Shared Service Center
Several divisions, such as HR, IT, finance, and others, undertake administrative duties for a corporation, which may or may not be situated in distinct locations. A shared service centre, on the other hand, offers centralised management in a single place. Separate specialised departments are under the supervision of specialist shared service centre managers in a shared service paradigm. Certain services are occasionally outsourced to third parties. The shared service centre concept and outsourcing are both approaches for businesses to reduce costs while increasing efficiency by bringing in more specialist expertise. Clients are served through shared service centres that use a “shared delivery approach.”
The difference between the centralized model shared service centre model
It’s critical to analyse how, while shared service centres and centralised service centres appear to be identical, they have significant differences. The former is more about centralising functions and processes, whilst the latter is more about synergizing. The following are some of the differences:
- Location: Different departments are housed under the same roof at the company headquarters under a centralised structure of operation. In a shared service centre, however, client service takes precedence over the location. Today’s largest multinationals see where the opportunity resides in terms of customer requirements and operations, and then move on to build their business with a strong focus on operations by outsourcing them for improved efficiency and standardised processes.
- Governance: Strong governance under senior managers overseeing functionality is essential for a shared service centre’s structural effectiveness. Under this setup, there is a more comprehensive approach to management. On the other hand, centralised operations do not guarantee the same level of efficiency since, instead of delegating, top managers oversee every department’s activity.
- Flexibility: Each activity may be allocated outside in a shared service centre model based on the need for expertise, better management, or better customer service. In a centralised system, on the other hand, only the available employees and management are able to meet all of the needs.
- Accountability: The senior management of the companies are held accountable for the corporate performance of each unit under the centralised structure. In the shared service centre concept, however, the executives are directly accountable to specific customer units, making them significantly more sensitive to market demands. This increases the possibility for individual units as well as the company as a whole to flourish.
- Performance Monitoring: Internal objectives and performance are the sole benchmarks in a centralised system. This limits the potentially vast potential for improved performance, which is not the case with the shared service centre approach. This allows performance to be compared to industry standards, allowing for more room for improvement.
- Customer Focus: A line of responsibility is established in the shared service centre concept, which makes managers directly accountable and exposed to market demands. As a result, the services are strongly focused on the demands of the customers. On the other side, the centralised model’s structure only allows for corporate-oriented delivery.
- Service Orientation: All services are provided according to defined standards under the centralised model, but the shared service centre model allows for customised services based on client needs.
- Chargebacks: The quantities to be charged under the shared service system are set, but the sums to be charged under the centralised system are based on consumption.
Benefits of Shared Service centre
- Increased efficiency
- They can choose the best technology from a large pool to assist them to achieve optimization.
- The ability to achieve economies of scale through cost reductions is enabled by large volumes through separate units.
- Better control is possible with a more systematised and unified organisation.
- Procedure standardisation promotes more effective performance by removing the administrative hassle.
- A large pool of accessible practices aids in the re-engineering of practices and the adoption of the best for improved performance.
- Increased effectiveness
- Incompatibility between various components can be eliminated using separate processes.
- Customer centricity involves ongoing review on both an internal and external level, resulting in constant innovation.
- There’s room for improvement by learning from superior practices in other units and learning new problem-solving techniques.
- Managers have more time to focus on core business areas thanks to service outsourcing.
- The use of a standard framework helps decision-making and analysis.
- Through the implementation of new technologies and processes, better and automated controls may be obtained, boosting overall efficiency.
- Cost-effectiveness:
- Linear workload standardises operations and eliminates the need for manual monitoring.
- Changes in size are facilitated by the model’s cost variability, which saves resources (fixed cost model to the variability model).
- The supply of service expenses lowers the cost of service.
- Instead of paying large quantities, you pay according to your consumption and the service cost lists.
Shared service centre solutions available in the market
The need to meet world-class performance standards is leading in creative structures, strategies, and easy answers to complicated business challenges, thanks to rapid technological advancements. Through technology and automation, shared service centre suppliers provide services that may handle particular operational activities and transactional concerns in the finance and accounting arena. We operate as a multi-functional unit committed to a single point of contact.
Using the correct technological mix, shared service centre services establish customised procedures based on the business’s individual needs, with the goal of increasing efficiency and adding value to the whole system. Concentrating specialised talents and expertise within centres of excellence improve financial reporting and control operations.
