Shared Services: The New Old Thing
13 October 2011:
Globalization and new technologies are driving a new enthusiasm for an old idea. Whether called centers of excellence, shared services, or business-process outsourcing, the goal is the same: eliminate duplication, enforce standardization, and cut costs. And CFOs lead the charge.
In 2010, Mike Holmes was lured out of retirement by his last employer. His charge was to run the company’s shared-services center in Malaysia until he could find someone who could take his place, train that person, and then return to his happy retirement.
Why did the company reach out to its former finance director, then two years retired?
Because he had done it before. By the mid-2000s, Holmes had helped move 95% of his company’s SG&A functions to Kuala Lumpur. And because he had done it before, Holmes knew how hard it was. “Moving factories and administrative stuff offshore is hard,” he says. “Getting different countries where you operate to allow you to put things in a shared-services center is hard. In Germany, for example, they’re not comfortable with their books and records and tax returns being done outside the country. They’re afraid they’re going to get cheated.”
On the other hand, Holmes points out, cost-reduction benefits and efficiencies can be massive if “you have good procedures, processes, and an IT platform everyone can work on.”
Easier in the Cloud?
Decades ago, when the concept of shared services (taking first back-office operations such as payroll, IT, and human resources, and then other functions such as procurement and logistics out of individual business units and centralizing them) was pioneered by companies including Proctor & Gamble and Bristol-Myers Squibb, integrating on a common IT platform was a huge challenge. For many companies, it still is. PricewaterhouseCoopers senior managing director Charles Aird says he sees companies that have grown through mergers and acquisitions and have “never truly integrated them.” Consequently, says Aird, “on a day-to-day basis you’ve got different customer masters; different charts of accounts. You may have 15 different instances of your SAP ERP, all implemented differently.”
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Source: CFO.com
