The transition to shared services is rarely an end in itself. As FSN Contributing Editor, Lesley Meall discovers, it is increasingly likely to be part of a much broader attempt to handle transactions and processes more efficiently and effectively.
The transition towards shared services has always taken place in stages - whether an organisation is focussing on old favourites such as finance, human resources, and information technology (IT), or moving away from transactions to more complex cross-functional activities and business processes. But as well a taking a characteristically phased approach to simplification, standardisation and consolidation, shared services itself can be one of a number of stages. Increasingly, it is not an end in itself (for many it never was); it can also be a stage in the journey towards becoming a service provider (inside an organisation and beyond), or one waypoint on the road to offshoring and/or outsourcing – as the following organisations highlight.
The earliest shared service initiatives took place in some of the world’s largest organisations, such as Proctor & Gamble, where they have now (along with outsourcing) become an embedded and accepted part of the organisational culture, so P&G has numerous projects under way, and at various stages of development. In the case of HR, for example, the journey from shared services to outsourcing began back in 1998, and P&G relied on three global shared services centres (in Costa Rica, England and the Philippines), before an outsourcing deal was announced with IBM Business Consulting in 2003. “Combining our capabilities was a win for P&G and IBM,’ says Filippo Passerini, chief information and global services officer.
It certainly seemed to work. When Gartner assessed the deal a year later, IBM was delivering payroll processing, benefits administration, compensation planning, expatriate and relocation services, travel and expense management, human resources data management, and HR system application development and management - and meeting all 21 service level agreements. This compared well with measurements taken the month before the arrangement began, when P&G was achieving only 9 of them. So in HR, the approach delivered cost savings and added value. In other parts of the business, P&G has used the shared services approach to support its increasing globalisation and scale, in areas ranging from business reporting, through finance to IT infrastructure.
Agility and innovation
Since 2003, for example, P&G has moved increasing amounts of its desktop and end-user support, network management, applications development and maintenance, and data centre operations, into the hands of HP. “It gives us the ability to more quickly and easily deploy IT resources and services to meet the needs of our global businesses,” says Passerini, “and it provides the flexible infrastructure we need to remain competitive.” Outsourcing non-core IT also enables P&G to sharpen its focus on innovation. “With consumer focus groups for product development, each cycle took five to six weeks,” recalls Passerini. “Now we virtualise the whole thing,” he adds, which significantly accelerates the time it takes to bring new products to market.
Unsurprisingly, smaller organisations have followed suit. Thomas Cook UK & Ireland started its journey towards shared services back in 2001, by working with Accenture to create a UK shared service centre to provide finance and accounting, human resources, payroll and IT resources to the business, from one location instead of 13. Since then, it has also followed the path from shared services to outsourcing, and around 70 per cent of the shared services workload (including functional areas such as application management, accounting operations, payroll help desk and training administration) has been transferred to Accenture’s delivery centre in Bangalore.
The business benefits have not been insignificant. “High-performing companies like Thomas Cook have found they can be more strategic, streamline operations, reduce risk and improve overall business performance by outsourcing business processes,” comments Kevin Campbell, Accenture group chief executive, outsourcing, and this perspective is echoed by the executive team at Thomas Cook. “One of the big strategic advantages of our relationship is that it allows us both to focus on what we’re good at,” adds Juergen Bueser. “This means that as a CFO of Thomas Cook I can focus on adding value to the company,” he adds, “not dealing with a lot of the technicalities.”
With so much potentially to gain, from the move towards internal shared services and/or outsourcing, the UK government has been keen for public sector bodies to reap similar benefits. But its additional carrot and stick initiatives (such as the Operational Efficiency Programme) mean that this is an area where those in the public sector (have more to gain, and) are advancing more rapidly than similarly-sized private sector organisations. In addition to all of the other potential drivers for shared services initiatives, public sector bodies are uniquely well-placed to develop their SSCs and then offer them as ‘outsourced’ resources to other public sector bodies.
So when Land Registry, the government department that records ownership of land and buildings in England and Wales, decided to centralise and streamline its purchase-to-pay processes with a document management solution from Version One, it looked beyond the ability to meet its most obvious and pressing needs. “We required a document management solution that integrated into our Oracle system and helped us to become paperless,” recalls Debbie Wilkinson, head of financial accounting, Land Registry, but improving its payment performance, cutting costs and supporting its green agenda, were also seen as part of a bigger picture.
With the receipt of all invoices centralised, their place in the approval chain is instantly available to the accounts payable team, which improves payment performance and relationships with suppliers, as well as reducing manual data entry and minimising the risk of human error. “Version One’s systems integrated into the Oracle E-Business Suite will play a key role in Land Registry becoming a more efficient accounts payable department,” says Wilkinson, and enable it to offer its services to others. “The system will aid us in our ultimate aim of being a world class accounts payable department,” she explains, “ so that in the future, we will be able to act as a shared services centre for other government departments and agencies.”
Leading by example
Some other public sector organisations have already reached this point. “We had to upgrade our systems in order to meet the latest requirements of the Traffic Management Act,” recalls, Paul Moon, highway systems manager at Dorset County Council, so it started exploring the possibilities of shared services. “When we knew that Bournemouth and Poole were also looking to invest in upgrading their street works systems, we realised that this was a perfect opportunity to trial expanding the scope of shared services beyond the traditional departments and into the Highways Authorities.”
Dorset took the lead and worked with the Bournemouth & Poole Unitary Authorities to create a shared services system for managing cross border collaboration with works promoters. “The shared service model offered clear opportunities not only for economies of scale but opened up the door for the delivery of consistent and enhanced services across the region,” says Moon. The system provides the tools to obtain an accurate insight into the entire road network estate that combines assets, mapping and costs, both within and across the three authorities, enabling them to work more efficiently and effectively, together and apart, by making the right long term decisions rather than simply responding to immediate and apparent requirements.
Because Dorset project managed the implementation on behalf of the three authorities, there were other benefits too. “Not only have we gained significant savings and efficiencies in terms of the initial set-up and the licensing costs by adopting a shared services approach,” says Moon, and because the approach has facilitated the sharing of information and skills across the three authorities, the knowledge of the highways teams across the region have also increased. “It’s been a great success,” he says, adding: “This can only improve the overall quality of service we deliver to our citizens.” Rarely has the road to outsourcing been paved with such good intentions.
