The Benefits of Shared Services
Over the past few years, a trend has emerged in Shared Services. This is the process of taking a service that was originally provided by multiple divisions within a company and putting it in the hands of a single division. In many cases, that division is not only responsible for providing the service to the rest of its branch, but also to other branches of the company.
Effectively, they are the equivalent of a third party services provider, except that they operate from within the company, sharing resources and budget with the other divisions. Shared services can be provided from onshore or offshore facilities. But it’s not to be confused with outsourcing; another popular trend that involves delegating services to offshore providers.
Shared services have been responsible for massive cost-savings in organizations. It also leads to better business practices as the provider becomes highly specialized and more effective in performing that function. Over 30% of Fortune 500 companies have begun using shared services and have reported cost-savings in general accounting functions of up to 46% (Wikipedia).
Outsourcing and Business Process Outsourcing (BPO) are other popular business trends, so why not invest in those instead? In fact, shared services aids in that, as well, as it allows a company to better determine which of its processes can be outsourced by allowing them to ascertain the cost of automating internal processes (zdnet.com).
Information Technology Crucial to Implementation
SAP software has been a significant contributor to the success of shared services, as it aids communication within an organization. For shared services to be effective, the service provider and other divisions of the organization need to have easy access to all the required data, and they need to be able to easily exchange that data with each other. It also helps to have the different parts of the organization operating on a single platform.
Furthermore, ERP software is designed to aid an organization that specializes in a certain service by providing features and functions catering to that specialization, whether it’s finance, human resources or technology. So, it naturally aids shared services.
SAP's Shared Services Framework is specifically designed to allow seamless communication, and provide the automation necessary to enable faster flow of information throughout an organization.
Famous cereal provider Kellogg turned to SAP to help implement shared services in its HR department in its North and Latin American offices in 2008, which resulted in an 18% ROI within the first year (zdnet.com).
Singapore a Hub of Shared Services
Interestingly, in Asia the main incentive for implementing shared services is not cost-savings, but rather the better business practices that result from it. For example, Chinese company Lenovo implemented shared services with SAP for the purpose of making the company more adaptable.
Either way, five Asian countries featured in Frost & Sullivan’s 2008 list top ten list of countries for Shared Services (zdnet.com). Singapore in particular (rated fourth in the list, third out of Asian countries) has become a hub for shared services operations across the globe. Low crime-rates, low natural disaster risk, a wealth of talent, better operating standards for business continuity and disaster recovery, and stable wage increases have all been named as reasons for Singapore's popularity.
The city-state also has fewer “hidden expenses” than other places, so while it may seem an expensive place to operate, businesses are better able to manage their operations as they have a clearer picture of the cost. KPMG rated Singapore as the most cost-competitive out of 128 cities.
In 2007, SAP announced that 30% of Singapore companies were using shared services (channelnewsasia.com). In 2012, the IDA (Infocomm Development Authority of Singapore) announced that it would be investing $5.3 million in developing Shared Services for Business Analytics. Though it deemed business analytics a priority, it intends extending the services to healthcare, insurance and food industries (enterpriseinnovation.net) Even the Singaporean government has established an arm dedicated to shared services.
SAP's already significant presence in Singapore looks likely to increase, as more companies look to save costs and improve efficiency through shared services and the ICT services that make it possible.