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Outsourcing, shared services and the 50:50 gamble
by Jonathan Cooper-Bagnall, head of shared services & outsourcing at PA Consulting Group and sourcing expert Simon Tennant
Wednesday, March 12, 2014

Many organisations are adopting shared services because they want better support services for their businesses. But there’s a big variation in what they achieve when they take this step. All start out with high expectations – but only 50 per cent secure the benefits they hoped for. The other 50 per cent are disappointed.

The difference in results lies in the way shared services are sourced. Businesses that outsource most of their shared services are far less likely to get good results than businesses that keep a good chunk of shared services in house.

This is one of the key findings from recent research by PA Consulting Group. We spoke to 135 major organisations to find out what approaches they were using to develop shared services and how these approaches affect the results they get.

Outsourcing is a crucial part of the shared services mix

The research shows that shared services delivered mostly by outsourced providers are the least successful in terms of exceeding the expected benefits, But that does not mean there’s no place for outsourcing in the shared services world. The survey also showed that shared services delivered by a combination of in-house and outsourced providers achieved the best results of all. Outsourcing is a crucial part of the shared services mix but it matters how you do it.

The research told us that:

• none of the companies that use mostly outsourcing to deliver shared services said they had been able to develop shared services that exceeded their expectations

• 6 per cent of companies that use mostly in-house teams said they had managed to develop high-performing shared services

• 10 per cent of companies that use a more balanced mix of in-house and outsourced providers had seen results that exceeded their expectations.

While outsourcing was a critical issue affecting performance, there are other factors too. We identified three further drivers of success: service scope and reach, integration across functional silos; and a professional approach to change management.

How service scope and reach affect performance

Over the past five years, organisations have been adding more scope to shared services.  Data analytics and procurement are increasingly being included in shared services. The geographic footprint of shared services has been expanding too. This is a good thing. The research showed that organisations delivering shared services with more functional scope and across a greater geographical reach also achieve superior returns.

Why integration across functional silos matters

Organisations with shared services are increasingly breaking down traditional functional barriers and integrating operations. We found that this kind of integration yields good results; 12 per cent of organisations that had brought all functional services under a common service delivery model said the results they got from shared services were better than anticipated. Where functions only shared components of the service delivery model, that figure fell to 5 per cent.

Managing change professionally has a big impact on results

Implementing shared services has always required organisations to undergo transformational change. It is essential to recognise this and invest in the change management that is necessary to deliver it.

Organisations we spoke to told us that the critical factors were:

• getting the right capacity in place to deliver the programme well

• putting a strong emphasis on managing and communicating with stakeholders

• establishing a new culture focused on customer service.

Implementing shared services can be a gamble – but organisations can increase the chances of success by using these four strategies. This clear focus on the sourcing mix, scope, integration and change management will make it much more likely that the move to shared services will meet your expectations.

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