Posted in Operations and Supply Chain Terms, Total Reads: 265
Definition: Shared Services
It refers to centralization of services that were used by multiple departments earlier. In this system, a common department serves other departments. For example, finance, Human Resources, Information Technology etc. are shared services in an organization.
In some companies, shared services are properly accounted and service taking departments are billed. It’s done in order to avoid over-usage of these services and encourages responsible consumption. But in other companies, shared services are included in cost of running a business.
The goal of shared services delivery model can be as follows:
• It distributes the cost of infrastructure for providing the shared service which can be expensive to build e.g. IT infrastructure, training facilities etc.
• It allows different departments to focus their resources in their core activities
• It prevents under use of service infrastructure by individual departments
The advantage of shared service is that it eliminates redundancy and reduces overall cost through economy of scale. Shared services are different from outsourcing that involves external parties. Shared services are provided by internal department that imparts quality services at cost effective and timeliness manner.
Example, pooling IT infrastructure at one place reduces the need of computers, servers, engineers etc required to serve the organization. It reduces cost and increases efficiency.