Scottish Government

SECTION 2: What?

What can be shared?

Although it is widely acknowledged that the industry definition of Shared Services refers to the sharing of business processes, business functions or expertise, it is recognised that many different aspects of an organisation can be shared, each in themselves providing incremental benefits to a participating organisation. Sharing may start with collaboration and adoption of best practice. The more detailed level of sharing leads to greater levels of efficiencies, higher quality service and an increased ability to react to market or legislative change. However these benefits come coupled with higher risk and need for a strong change management culture.

Shared Services is a journey without a fixed end point, but has an agreed vision of what good looks like, for an organisation and the strategy defined to deliver that vision. It needs measurable milestones to mark achievements and the journey involves collaboration, change management, change of culture regardless of the level of sharing.

There are numerous areas and levels of sharing that can and do occur on a Shared Services journey. They start with collaboration and shared practices. Many stop at the early stage as they entail the least risk and organisational and cultural change. Others go on in accordance with their strategy or build on their initial experiences to achieve the full level of Shared Services.

Most Shared Services efforts begin by focusing on Centres of Scale: volume-based services - transactional, processing and administrative, those that are delivered to most employees or to external customers and can be maximised by aligning economies of scale.

Typically, success in these areas leads organisations to search for other services where similar operational efficiencies and cost reductions can be achieved. The logical choices for this second stage are Centres of Expertise: knowledge-based services - specialised expertise, consultative and integrated solutions, supported by common business processes to provide consistent delivery.

Centres of Expertise and Scale are candidates for Shared Services because they provide the greatest opportunities for leveraging efficiency and effectiveness.

Listed below are examples of the types of sharing and collaboration that can occur, with different levels of benefits being achieved, depending on the nature and extent of the sharing. They all encompass many of the attributes and skills required to achieve Shared Services, e.g. collaboration of requirements, negotiation, change of culture and process review, all of which are invaluable on the journey to Shared Services and achieve incremental benefits as well as credibility and experience. This is not intended to be an exhaustive list but should give an indication of the types of sharing that can occur and further examples of sharing across the public sector in Scotland are listed in Appendix B.

Definition of Terms for Service Provision

Shared Services

The industry wide definition of Shared Services can be summarised as the convergence and streamlining of an organisation or organisations functions to ensure that they deliver the services required of them as effectively as possible.

Shared Services are more than just centralisation or consolidation of similar activities in one location. Shared Services mean running these service activities like a business and delivering services to customers at a cost, quality and timeliness that is competitive with alternatives.

Centralisation

Is the process by which the activities of an organisation or organisations, become concentrated within a particular location and/or group. There are two types of centralisation, the first involves organising workers into groups that support business processes for the entire organisation or across multiple organisations. The second organises workers by specific skill set and experience to provide services for the entire organisation or across multiple organisations. Provides economy of scale, reducing costs and overheads whilst providing resilience and can be used as a step in the direction of providing a full Shared Services model or an end state operational model in itself.

There are many and varied types of services that are often associated with Shared Services and sometimes confused as being Shared Services. The section below defines some of the most common service provisions and their definitions. All of the services listed can be used to support a Shared Services operation, and equally all can be used to support centralised and distributed operations as well.

Outsourcing

Became part of the business lexicon during the 1980s and often refers to the delegation of non-core operations from internal production to an external entity specialising in the management of that operation. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of worldwide labour, capital, technology and resources. Fundamentally and historically, outsourcing is a term relative to the organisation of labour within and between societies.

Over the years various forms of outsourcing services have evolved and provide services for all type of business operations, eg Shared Services, Distributed and Centralised. Further definitions of outsourcing are as follows:

Business Process Outsourcing (BPO) is the contracting of a specific business process, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in the marketplace. BPO is often divided into two categories: back office outsourcing, which includes internal business functions such as billing or purchasing, and front office outsourcing, which includes customer-related services such as marketing or technical support.

Use of a BPO as opposed to an Application Service Provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to operate the service, while a typical ASP model includes only the provision of access to functionalities and features provided or 'served up' through the use of software, usually via web browser to the customer. The most common examples of BPO are call centres, human resources, accounting and payroll outsourcing.

Application service provider (ASP) is a business that provides computer-based services to customers over a network. Software offered using an ASP model is also sometimes called On-demand software or software as a service (SaaS). The most limited sense of this business is that of providing access to a particular application program (such as medical billing) using a standard protocol such as Hypertext Transfer Protocol (HTTP), a communications protocol used to transfer or convey information on the World Wide Web.

The need for ASPs has evolved from the increasing costs of specialised software that have far exceeded the price range of small to medium sized businesses. As well, the growing complexities of software have led to huge costs in distributing the software to end-users. Through ASPs, the complexities and costs of such software can be cut down. In addition, the issues of upgrading have been eliminated from the end-firm by placing the onus on the ASP to maintain up-to-date services, 24 x 7 technical support, physical and electronic security and in-built support for business continuity and flexible working. Customers of ASP services include businesses, government organisations, non-profits, and membership organisations.

Hosted Service Provider (Xsp) is a business that delivers a combination of traditional IT functions such as infrastructure, applications (Software as a Service), security, monitoring, storage, Web development, website hosting and email, over the Internet or other wide area networks (WAN). An Xsp combines the abilities of an application service provider(ASP) and an Internet Service Provider (ISP).

This approach enables customers to consolidate and outsource much of their IT needs for a predictable recurring fee. XSPs that integrate Web publishing give customers a central repository to rapidly and efficiently distribute information and resources among employees, customers, partners and the general public.

Hosted Service Providers benefit from economies of scale and operate on a one-to-many business model, delivering the same software and services to many customers at once. Customers are charged on a subscription basis.

is the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations. The person or organisation who owns or has direct oversight of the organisation or system being managed is referred to as the client, or customer. The person or organisation that accepts and provides the managed service is regarded as the service provider. Typically, the client remains accountable for the functionality and performance of managed service and does not relinquish the overall management responsibility of the organisation or system.