Posts Tagged ‘shared service’

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

May 19, 2010

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

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Key issues you wanted to know about shared services

July 25, 2009

It is about standardization, managing complexity, controlling cost, profitable growth, and performance – it’s all about the way a modern corporation is doing

Shared services – old wine in new skins or something really new? Well, it doesn’t actually matter. They enable organization to standardize the processes, manage complexity, reduce costs, ensure profitable growth and performance… – do you want to achieve something more?

Here some findings characterizing the shared services approach:

Issue 1: Location. While choosing a location for their shared service center, corporations take the following criteria in consideration:

• Availability of qualified personnel,
• Local cost structures,
• Experience already gained regarding the location,
• Integration with the company infrastructure,
• Political stability,
• Life quality,
• Transport and technology connection.

Issue 2: Benchmarking and measurement. Benchmarking and measurement are the MUST while establishing and running one or more shared service center(s). Benchmarking allows to compare the service provision with the best in class. The measurement mostly occurs using agreed key performance indicators (KPIs). The amount of KPIs chosen differs from corporation to corporation, the experience shows than 10 carefully chosen KPIs will deliver the best results.

Benchmarking can be used to achieve different objectives including:
1. Improvements in performance,
2. To align the processes with these used by the best ones enabling organization to become world class with processes.

Issue 3: Shared service center – challenges and opportunities. The following issues are to be carefully considered while establishing and running a shared service center:

1. Precise definition of objectives (is our shared service center to be a profit or a cost center?)
2. New organizational structure and considering of formal and informal groups of influence – how will the new organization look like and who is going to play the leading role after the shared service center has been established?
3. Product and service dimension – what products and services will be delivered at what prices? Considering quality and time of delivery issues is a very important matter, too.
4. Measurement and benchmarking to ensure that the shared service approach delivers more value comparing with alternative options (like outsourcing or traditional solution) and learning from the best in class.

Magdalena Szarafin
http://www.szarafin.info
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Magdalena Szarafin has immense knowledge of the outsourcing sector and is one of the authorities in shared services and outsourcing industry analysis. Her research interests include insourcing and outsourcing in connection with the value chain. She is an author of many publications dealing with outsourcing, knowledge management and total quality management (TQM).
Magdalena lives in Frankfurt, Germany and she works as an International Management Accountant in a big multinational group, dealing with preparation of financial statements under IAS/IFRS and local GAAP. In her leisure time she prepares a PhD dissertation focused on shared service centers.
Contact her to leverage her knowledge and in-depth BPO and shared service industry penetration experience.