Discussion board

Based on their experiences, focus group members agreed on four strategies that they believed would contribute to the successful creation of an IT shared services organization. 1. Create a transparent process for goal alignment. The group pointed out the importance of establishing a transparent process for articulating common goals. For IT managers, the key attraction of a shared service is typically cost savings and/or reduced complexity. Being able to reduce costs by means of mobilizing reuseable assets standardizing platforms and virtualizing services, and eliminating redundant systems while providing a uniform and consistent level of service is appealing. For business managers, however, the promise of cost savings comes second to the desire for enhanced customer service through improved quality, faster response and delivery, greater financial transparency, and/or improved relationships with IT. Without goal clarity, transparency, and alignment, the shared services organization will champion one set of goals over another, creating animosity between the parent organization and the shared services provider. One manager described the experience in her firm as follows: The centralization of the service was soon viewed by the business as a standin-line-and-wait for a one-size-fits-all solution . . . the fact that the business was unable to do an end-run on this delivery process was seen as unresponsive to the urgent and unforeseen demands placed on the business . . . the elimination of business priorities . . . no one on the business side wanted to hear about reduced costs of service. The focus group suggested that the creation of a shared service need not degrade into a situation of conflicting goals. There is nothing to suggest that improved service and cost reduction cannot be tackled simultaneously. In fact, the centralization process alone should produce sufficient economy of resources to enable enhanced quality of service. The difficulty is typically built in at the outset of the shared service by failing to articulate a set of explicit goals that have acceptance by both the business and IT. Without mutual acceptance and alignment, the shared service can be doomed at inception.

2. Develop a comprehensive investment model. Establishing a shared services

organization is not a trivial task. In a majority of the cases, the existence of multiple distributed services across the enterprise (perhaps globally) presents formidable barriers to consolidation and coordination. Time differences, cultural differences, and geographical distances all complicate the process. For global enterprises, legal differences also come into play in building an effective shared services organization. The focus group suggested that the larger the organization, the more onerous the task and the longer it takes. But shared services are not just large organization phenomena. As a practical rule, Bergeron (2003) suggests, the “shared services model is a viable option when the savings from reduction in staffing are greater than the added overhead of creating a management structure to run the shared business unit.” Administrative overhead is a significant component of the overall investment in shared services. In addition, there are other substantial one-time costs associated with centralizing operations. These include the relocation of people, consolidation of technology, establishing support roles/activities, developing capabilities/skills, and building communication networks to support centralized operations. Most organizations currently have chargeback mechanisms in place for IT services but, according to the members of the focus group, these are often inadequate for a shared service. For well-defined services (like printing, desktops, or e-forms), the costs are easily identified and associated with the service levels provided. With more complex services (e.g., payroll management, disaster recovery and planning, records management), however, costing of the actual service requires more sophisticated algorithms to apportion costs2 for services provided. A key component is the ability to establish baselines for existing services. Without these, it is problematic to assess the incremental contribution of a shared service after its implementation. A shared service investment model needs to account for significant ongoing costs in addition to the start-up costs mentioned earlier. Realistic implementation times range from “at least a year in simple domestic business scenarios involving one or two company locations to five years or more for a major international organization with dozens of locations” (Bergeron 2003). Furthermore, cultural change can present a more formidable challenge than amassing resources (Lacity and Fox 2008). A shared business unit is first and foremost about building relationships between the parent organization and the service unit. Building effective relationships takes time (Smith and McKeen 2010). The bottom line is that the investment model for the establishment of a shared service requires sophistication, understanding, and a commitment from the business as well as IT to make it work. Depending on the size of the undertaking, even reaching a breakeven point can be protracted. However, to the extent that the investment model is comprehensive and has the backing of senior management, it can withstand the ongoing challenges faced by any significant organizational transformation.

3. Redraft the relationship with the business. The establishment of a shared service necessitates a different type of relationship between the business and the service provider. For instance, with a distributed service, business management has the ability to impose priorities to reflect the demands of the business. These localized priorities, however, rarely survive the transition to a centralized service mechanism. As a result, the business typically experiences feelings of loss of control with the creation of a shared service. The old adage “centralize for control, decentralize for service” applies. Even worse is the potential to develop an “us versus them” mentality, where the business feels a tangible disconnect between the urgent demands of their business and the unresponsiveness of the shared services provider. The risk of this occurring is greatly enhanced in situations lacking goal alignment. A customer service orientation must therefore be instilled within the shared services organization to guarantee that satisfaction of the client remains the key goal. The need for an effective service orientation, particularly during the early stages of the development, is to counter the risk of the shared service being perceived as a “distant, unresponsive, and overly bureaucratic” provider. Furthermore, this orientation must be conveyed to the parent organization. This involves strengthening internal IT capabilities; changing the mind-set of IT personnel; training and motivation; and commitment from all levels of management (Fonstad and Subramani 2009). To accomplish this, the shared service must build “internal sales and marketing”

competencies, which require resources focused on communi cating with current and prospective customers (Bergeron 2003). 4. Make people an integral part of the process. Lacity and Fox (2008) argue that successful shared services result from effective management of four interrelated change programs: business process redesign (i.e., what business processes the shared services organization will perform); sourcing redesign (i.e., who performs the business processes); organizational redesign (i.e., where business processes will be performed); and technology enablement (i.e., technologies used to implement and coordinate the work). The focus group agreed with the need to manage each of these programs effectively but was particularly enamored with the notion that each of these programs was appropriately viewed as a “change” process. Their

experience suggested that the difference between success and failure of an IT shared services initiative was frequently the result of the effectiveness of the change process itself. The creation of a shared services organization requires significant transformation within the IT organization and directly impacts IT staff. As with outsourcing, dislocations are inevitable. As decentralized staff become centralized, reductions are expected, reporting relationships change, new skills are required, existing skills become redundant, and the overall relationship with the business becomes much more immediate and business-like with the focus on the bottom line. None of this happens automatically. Communications and marketing strategies take on new importance. Customer service is no longer a “take it or leave it” phenomenon. Training is essential. New metrics and key performance indicators become necessary. Service level agreements must be articulated and managed. Together, this represents enormous change for IT. Bergeron (2003) suggests, “The pace of cultural change, not the availability of resources or technology, generally gates the limitation.” The focus group did not provide specific suggestions for organizations to follow but stressed a realization of the enormity and significance of the organizational change that accompanied the adoption of a shared services model and a call to make the “people part” of a shared services implementation the top priority. In short, a customer service orientation is built over time and through the conscious and deliberate attention of all employees. It thus needs to be planned as thoroughly as any other major organizational transformation initiative.

McKeen, J. D., & Smith, H. A. (2015). IT strategy: Issues and practices (3rd ed.). Pearson