The days of shared services v outsourcing are long gone. There is an array of other models that are growing in popularity and we wanted to describe some of these that may be less familiar in the market:
- Hybrid: Why do either shared services or outsourcing when you can do both! There are three common types of hybrid models utilised that provide an optimal solution based on the business requirements.
- Location Hybrid: For a particular geography an organisation may have a shared service centre (ie North America) whilst for another geography (EMEIA) they may have decided to outsource. This enables a comparison within the organisation between the performance, cost, and impact of change of the shared service centre against the business process outsource (BPO).
- Production Line Hybrid: Clearly aligned to the overall corporate strategy, the production line hybrid is the scenario where the shared service centre acts as the intermediary between the business and the BPO provider. The shared service centre pulls services away from the business divisions, manages the initial change, makes these services rule based, repeatable and measurable and then transfer the scope to the BPO provider. The production line hybrid model enables a company to transfer more complex activities to a BPO provider, and smoothly manage the change.
- Scope Hybrid: For companies that face certain activities that they are either not prepared or not allowed to outsource, the scope hybrid provides an effective solution. The shared service centre performs the activities that cannot (or will not) be migrated to a 3rd Pary with other support services performed by the BPO provider. This is particularly prevalent in Financial Services institutions, where the shared service centre performs activities relating to customer data that is too sensitive to be migrated to a 3rd Party.
- Joint Venture (JV): For organisations that are not ready to give full control to a 3rd Party company, or would like the back office to be revenue generating then JVs may be a viable option. There are three types of JV utilised:
- Traditional JV: The traditional JV model is set up between a buying organisation and a BPO provider to jointly provide services to the buyer. This model can then be expanded to provide services to other subsidiaries and potentially other companies with an equitable split of any profits accrued. An example of an effective model where this is employed is the Steria – Dept of Health joint venture that provides services to range of NHS independent entities, and the Xchanging – Lloyds of London joint venture that provides services for insurance syndicates.
- Industry JV: The industry JV model is set up by two or more organisations within a particular industry to provide services back to those organisations. It is a method of sharing resources and driving improvement in a collaborative manner without joining forces with a BPO provider. These are most prevalent in collaborative industries in the public sector, but examples are evident across almost all industry sectors.
- Cross Industry JV: Notably there are plenty of examples where an organisation partakes in a joint venture to grow a capability that can be offered to other organisations across industries. Examples include Barclays JV with Intelenet (of which they sold off their 50% share in 2007, and bought 12.75% in 2010) and Dow Chemicals arrangement with TCS in North America.
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Tags: Outsourcing, Shared Services
