taken between 12 and 18 months to implement a SSC.

After the implementation of a SSC, it takes shorter than 2 years for the investment in a shared service center to payoff in case of each fifth corporation. For further 60% the amortisation period is between 2 and 4 years.

Which functions and activities are eligible to be relocated to a SSC?

Accounts payable, receivable and account reconciliation are the favourite activities and functions which are likely to be relocated to a shared service center by global corporations. Except of that, global giants use shared service centers to provide services in the following functional areas:

• Asset accounting,
• General ledger,
• Travel expenses,
• Payroll,
• Controlling and reporting,
• Procurement,
• HR administration,
• Treasury,
• Tax,
• IT helpdesk,
• Order accounting.

Why shared services?

Cost reduction, process improvements, increase of customer satisfaction and improvements in quality are the main drivers for corporations to run a SSC. In brief: shared services means establishment of a common languages in a heterogenic, multinational environment.

Shared services vs. IAS/IFRS

The subject of compliance with IAS/IFRS or US-GAAP is an important issue for financial shared service centers. Placing IAS/IFRS reporting in a shared services environment can yield cost savings through consolidation and process efficiencies. It can also help increase the consistency of corporate financial reporting and improve comparability of single financial statements across the corporation.

Shared services organization (SSO): important dimensions

The following dimensions are crucial for a SSO:

• Performance metrics (mainly through a set of key performace indicators: KPIs), customer feedback,
• Service level agreements (SLAs),
• Global and regional process owners.

Cost savings through shared services

The potential for cost savings through shared services vary from function to function. For most organizations it is around 15-20% in a treasury, financial reporting and analysis, procurement and tax function, amounting to even 30-50% in the IT, accounting, facility management and personnel administration functions.

Literature:

1. Heinz-Josef Hermes, Gerd Schwarz, Outsourcing: Chancen und Risiken, Erfolgsfaktoren, rechtssichere Umsetzung, Haufe-Lexware 2005
2. Shared services shines in challenging times. Insights from Deloitte’s 2009 global shared services survey

Magdalena Szarafin
http://www.szarafin.info

Tags: , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: