Understanding Shared Services : An exploration of the IS literature

In a competitive environment, companies continuously innovate to offer superior services at lower costs. ‘Shared services’ have been extensively adopted in practice as one means for improving organisational performance.

Shared services is considered most appropriate for support functions, and is widely adopted in Human Resource Management, Finance and Accounting; more recently being employed across the Information Systems function. IS applications and infrastructure are an important enabler and driver of shared services in all functional areas. As computer based corporate information systems have become de facto and the internet pervasive and increasingly the backbone of administrative systems, the technical impediments to sharing have come down dramatically.

As this trend continues, CIOs and IT professionals will need a deeper understanding of the shared services phenomenon and its implications. The advent of shared services has consequential implications for the IS academic discipline. Yet, archival analysis of IS the academic literature reveals that shared services, though mentioned in more than 100 articles, has received little in depth attention.

This paper is the first attempt to investigate and report on the current status of shared services in the IS literature. The paper presents detailed review of literature from main IS journals and conferences, findings evidencing a lack of focus and definitions and objectives lacking conceptual rigour. The paper concludes with a tentative operational definition, a list of perceived main objectives of shared services, and an agenda for related future research.

See here for more information.

Business models for integrated solutions

A while ago there was an interesting article titled 'Charting a Path Toward Integrated Solutions' (Davies, Brady & Hobday, 2006). An integrated solution provides 'innovative combinations of technology, products and services as high-value unified responses to their business customers' needs.'

While the article gives a good overview of the required organizational capabilities and structures, and addresses the path to maturity, I had the impression that it may add value to view the paper from a business model perspective. Therefore, I used the Business model Canvas of Osterwalder (via the BMDesigner tool) to create a visual business model presentation (see below).

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?

Business Model Mind Map

This picture presents Osterwalder's Business Model Canvas as Mind Map. Mind mapping can be used to generate a number of alternatives for the different elements without thinking too much about the relations between the elements. This is more prominent in the canvas itself.

Critical success factors for business model innovation

Okay, you have a fantastic idea and managed to translated that into a superb business model design. The hard work is done, or not?

The need for deconstruction

Business model innovation, as a form of radical innovation, requires ‘creative destruction’ that challenges the certainty of current core competencies and revenue stream in favor of uncertain future competencies and revenue stream. This requires vision and risk-taking, something that is often discouraged by corporate incentives and institutional arrangements.

The ability of to execute

Translate a high-level business model into a more detailed operational model and implemented that model in a way that stays consistent with the original concept. A few small compromises here and there (in particular, in performance indicators and incentive schemes) can easily result in a flawed business logic in the operational processes.

Challenge you own innovation

Do not get too attached to the first idea or implementation, how good and promising it may seem. Built in feedback loops and monitor early warning signals to explicitly challenge your original concept and be willing and able to completely change it, if required.

Note that this kind of explicit learning is facilitated by a consistent implementation of the original concept, as described above. Otherwise, it is unclear how to interpret feedback, is it caused by the original concept of by the implementation.


The role of timing

You cannot be too early, but certainly not too late.

New book on business model design and innovation

Soon the new book of Alexander Osterwalder et al., Business Model Generation, will be out. Find out more about the book on the special website. Read also more on the creation process of the book and the launch event at his blog.

What is interesting about the book is that it not only addresses business model design and innovation, it also practices what its preaches. Alexander initiated a community that co-created the book (with a membeship fee increasing with the membership numbers) and cut out the intermediairy (the publisher in this case).

Towards a business model definition

Coming up with a good definition is hard, and for a body of knowledge as immature and abstract as 'business model' thinking (logic? theory?) it is even harder. Two particular, related, problems I have come across are:

1. Whether a definition refers to a business model of an organization (actor) or of an initiative (network).
2. Whether a definition refers to a (more or less) abstract innovation logic (e.g. open), or to offering and delivering a specific value proposition.

Trying to reconcile this, here is an attempt to define what a business model is and what this means for business model management.

A business model describes the value rational for the application of resources by one or more business actors. A business model can be described from the business actor and/or the business initiative perspective. A business actor can participate in one or more business initiative. A business initiative can involve one or more business actors.

From the business actor perspective, the value rational comprises the fundamental value logic of a business actor. From the business initiative perspective , the value rational comprises the value creation, configuration and capture of a business initiative.

The core challenge of business model management is to ensure that the value rational is viable and sustainable. This requires governing the value rational, aligning the value rational at a moment in time (including nourishing synergies and handling conflicts), and evolving the value rational over time.