Shared Services

Shared services is the provision of a service by one part of an organization or group, where that service had previously been found, in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key here is the idea of 'sharing' within an organization or group. This sharing needs to fundamentally include shared accountability of results by the unit from where the work is migrated to the provider. The provider on the other hand needs to ensure that the agreed results are delivered based on defined measures (KPIs, cost, quality etc.).

Shared services is similar to collaboration that might take place between different organizations such as a Hospital Trust or a Police Force. For example, adjacent Trusts might decide to collaborate by merging their HR or IT functions.

There are two arguments for sharing services: The ‘less of a common resource' argument and the ‘efficiency through industrialization' argument. The former is ‘obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. The second argument is ‘efficiency through industrialization’. This argument assumes that efficiencies follow from specialization and standardization – resulting in the creation of ‘front' and ‘back' offices. The typical method is to simplify, standardize and then centralize, using an IT 'solution' as the means.

Shared services is different from the model of outsourcing, which is where an external third party is paid to provide a service that was previously internal to the buying organization, typically leading to redundancies and re-organization. There is an ongoing debate about the advantages of shared services over outsourcing. It is sometimes assumed that a joint venture between a government department and a commercial organization is an example of shared services. The joint venture involves the creation of a separate legal commercial entity (jointly owned), which provides profit to its shareholders.

Traditionally the development of a shared-service organization (SSO) or shared-service centre (SSC) within an organization is an attempt to reduce costs (often attempted through economies of scale), standardized processes (through centralization). A global Service Center Benchmark study carried out by the Shared Services & Outsourcing Network (SSON) and the Hackett Group, which surveyed more than 250 companies, found that only about a third of all participants were able to generate cost savings of 20% or greater from their SSOs. At NASA, the 2006 switch to a shared services model is realizing nearly $20 million of savings annually. Further, by the end of 2015, the NASA Shared Services Center is expected to save the organization a total of over $200 million, according to NASA’s Director of Service Delivery.

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