If someone told you that there was a sure-fire way to reduce costs, improve service quality, and possibly even increase sales, how would you respond?

Most leaders would look closely at the source of the claim: is it coming from a credible source, or from a promoter with a dubious reputation?

Hopefully, since it is coming from me, you would think it is coming from a credible source. But the question stands: is the claim even possible? And if so, how? The answer can be found in the title of this post: Shared Services.

The concept of shared services are usually applied within larger organizations. A central accounting department services all divisions. A central HR group services all geographies. Procurement, IT, and many other functions can be similarly managed. Some organizations even have internal ad agencies and consulting firms, all delivered as a shared service to internal clients. The key benefit is reduced costs, followed closely by functional excellence.

But when examining digital transformation, why not extend the concept further: why not shared services BETWEEN organizations? If everyone requires accounting, office supplies, printing, legal, treasury, insurance, IT, and other non-strategic overhead services, why must this be done internally? And rather than outsourcing it, why not set up an external shared service entity that provides these services to a number of like-minded organizations.

The concept isn’t exactly new: a number of financial services companies do this already with statement printing. Many newspapers do this with delivery. And professional Service firms do it with liability insurance.

The key to implementing this strategy (beyond finding other shared service “customers”) is using technology so that the function is seamless to internal users. And of course, that the shared service function itself is limited to non-strategic areas.

Back to the question of reducing costs, improving service quality, and possibly even increasing sales: is it even possible? Consider:

Reduced costs: Fixed overhead is spread over all shared service users. And better costing can be negotiated because of the greater scale.

Improved service quality: With scale comes the ability to invest in better systems. And management focus (and investment) need not be spent on non-strategic activities.

Increased sales: Ditto – with less management focus on non-core activities, there can be more focus on marketing and sales.

To be clear, many organizations have affinity arrangements with outside service providers, where members may get a discount (on insurance, or on fitness memberships, for example). This strategy is not “shared services”: it is a sponsorship or commission arrangement at best, while also serving as an employee benefit. Shared services go much further.

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