Tricks of the Trade: Building A Successful Shared Service Center

Continuous cost pressure and the never-ending request for a higher transparency of IT services still lead companies to build corporate shared service centers (SSCs) with the aim of harmonizing and streamlining certain business functions. While originally designed to support repeatable business functions more effectively, many companies overburdened those centers with more complex services such as IT. In extreme cases, CIOs were asked to turn an SSC into a third-party professional services group delivering services to other organizations.

While many SSCs didn’t pursue that extreme, they still faced some very high expectations from their business stakeholders, including that they deliver services below market price, increase customer satisfaction and take responsibility for all service delivery supply.

Criteria for a good shared service center

Building a shared service center successfully started with the original idea of consolidating shareable services and focusing on delivery excellence. They also focused on building trust by demonstrating increased value to the business over time. There are some basic criteria required for successful SSCs, including:

• Building an SSC is a cultural breakthrough. People who have been colleagues for years become business partners over night, shifting employee mindset and leading to a different way of collaboration.
• Understanding the human challenge. As with outsourcing, the people transfer is key for success.
• Fostering senior executive patience. Executives we spoke with said that the first years are the biggest challenges as the chance of short-term success stories are limited. During this time it is essential that there is a continuous support from the board of directors.
• Agreeing on what is “shareable.” Not every service is shareable. Successful SSC management understands which IT offerings can be shared across various clients without tailor-made offerings.
• Clearly defining SSC responsibility within each shareable process. The prime goal in the beginning is to consolidate only the operational aspects of IT services to allow the SSC to deliver them.
• Building a service portfolio. As with the process responsibility, a clear service portfolio strategy is mandatory. Splitting IT service responsibility between a shared service center and a retained IT organization will add another level of complexity – but an overly aggressive SSC scope will blur focus and increase the risk of failure.

Firms address those key areas differently depending on their IT mission. Each mission is built on objectives which are based on the relationship between IT and business. Forrester defines this as the “archetypes of IT”, which fall into three categories: Utility Provider, which focuses on operational excellence and providing dial-tone reliable infrastructure services; Trusted Supplier, which manages application projects to support the business demand by delivering against functionalities;  and Partner Player, which enables corporate development based on an intimate understanding of business and market requirements.

Making a successful SSC

While forming an SSC, our clients have realized that the touch-points between the retained corporate IT and the SSC management will vary heavily and move over time as the organizations mature. The right separation is governed by the archetype that is defined as the basis for the implementation strategy.

• Focus on operational excellence first. It sounds simple — and obvious — but a CEO of a SSC said that focusing on operations and understanding how to innovate the service delivery reduced cost and increased efficiency while maintaining quality. This focus on operations not only leads to a strong increase in customer satisfaction scores, but allows the staff to identify itself with this new situation. Many Utility Provider organizations will find that they will stay focused on operations, particularly infrastructure operations, even as the SSC matures.
• Evolve into a service center of excellence. After stabilizing the first set of services, shared service centers that want to expand their scope of responsibilities will begin to take over more strategic tasks like infrastructure architecture design and the related outsourcing strategy. Trusted Supplier SSCs may choose this as their desired end state and continue running in this approach.  Partner Player SSCs will use this as an interim step in their evolution.
• Take over full responsibility for all demand and supply activities. Partner Player SSCs will eventually take over strategic responsibilities such as defining the overall corporate sourcing strategy and the design of the application architecture. Part of this expanded scope means taking over responsibility for demand management and not just supply management. Analyzing and understanding the impact of new and upcoming technologies and services on corporate’s business success will allow the SSC to get ahead of the growing business demand and prepare proactively for changes. The corporate IT organization will focus on IT governance and strategic portfolio management.

To allow the shared service center to become successful and add value as a center of excellence in both service delivery and sourcing, sourcing professionals need to involve themselves in the early stages of the definition and the setup of the SSC strategy. Successful sourcing professionals in such situations have been able to use their knowledge about service definitions, sourcing risks, and availability of services in the market to set expectations and to develop a fully aligned sourcing strategy.

Lutz Peichert is a Vice President and Principal Analyst at Forrester Research, where he serves Sourcing & Vendor Management Professionals. He will be presenting at Forrester’s IT Forum, May 25-27, in Las Vegas and June 10-12 in Barcelona.

See other Forrester articles on Nearshore Americas here.