How to Explain Shared Service Centres to Your Boss
Shared Service Centres (SSCs) emerged out of a need to optimise costs. The concept was based on the simple premise of economies of scale – a single unit performing a singular function for multiple clients cutting costs and therefore achieving greater productivity. Over time however, shared service centres have matured and evolved into a much more substantial concept than that of simply providing cost savings.
SSCs today equip their clients not only with a cost advantage but moreover agility, scalability, and most importantly – the ability to outsource non-core business activities. It is no secret that businesses which focus on their core value propositions can achieve a lot more than generalist organisations. However, it is not always that simple. Spinning off non-core activities might seem like a good idea on paper, but it can be tricky to implement and can lead to uncertainty. The key to successfully transitioning from a bloated, do-it-all organisation to a lean and agile business is knowing which activities to outsource and how to manage the relationship with your SSC.
A model for every need
Shared service centres come in various shapes and sizes. Some cater to a single global conglomerate with each foreign subsidiary being a separate client, while others are structured around business functions like IT, HR, legal, compliance and so on. They can also be differentiated based on size, geographical location, the extent of integration with the parent unit etc.
The key to success when using an SSC business model is to find which model suits you best. An international bank, for example, would need its SSC to have a separate sub-unit for each country that the bank operates in since the regulatory requirements would be starkly different between them. Whereas other functions which are common across jurisdictions (like an IT helpline for example) might be bunched together at a single servicing unit.
Scalability and agility
Scalability is one of the primary advantages of shared service centres. Rather than having to build up or scale down local capacity to meet seasonally fluctuating requirements, business units can simply rely on the SSC to manage the extra load. SSCs are in a better position to manage fluctuations since they can move around resources between various sub units performing similar functions.
Relying on an SSC. rather than doing the work in-house. can also make the organisation more agile. This agility derives from not only a leaner and smaller front office, but also has the advantage of having someone available around the clock at the back end. Picture a scenario where a client-facing relationship manager needs a report done by morning. He can specify his requirements during the day and pass it on the SSC team in a different time zone which then works on the report and hands it back by morning.
What and where to outsource?
Activities that would traditionally get outsourced were the rule-based simple tasks where it was easy to hand over a task to different team some thousand miles away. However, businesses have been having a valuable experience with outsourcing even more complex, knowledge-based tasks recently – like the report-making example highlighted earlier. Companies have been enhancing the capabilities of their SSCs which allows them to hand over even more complex tasks. In fact, the high-skill Knowledge Process Outsourcing industry has been gaining increasing popularity around the world while adding more value than traditional low-skill outsourcing.
A common misconception is that SSCs can only succeed if placed in low-cost countries. This is not necessarily true. While low cost and high skill countries obviously have an advantage, many businesses prefer to place their shared service centres in close proximity to their main business units. This allows companies to have the best of both worlds – the ability to outsource non-core activities while still having a local touch for business functions which need them.
Maintaining quality with service level agreements
The main concern when it comes to shared service centres is usually around performance – getting things done on time and at an acceptable quality level can be challenging. This is where formal Service Level Agreements (SLAs) come in. An SLA must define clearly the type of service to be provided, response time, deadlines and most importantly – a mechanism for issue resolution. A solid SLA helps not only the business unit by improving the level of service that it gets, but it also acts as a guideline for the SSCs as it forms the basis of their entire business process. Based on the commitments in the SLA, the SSC would need to hire resources and provide training. The Key Performance Indicators of the SSC employees would derive directly from the SLA.
The mechanism for issue resolution is critical. The SLA must specify how escalation of issues should work and how their resolution should be tracked. The ability to address these outlying issues will most often make or break the entire SSC experience for the other business units.
Technology has definitely made it a lot easier to work with an SSC based model by providing better communication, real time collaboration, workflow tracking and analytics. In fact, technological upgrades can provide a relatively cheap and reliable way to further enhance the capabilities of a Shared Service Centre.
Essentially, business optimisation is all about creating synergy – making sure that the whole is greater than the sum of its parts. Shared Service Centres have really proven that they can add value to a company’s operations which exceeds the amount of resources that need to be committed into them. Sometimes this synergy comes purely out of cost savings, but it often has got more to do with helping the business units stay focused on their core competencies.
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