Wednesday, November 04, 2009

Business models for shared services

During my work, I have become more and more involved with shared services. Given my focus on business models, my interest is in understanding the business logic behind shared services.

Firstly, we have to address what we mean with shared services. Shared services can be defined as “The concentration of company resources performing like activities, typically spread across the organization, in order to service multiple internal partners at lower cost and with higher service levels, with the common goal of delighting external customers and enhancing corporate value” (Schulman et al., 1999).

An initial orientation on the business model of shared services has brought me to two core considerations for service provisioning in organizations. The first consideration is related to the centralization/decentralisation discussion that is quite common in organizational literature, for example in relation to the IT function. The preliminary proposition is that shared services combine the benefits of both approaches while circumventing the disbenefits, see the following link for a nice example.

The second consideration is the hierarchy/market discussion that is quite common in economic literature. An alternative for this is the insourcing/outsourcing (make-or-buy) discussion found in supply chain and purchasing literature. The preliminary proposition here is that shared services provide control (and internal capabilities) on the one hand and the discipline of the market (and a customer focus) on the other.

Note that, while we start with the optimistic mindset that shared services can provide us with the 'best-of-both worlds,' there is also the risk of 'worst-of both-worlds.' This provides the starting-point for research into how shared services can live up to its promises?


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