ITD #11 | 21Oct 2011| Integrating IT to shared services structures

8/3/2019 ITD #11 | 21Oct 2011| Integrating IT to shared services structures

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ITD #11 ‘Integrating IT to shared services structures’

© IT Decisions 21 October 2011 – All rights reserved

Integrating IT to shared services structures ITD Research #11 : 21 October 2011



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IntroductionTo many executives across business functions worldwide,

IT is a support function that is a cost ‐ often quite high ‐

to their business.

But IT is essential for just about any industry, because foralmost any corporate environment the Internet, email,

communication systems, and enterprise software such as

ERP – imagine trying to function without this?

However, many companies in Brazil and overseas have

created a shared service structure for the support

functions of the business, like payroll, finance, and

human resources.

IT is usually more strategic and important than thesefunctions, but there are many areas where the lessons of

the shared service culture can be applied to IT.

Infrastructure is a good example. If various areas of your

business just need storage space then why not arrange

that centrally and share the service across all divisions of

the business?

While sharing IT may appear logical and

may introduce efficiencies, can this

internal market in services disrupt

workflow and make it harder to deliver

efficient and innovative IT services?

This week, our CIO research group

shared their thoughts and experiences

on IT as a shared service, and the results

are supportive in general, but with a few

surprises.

Many lessons of the

shared service culture

can be applied to IT



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Participant feedbackTo explore the issue of integrating IT into a shared service function we asked four questions – three

of which were multiple choice and one designed to promote an open discussion.

We received answers from 22 executives from 16 industry sectors: shipbuilding, pharmaceuticals,

logistics, consumer services, transportation, insurance, broadcasting, consumer goods, media,

chemicals, engineering, education, food production, real estate, automotive, and telecoms.

Question 1: Could you (or are you already) achieving an economy of scale by sharing IT services

across the organization?

This was very much a mixed answer and perhaps it depends on the scale of sharing involved. Almost

half of respondents (45.5%) confirmed that they are using a shared services model to achieve

economies of scale for IT, but a further 36.4% noted that they are partially working this way.

Taken together this is quite a strong vote of confidence in the shared service model working for IT,

with 4 out of 5 respondents confirming that they are working partially or entirely within a shared

services model for IT.

0 1 2 3 4 5 6 7 8 9 10

Yes

No

Partially

45.5%

18.2%

36.4%



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Question 2: Do you believe that the increased efficiency of sharing IT outweighs the additional

processes needed to make it work (centralization, handoffs, duplication of effort...)?

In theory, the shared service model should ensure that services are not duplicated. You should not

need that same IT function in every region you operate, or in every division of the organization.

In practice, even though the shared service model is designed to create efficiency, it can also

create structural problems due to centralization of services, the need to hand over tasks between

teams, and additional processes for management and communication – compared to delivering all

services locally.

Despite the potential for issues, our respondents firmly believe that the efficiency gains more than

compensate for any additional complexity in managing the IT service.

A full 40.9% of the participantes of this research cycle agree entirely that the gains outweigh the

complexities, and a further 45.5% said that this is mostly true – this compares with the few who

said that shared services actually create more problems than they resolve.

0 1 2 3 4 5 6 7 8 9 10

Yes

No

Mostly

Rarely

40.9%

4.5%

45.5%

9.1%



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Question 3: Does the centralization of a function, such as sharing IT across the entire

organization lead to a situation where you are less able to respond to business demands

because an additional layer of bureaucracy has been inserted between your team and the

frontline business?

It can be tricky when the business has been used to working with specific individuals directly, or

they expect an immediate IT response without the need for prioritization against other users in

the organization. By introducing a shared services culture, can you create a wall of bureaucracy

between you and the business?

It’s possible – 18.2% of our respondents believe that bureaucracy can be created or increased

within a shared service environment. However, as with the other questions, our respondents arelargely in favor of the structure.

A full 50% of participantes in this research said that a shared service structure does not create

additional bureaucracy and a further 31.8% said that even when moving to this new approach to

IT services, bureaucracy could be avoided.

Across the entire multiple choice segment of this week, there has been strong support for the

potential of a shared service structure to create a more efficient IT department.

0 2 4 6 8 10 12

Yes

No

Bureaucracy can be avoided

18.2%

50%

31.8%



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Question 4: Please outline your own experiences of best or worst practices in implementing IT asa shared service.

Shipbuilding ‐ Shared services can increase user satisfaction

It is possible to achieve cost savings through the synergy of processes; quality improvements will

increase user satisfaction; the focus on innovation will allow the creation of services that have a

greater global reach.

Logistics ‐ Strong governance can replace the benefits of sharing

We do not share IT services, but we have internal governance processes that let us capture and

act quickly on business demands. Being a CIO who responds to the CEO, this allows me to know

and participate in strategic decisions and, therefore, have clear visibility of the criticality of the

demands in the medium and long‐term. The short‐term demands are captured directly through

the actions of business analysts working alongside business units.

The IT portfolio and the pipeline of projects are reviewed periodically, allowing priorities to be

revisited in conjunction with those in charge of the business.

Consumer Services ‐ Infrastructure and support can generate many benefits when shared

I created an area of shared IT services in Portugal with much success, cost reduction and more

efficient SLAs. The areas of infrastructure, user support and systems are areas that generate many

benefits when shared.

Insurance ‐ We reduced costs and became more agile with shared services

Part of our core business is the delivery of large volumes of information in real‐time, so we share

infrastructure with enterprise applications.

I adopted the strategy of measuring capacity through the most demanding systems, and that has

totally met the need for replication of resources (hardware and some software), which resulted

agility and reliability in the delivery of information, and reduced investment costs related to these

activities.

Consumer Goods ‐ Management culture is the biggest challenge of shared services

Driving standardization of processes and purchasing, as well as more generalist staff are good

practices. The greatest difficulty is a cultural one, since many business unit managers have

difficulty accepting that their priorities will be queued up along with those of other areas.



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Chemicals ‐ Our shared services centers are an international benchmark

The sophistication of IT, the high costs of infrastructure, the need to recruit and retain specialists,

the challenge of security and many other aspects leveraged the shared, centralized model of IT.

Businesses, in general, give up some specifics in exchange for large economies of scale. There are

very few decentralized IT departments in the world. Our experience is an international

benchmark. We have maximum centralization and sharing, but with teams distributed around the

world These are the famous centers of competence.

To get closer to the business, the relationship begins with relationship executives within the IT

team. Today, we reinforce this role by migrating these professionals into the business as the IT

directors of business units.

Education ‐ Sharing IT services requires maturity and ability to change

The concept of shared service centers demand a high level of maturity of the organization, as well

as capacity to promote change.

In our current structure, we operate under a process that is a cross between conventional IT andone where IT is inserted into a service center. There is still some way to go to get there.

Food Production ‐ Governance is the key to centralization of success

Centralization of IT governance requires governance as opposed to bureaucracy, ie, process

management and performance indicators to ensure that the services offered are in accordance

with the agreed level of quality.

Real Estate ‐ The greatest challenge of sharing IT is responsiveness

Commenting on question 3: I do not agree that sharing reduces responsiveness, but it is common

to find scaling problems in the team and failure around the processes in place, which should be, in

fact, different processes to those used in an IT department focused on a single business.

I have supported a shared IT department for three years now, and the challenges are linked, in

fact, to responsiveness, but the solutions go through better processes and structured. The gains of

sharing certainly outweigh any discomfort.



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Telecommunications ‐ Expertise in areas of the business is essential in implementing shared

services

For some functions, sharing IT services is fully applicable, but we always need to have staff that is

specialized in specific business areas to ensure agility and adherence to the proposed solutions.

What other IT leaders told us about their experiences in sharing IT services...

Pharmaceuticals

[According to my experience], shared services, causes loss of agility and knowledge of business

areas.

Consumer Services

[My experience in shared services includes] "outsourcing" the activities of procurement and

development.



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Conclusion and Executive SummaryWe had many favorable responses from the IT leaders that took part in this collaborative research

regarding the use of shared services and IT within this environment.

Some of the respondents mentioned specific projects they have managed as a shared service,

including the shared infrastructure for enterprise applications, technology governance, and

innovation.

The initial findings within this report are:

• Four out of five respondents are using a shared service IT model or are at least partially

delivering IT services using a shared structure.

• There is an overwhelming belief that the benefits of sharing IT services far outweigh the

bureaucracy of managing the structure needed to allow this.

• Exactly half the respondents believe that a shared service culture does not introduce new

bureaucracy, and combined with those who believe that bureaucracy can be avoided with

planning there is a large majority who believe that it can be introduced without the businessfeeling more remote from IT.

These overall messages are very positive and support the management of IT as a shared service as

an approach that works and creates efficiency within the organization.

There are some key lessons from the responses of our IT leaders:

• Infrastructure and user support are both key areas where a shared model can be applied

in a very logical way – the business can understand how it works to share both of these IT

services very easily. Even if the delivery is harder than the strategy.

• Sharing IT services works well when you have the scale to have several centers of

excellence in different locations. In this case it is possible to share particular types of expertise

from different IT groups that may be geographically dispersed.

• The IT team can provide a “managed outsourcing” function, handling suppliers as well as

delivering a service from within allowing more services to be offered on a shared basis, with

suppliers handling what cannot be performed internally – though it always looks internal to your

business user.



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It is not easy to make this work. Some recurring problems were the difficulty in remaining close to

the business user and agile enough to respond and change to their demand. Once you have

structured a shared service and designed it for the entire organization then it is hard to meet the

needs of a single business team.

Scaling up can also be difficult. If you design your service for a single country and the CEO then

decides it works so well that the entire global organization should go to your shared service

centre, it can be hard to ramp up to meet the demand – leading to delivery failures during the

time you are trying to catch up.

On the whole though, our CIO respondents were very favorable on the subject of sharing. It

promotes greater business efficiency and allows your IT expertise to help all areas of the business

– and that has to be a good thing.



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IT Decisions Research IT Decisions produces a report like this every Friday, based on what CIOs told us that same week.

It is fast and relevant knowledge from your peers, it is only available to the CIOs in the research

network, and it is free.

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that will take no more than five minutes to answer.

The more participants, the better the quality of the research. So please do invite your

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of the year. Please contact us for more details.



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© IT D i i 21 O t b 2011 All i ht d

About IT Decisions IT Decisions is the premier source of insight into the technology and high‐tech service industry in

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features and analysis that cannot be found elsewhere.

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Image Credits:

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ITD #11 | 21Oct 2011| Integrating IT to shared services structures

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