shared services

Shared services is the consolidation of business operations that are used by multiple parts of the same organization.  

Shared services is the consolidation of business operations that are used by multiple parts of the same organization.  

Shared services are cost-efficient because they centralize back-office operations that are used by multiple divisions of the same company and eliminate redundancy. Some companies use a chargeback system to bill divisions that use the service on a per-use, per-quarter or per-year basis.  Other companies absorb the cost of shared services as part of the continuing cost of running the business. Today, most companies employ a shared services model for finance, human resources management (HRM) and information technology (IT).

The goal of a shared services delivery model is to allow each business division to focus its limited resources on activities that support the division’s business goals. Technology has often been the driver for shared services within an organization because it can be expensive to purchase, maintain and train employees to use.  Back in the 1920s, for example, an Underwood typewriter cost $100 and typists were highly trained employees.  Instead of having each business division within the company hire its own typists, a centralized department for typists was seen as being more cost-efficient and the typing pool was born.  Today, a typing pool would be called a shared service center (SSC).

See also: cost center, IT chargeback system

 

This was first published in March 2012

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