The Enterprise Model – an Evolution in Shared Services

The evolution of shared services – the enterprise view

Shared service is now becoming the standard model for large organisations wanting to improve service effectiveness and efficiency whilst achieving cost reduction. Objectives have conventionally been to maximise benefits from economies of scale through:

• Standardising processes
• Moving transaction processing to lower cost labour economies
• Balancing resources more effectively to improve productivity
• Providing better management visibility
• Investing in systems more effectively to drive step change improvements to processes

Traditionally shared services has been a functionally focused imperative, focused on re-engineering specific end-to-end processes (e.g. purchase-to-pay, order-to-cash, payroll gross-to-net). Its foundations were originally in the Finance function, but it has now become popular in other areas including HR, ICT and Customer Services.
The benefits from shared services were historically only available to very large organisations where the economies of scale are significant, but in recent years this has changed due to improvements in technology and accessibility to remote labour markets.
The key technologies that offer this step change in the way that shared services are delivered are:

• The web, including browser based user interfaces and self service
• Enterprise Resource Planning
• Telephone call management systems
• Electronic document management

These technologies have added new dimensions to shared services beyond the traditional function and processes model. These new dimensions include better service access channels and development of the cross functional skill sets that support the use of these access channels.

1. Traditional models for shared services
Shared service is based on the premise that support service functions can be separated into 2 discrete components;

• Repeatable, rule based transactional business processes and knowledge
• Strategic decision support activity and expert professional knowledge
  This is shown diagrammatically with the rule based repeatable transactional elements and non-core knowledge management moved into the shared service organisation (the white trapezium). Retained professional decision support activities together with core expert professional knowledge is shown in the blue triangle.

2. Moving to Enterprise
Once it is agreed that this is a workable operating model, the shared service model can be expanded as shown below to create a multifunctional shared service organisation. This further increases the potential to maximise economies of scale and opportunities from new technology and channel management.

This is the basis of the Enterprise model for shared services, and it is conceptually a simple move forward from the traditional single function model, but how significant are the benefits and how will they be achieved?

The benefits come from sharing cross functional channel management, technology, skills and processes to maximise return on investment, grow the scope of shared services and improve the pace of change.

It is the cross functional nature of these improvements to the shared services model that have led to the concept of the "Enterprise Shared Service".

3. Enterprise shared services – maximising the synergies
The model below shows a channel, process and skill based approach for shared services, where the user access channels are shown as a discrete but integrated component of the shared services model.




Improved channel management can increase the scope of shared services by widening the accessibility of services, and it can also make shared services more efficient by focusing effort on migrating service users to the most cost effective access channels, typically the web, using self service technologies.

The development of applications for mobile devices such as smart phones and other hand held devices will open up an even wider scope with better accessibility provided to remote users. This will create further opportunities to improve process and reduce costs.

4. The current position for shared services
Proservartner research recently carried out an analysis of 850 current shared service organisations, and explored whether these organisations have taken up the enterprise shared services model.

EXHIBIT A
The chart below shows the ratio of shared service centres that have chosen to pursue a multifunctional model compared to single function service organisations.




Source: Proservartner Research

EXHIBIT B
The following chart shows how effective the integration is within service centres servicing more than one function.



Source: Proservartner Research
Exhibits A and B illustrate that whilst the enterprise concept is robust, only 53% of organisations have more than 1 function within their shared service centre, and only 3% of those organisations have fully implemented enterprise shared services with the functions that they operate completely embedded together.
This statistic will increase in the next few years, as organisations understand the benefit of grouping shared service functions and providing enterprise wide support to their organisation.

5. Developing an enterprise road map
This future state vision can be a significant departure from the current ways of working, and requires investment in both physical assets and people change.

The development of the new strategy must not overshadow existing tactical improvements or business as usual, and must be aligned alongside current priorities whilst guiding the future direction.

The pace of change should not just be agreed with senior management but captured in a formally signed off route map. The approach taken will depend on available free cash as rapid implementation approaches may generate negative cash flows in early years, but with the incentive of greater benefits in future years.

The route map must consider both current and future investment in systems and other assets to ensure those investments are fully utilised.

Once functional visions have been developed the business case for an integrated, cross functional approach can be considered. This will consider both tangible and intangible benefits and all costs associated with the changes.

Together with the solution and the business case, the route map is built showing a clear direction for each functional work stream working towards an integrated Enterprise model.

Where possible, new approaches to service delivery should be pilot tested in an isolated area of the business as part of the learning experience. If it is feasible, existing technology should be used in the pilot tests, supported by manual processes. The objective of the pilot is to emulate and evaluate potential benefits of the future vision as closely as possible prior to making significant investment in new technologies and change.

6. Building blocks and enablers for enterprise shared services


When considering a business case for enterprise shared services, the investment requirements must be understood from the outset.

The cost requirements for enterprise shared services can be grouped together under two headings;
Building blocks – Tangible investments that are fundamental to the creation of shared services, including the shared service centre(s), business systems and senior management. These may require significant investment decisions, but are prerequisite to successful shared services. Careful attention must be applied to ensure all available options are considered and that decision making is well informed.


Enablers – Shared services can bring significant benefits, in which case the business case must consider all relevant available options for expediting the changes to bring forward the benefits. This should involve an assessment of internal resources to review the capability and capacity for change and identify where this will need supporting with specialist skills if required. These are the enablers for shared services and are described below;



7. Governance structures and approach for developing Enterprise Shared Services
The governance for developing the new strategy should be considered carefully to ensure the right people are involved and that the strategy is given the right level of attention.

It is recommended that a working group is set up under a new project board in the early stages of the strategy development to act as an "Enterprise Design Authority". Functional work streams would be initiated for each function within scope, working together to develop an integrated operating model.

The stages for this work study would be as follows;
STAGE 1 – OPPORTUNITY ASSESSMENT
The objective for this phase of the study is to agree prima facie evidence to support a case for Enterprise Shared Services. This should be a low cost study to review the current state at a high level. It will consider the opportunities to broaden the scope for shared services, and for functional streams to work more closely to utilise technology and skills more effectively.

STAGE 2 - DEVELOP A BUSINESS CASE AND OPTIONS APPRAISAL
The main objective for this deliverable will be to understand the potential improvements that would be achieved from the new model together with the potential cost options for its delivery. This should give an indicative payback for the investment required for each of the potential delivery options.

STAGE 3 – DETAILED DESIGN
If there is a strong case for developing Enterprise Shared Services, a detailed design exercise should be undertaken to clearly understand the future state vision, the investment required and potential risks prior to making significant investment decisions. This design may be supported by a combination of pilot tests and desk based evaluation. Pilot opportunities will be agreed by operational boards and should identify tactical immediate operational improvements where possible. The design developed at this stage will be utilised in the implementation phase.
The project governance should be reviewed before entering this phase, as more stakeholders and decision makers may need to be engaged as design costs start to accrue and additional resources and skill sets are required.

STAGE 4 – IMPLEMENTATION
This phase will incorporate the implementation and roll out of new technology, processes, and people changes. It is at the beginning of this stage that potentially significant investment decisions will be made and long term contracts signed. This will include the potential procurement of;

• Systems applications
• Buildings
• Other infrastructure
• Implementation partners
• Outsourced or other 3rd party managed services
  The previous 3 stages will have provided the due diligence to confidently support these procurement decisions.

8. Summary
We are at the beginning of the evolution of shared services. Whilst traditional models have long focused on a single function approach for optimising service effectiveness and efficiencies, the concepts are now mature enough to migrate to the next phase of development.

Improvements in technology are offering the potential for a step change in the way that shared services are delivered. Shared service is more accessible to a wider range of businesses and the scope of services that can be delivered is increasing.

The potential for improved shared service design through utilisation of better service access channels, and the development of a broader skill base will soon form part of any shared service organisations future plans.

ABOUT THE AUTHOR
Paul is a Chartered Accountant, business transformation specialist and operational manager with extensive experience in shared services, business process outsourcing (BPO), systems implementation and programme management. He has 20 years experience gained in both consulting within major consulting organisations and operational roles up to CFO level. Paul has worked on over 20 shared services projects and his experience covers the full BPO / shared services life cycle from service strategy and feasibility through to solution design, service transitioning and operational management of shared services.

Paul has experience in all key back office functions including Finance and Administration, Human Resources, IT and Customer Services, and has managed a number of large scale ERP Finance and HR systems implementations. Paul has worked with leaders of some of the UK's largest and most complex shared services centres, all of whom have seen their roles transform to a leader of multifunctional service, and are now considering this evolution in shared services.
Contact: paul.chinn@proservartner.co.uk