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The Hype is Over:

The Rise of the Shared Service Centre

Bringing multiple departments together under one roof in a Shared Service Centre (SSC) has turned out to be not just another passing trend, but a serious solution to the problems that many organizations face. Setting one up, however, is not always successful. Research shows that a third of all SSC projects do not live up to their expectations¹. The primary reasons are a lack of standardization, insufficient process specifications and inadequate policies regarding the purpose and functioning of the SSC.

TEXT: NIEK STEENHUIS

Decentralization

In order to explain the rising popularity of SSCs, it is first necessary to examine their roots. The rise of the SSC in the nineties was not in line with the trend of decentralization that began after World War II. In the decentralized organizational model, each branch has its own support services such as facilities and financial departments. This kind of localized support is attuned to the specific needs of the branch and enables each branch to concentrate on its own activities. Localized support also means that coordination costs are low and opportunities for employees to develop career-wise are greater because staff and support services remain in close contact.

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However, because support departments in this model are focused on just one branch, collaboration between support staff departments is far from efficient. For example, each facilities department has its own processes, systems and assets that differ from the other facilities departments.

The SSC is a means to improve the poor collaboration between various departments at one branch. IT, Facilities and HR departments all work with similar processes – they all provide services to their colleagues – but they have their own systems and administration. Since each support department at each branch purchases its own supplies,

the costs for the organization as a whole are relatively high.

For quite a while, these high costs did not equate to a large financial burden. There was significant growth in the market in the last century and the profits that could be made by expanding with the market were many times greater than the savings that could be made through internal reorganization. Since 2001, however, increasingly more organizations have been facing saturated markets, which, consequently, are less profitable. To increase their profit margins, many organizations are trying to keep costs down through internal reorganizations, of which the formation of an SSC is an example.

The growing popularity of SSCs is thus a reaction to a saturated market and the high costs associated with the decentralized organizational model; however, it

seen as the enabling technology, without which the current massive expansion of SSCs would not be feasible. After all, information technology makes it possible to

market continued to expand.

Now that the profit margins have dropped, the alternative, standardization, has become

“Service management software can bridge the gap between various support departments”

also accords well with other recent developments in the business world. Ever since the nineties, there has been a strong movement towards professionalization within support services – business processes are conforming to models such as ITIL, certification and training is playing a larger role and more and more support departments are defining their own goals and purposes. Increasingly more services are being mapped out, which makes it easier to bring the different departments together in one SSC. The structure of the SSC is also a solution to the growing demand for knowledge sharing and transparency within organizations.

store, edit and transfer data across large distances without affecting the quality”² (Strikwerda, p. 66). Service management software can bridge the gap between various support departments such as Facilities and HR. By doing so, not only is information shared, but costs as well. To put it simply: if five support departments such as IT, Facilities, HR, Purchasing and Finance all use the same application, your costs will be five times lower than if each department purchases its own software package.

Standardization

It is currently the case that many departments still have their own, separate IT infrastructure

more attractive. To keep costs down, increasingly more companies are choosing standard software over bespoke software.³ Process standardization is also in full swing; process models and best practices such as ITIL, ASL and BiSL have been developed for the IT world and other fields such as Facilities Management are beginning to examine the applicability of such guidelines. 4 Legislation is also standardized in the industry with norms such as ISO.

More and more support departments are standardizing their processes and software, but in practice such standardization can prove to be a problem when

“Research shows that the failure of an SSC project can, in many cases, be attributed to incompletely defined processes and a lack in system standardization”

IT as enabling technology

IT developments in recent years have simplified the process of support service centralization, paving the way for SSCs. According to Dr. J. Strikwerda, Professor of Business Studies at the University of Amsterdam, the circumstances are so ideal that “IT can even be

and processes. That should not be very surprising since the idea that “specific products and services require specific software” (Strikwerda, p. 66) has been around for a long time. The high costs for both the software and the maintenance were tolerated as long as the

setting up an SSC. Research from KPMG shows that the failure of an SSC project can, in many cases, be attributed to incompletely defined processes and a lack in system standardization. 5 One of the interviewees, the head of Finance at Continental, formulated it as follows: “When setting up an SSC,

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services are often decentralized because people think this will reduce costs. But they forget to standardize their processes. And it takes a huge amount of work to then bring departments together.”

Pragmatism

A certain degree of

standardization is essential for the success of an SSC. However, complete process standardization for many different departments has proven in practice to be extremely time-consuming and complex. For that reason, Renske van der Heide, Senior Consultant at TOPdesk and specialist in SSCs, recommends first harmonizing the processes in consultation with all involved departments.

“You do not necessarily have to set up an SSC so that various departments will work together more efficiently,” comments Renske. “Efficiency is, for the most part, a matter of making arrangements. Take the example of moving a colleague’s workstation. The facilities department needs to take care of moving the furniture and the telephone, the IT department needs to make sure the hardware and software is in order, and

the provider needs to be alerted to ensure that the phone and computer are connected. By reaching a mutual agreement in regards to planning, you can ensure that such a manoeuvre

is coordinated successfully. A

facilities employee can then tell an IT employee, ‘You pick up the computer and I will move the desk, and then you can take care of the rest after I’ve moved it.’ It seems like a simple arrangement, but in practice, that

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a simple arrangement, but in practice, that 22 TOPDESK is not always the case. Moving a

is not always the case. Moving a workstation is a simple example, but when an entire department relocates, you have to apply the concept on a much larger scale.”

Renske continues, “Introducing one tool for multiple departments to harmonize these processes can be the solution. The various departments can operate independently of each other, but log their data using the same tool. Installing a new workstation, for example, can then be mapped out in a template in the software. By

using one software program across multiple departments, you can also offer clients one all-purpose portal in which they can address their concerns regarding IT, facilities and HR. This can be set up as an SSC, but it does not necessarily have to be. The advantage,

though, is that well-structured mutual agreements between departments can be made and that processes are harmonized.”

Change or improvement?

The introduction of an SSC can be an answer to specific problems – such as high costs, inadequate transfer of knowledge or lack of transparency – within your current

organizational structure. However, an SSC is sometimes viewed as

a tool that will automatically

lead to overall improvements,

but that is not always the case. Implementing an SSC means

a large-scale reorganization

and, just as with any other organizational change, a number of things need to be considered for the project to be a success.

Apart from standardization

and clearly defined processes, a customer-focused staff is important for an SSC. A report from

and clearly defined processes,

a customer-focused staff is

important for an SSC. A report from KPMG indicates that less successful SSCs do not focus enough of their attention on the satisfaction of their clients – more than half of the companies

surveyed did not conduct customer satisfaction research. They have too little insight into the quality of their services, which leaves them unprepared to make improvements.

Another issue that needs to be considered is the potential for career development for employees of the SSC. This

is an aspect to which many

companies have not given sufficient consideration: four of the five companies surveyed by KPMG indicated that their SSC

employees have never worked in internal functions outside of the SSC. According to this research, such a lack in career perspective can lead to a relatively large turnover of employees, making it difficult to establish lasting relationships with clients.

Satisfied employees

To prevent a rapid turnover of staff within an SSC, it is important that not only the clients are satisfied, but the employees as well. “When implementing an SSC, career opportunities for the employees need to be factored in,” comments Renske. “You have to consider what sorts of positions you would want to strive for as an employee. A new SSC means new tasks and responsibilities for everyone. Those who enjoy contact with clients should perhaps work in the front office, while those who prefer to focus on technical problems would

be better suited in the back office. If managers are familiar with employee preferences, they can be accounted for in the reorganization. This increases employee satisfaction.”

Strikwerda notes that introducing an SSC is generally not seen as just another forced organizational change. In most cases, many people are involved in the policy forming, and the purpose of the SSC is made clear from the very beginning. If SSC employees can see the advantages of the changes for themselves, they will be sooner

prepared to stand behind them.

The future

Whether or not an SSC should be set up is for the individual

organization to decide. It is clear that there are enough advantages to be had, but they will not mean the same thing for every organization. It will be interesting to see what the future has in store for the development of the SSC. Will companies cut back to the extent that they will not want to invest in a project that does not deliver any short-term profit? Or will the falling market compel companies to do just the opposite, hoping to bring down costs in the long run? According to some 6 , a crisis is the right time to invest. If that is true, we can expect to see the growth of SSCs explode in the coming months and years.

the growth of SSCs explode in the coming months and years. 1 See report entitled “Finance

1 See report entitled “Finance

shared services – Delivering the promise”, resulting from research conducted by KPMG LLP, 2008.

2 Strikwerda, Shared Service

Centers, Van Gorcum, 2007.

3 Nieuwsbank, “KPMG: meerderheid

bedrijven kiest voor standardsoftware”, http://www.nieuwsbank.nl/

inp/2000/01/0110R046.htm

4 For more information about process

models for facilities management, see ‘Facility management moving toward ITIL’ in this edition of TOPdesk Magazine.

5 KPMG LLP, 2008.

6 Automation guide: “Crisis is de tijd voor strategische investeringen”, http://www.

automatiseringgids.nl/artikelen/2008/50/

crisis%20is%20de%20tijd%20voor%20

strategische%20investeringen.aspx.

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