Paring costs has been critical for organizations that were hit hard during the recession.
Cause And Effect
According to a report by McKinsey, large IT projects on average run 45% over budget, 7% over time, and deliver 56% less value than predicted. Another report by IBM Consulting concluded that only 40% of change projects met their schedule, budget, and quality goals. These stark statistics have real-world implications when you consider that organizations, companies, and even governmental agencies have been frantic to trim costs wherever possible over the past few years as a result of the global recession.
It didn’t take very long for progressive organizations to take a critical look at their internal processes and discover areas that could be streamlined, cut back, or consolidated. With the elimination of redundancies and inefficiencies came the growth of Shared Services. Business operations that used to be shared by several units within an organization were consolidated, and each business unit in effect became an internal client. Consequently, organizations have been able to get leaner and flatter and save considerably by streamlining processes.
Doing More With Less
Typically, shared services have involved operations such as HR, IT, Finance, Procurement, Legal Services, Marketing, and Sales. With several business units in an organization using services provided by the shared service centers, there are gains in efficiency and reduction in costs. The services provided by each operational center are then charged back to the business units that needed them. Charge-backs could take the form of a flat rate (e.g. share of revenue or headcount), budgeted rate (e.g. based on revenue), activity-based (per unit pricing of services), transactional rates (depending on pricing at specific times), or even market based rates (per time and volume of services).
Keeping Tabs On It All
Companies that have adopted the shared services model need to keep track of which business unit consumed services from which operational center, as well as account for internal charge-backs for services rendered. Many companies have to deal with poor visibility into resources used and costs incurred through shared service centers. Disparate transaction systems add to the confusion, as do outdated manual systems for tracking timesheets and project costs. This hinders accounting for chargebacks and planning for future projects and staffing levels. What’s more, estimation of project requirements becomes difficult without clear insight into the resources used for various projects.
As the complexity of an organization increases, so does the need for a unified solution that provides clear visibility into the time and cost spent on services, and itemized breakdowns to internal clients. Moreover, bottlenecks and inefficiencies can be discovered with the introduction of a unified solution, and measures to mitigate these issues can be taken.
The complexities of shared services in mid-sized to large organizations call for a solution such as Replicon Shared Services Management. It empowers managers with full visibility into the costs of service delivery and their requirements, and optimizes delivery of resources and services, while also enhancing forecasting capabilities with easy access to vital information across the board. Service centers can then provide cost summaries for internal clients, facilitate easy chargeback calculations, and improve budgeting and planning. Internal business units will benefit from detailed drill-down views into services consumed and their associated costs, as well as gain the ability to submit service requests and track status.
As adoption of shared services grows with leaps and bounds, companies and organizations will have to decide wisely on the solutions that they employ to keep everything in sync between their business units and shared service centers.