The shared services concept, both in its in-house and outsourced flavours, is driven by a number of business objectives. If we asked a group of people to list these objectives, we would probably see cost reduction coming high on the list. Process efficiency would probably score highly too.

The cost reduction is historically achieved by centralising activities in one place to get economies of scale, and often this is accompanied by a shift to a lower cost location. In more recent times, cost reduction is achieved by a focus on automation, including robotics and machine learning.

Process efficiency is achieved by creating standardised processes, managed by people who are experts in the process being supplied, and also in the art of process management. Effective shared service centres place strong emphasis on upfront process re-design, and in having good workflow management tools. The ongoing business challenge is to balance the competing forces of standardisation (often using the argument “this is best practice”) and a desire by the business for flexibility, which is absolutely natural given that most businesses experience flexibility as a critical enabler for them to survive and thrive.

Another key challenge for the shared service centre is to maintain the momentum for continuous improvement, which can be hard after the initial investment has been used up, and where there may well be no funds available for new investment, even where a positive return on investment is on the table. But shared service centres which fail to rise to that challenge will face increasing frustration, both from the shared service staff themselves and also from the businesses that they aspire to serve.

In times past, it has been the functional business user (the Finance Director, for example) who has been the dominant customer, and the arbiter of the success or failure of the service centre. Whilst he or she still has the power of judge, jury and executioner, recent years have seen much more focus being placed on the satisfaction of the end-user (the employee, for example).

This is driven by new technologies, and the way society is adapting to use these technologies. Consider how many times you (or at least your children) have thought “it’s easier to click on the website than to pick up the phone”. We translate into the workplace our role as online retail consumers, and all now expect anytime, anywhere, anyhow access. Cue for a big investment in self service capabilities.

The service centre owner naturally takes this as an opportunity to reduce staff, and to promote and enable the concept of maximum self service by end-users. All tends to be well in an environment of simple processes. But when the business comes knocking on the door demanding flexibility, the service centre which has distanced itself too far from understanding and regularly communicating with end-users faces a major and often fatal challenge in adapting rapidly to meet new demands. And if there is no warmth in the relationships between the service centre and its end users, then there may be very few people willing to argue for the centre’s continued existence.

There are many very well run shared service centres out there which are managing these challenges with great skill. But there is no doubt that the pressure is there too.

I would like to finish by posing a question – do you see the termination of shared service contracts happening more in the outsourcing world, in the in-house world, or both? And what does your answer tell us about the likely future of shared services?