Shared services is on one of the hot buzzwords in the outsourcing industry. In this piece, which first ran in our sister publication Nearshore Americas, a buy-side expert dispels four myths that can keep you from taking advantage of this model.
Shared services, or the combining of different functions across company departments, can create efficiencies while reducing operational costs. Yet the concept of shared services still meets a good deal of resistance in the marketplace, largely due to the continuing popularity of several myths preventing a proper understanding of what they are about.
At the upcoming North American Shared Services & Outsourcing Week conference in March, I will be participating in a panel discussion entitled “Debunking Myths: Exploring the Validity of the Top 6 Industry Perceptions.” As a preview of that discussion, and in the interest of brevity and clarity, I will review four prevalent myths regarding shared services and following the lead of a popular reality TV show, “bust” them.
Myth 1: Shared Services Leads to a Loss of Control
One of the primary myths about shared services is in regard to control, or loss thereof. There is a perception that if anything is outsourced or done on a global level, it inevitably leads to a loss of control. This view is usually held by the people who used to perform the process being outsourced, as they say, “How would someone else know how to do everything I do?”
The best way to debunk this myth is take the emotion out of your shared services initiative and make it data-driven, using elements like service-level agreements, benchmarks, and common metrics. Then you can give the group being affected hard data on how shared services is doing, and give them the comfort to turn their attention to other priorities that help the business stay profitable.
Myth 2: Globalization
The myth surrounding globalization is multifaceted. On the top layer, there are the equally erroneous beliefs that no process can be performed globally and that any process can be performed globally. In reality, some processes can be globalized, but that leads to the deeper layers of this myth, as many people do not truly understand what “global” shared services encompass.
Let’s use accounts payable (AP) as an example of a process that can be performed globally via shared services. You can globally manage your payroll processes, putting controls and reporting together, as long as you are cognizant of the legal ramifications in different countries. Some countries have regulations that are more draconian than others. Therefore, not everything will be or needs to be done in the same way, and you don’t have to rely on a single AP outsourcing provider to achieve AP shared services on a global level.
Myth 3: Outsourcing Won’t Work
The very simple myth that outsourcing won’t work goes back to the issue of control. Outsourcing will work, but you must pick your spaces. For example, at Pitney Bowes we have had great success in outsourcing transactional activities. If you can live with a decision-based ruling, then you can outsource a process.
Myth 4: Sophisticated Processes Can’t Be Put on the Cloud
To fully examine this myth, I’m going to first rewind the tape a little bit and look at the history of IT structure, which started with big mainframes that were run locally by the corporate IT department. Then IT became smaller, portable and more standardized, but still ran on in-house infrastructure.
Now, the cloud is out there. Basically, the cloud is someone else’s mainframe, and all the major portals like Facebook and Yahoo sit on the cloud. There is a perceived hurdle that legacy processes are too sophisticated to put on a cloud infrastructure. However, the real opportunity the cloud offers is to simplify sophisticated processes so they can be housed on an ERP platform that enables you to simplify things and store data more centrally.
In addition, the cloud offers significant cost savings opportunity, as today’s IT environment is largely based on a “pay as you go” model. IT implementations occur on a one-off basis with no economies of scale. The cloud offers a wonderful opportunity, based on simplification and scalability, to rectify this situation.
So there is a brief overview of four myths unnecessarily impeding the spread of shared services. I hope you will join me in Orlando on Wednesday, March 7 to look at shared services myths in more detail, and uncover the truths behind them.
Jeffrey Jacobson is VP of Finance/GM of Global Accounting Operations for Pitney Bowes.