I like Shared Services, my first response to any business need is to look around for a service which can provide it, only if all else fails do I develop it myself.
And Shared Services offer the opportunity to work with like-minded partners who have similar business needs and where we can work together to drive up service levels and drive down costs.
So why do I too often groan when someone suggests a new “Shared Service” offering to me?
1. Economies of FAIL
“Your Shared Service offering is more expensive on a per item basis so I will lose money on each transaction.” “Don’t worry, you’ll make it up on volume!!!”
Economy of scale is a perfectly reasonable concept, tried and tested over the years, the marginal costs of delivery will tend to fall in line with the volume. However too many Shared Service offerings start out more expensive than a traditional offering and never reach the point where they are cheaper.
2. The Spanish Prisoner
“Our Shared Service will save you money on each transaction, however there is just a small upfront fee to make use of the service…”
Some Shared Services, particularly those based around a catalogue or framework, offer ease of use and a discounted rate but to get to use them you have to pay in advance.
This is a perfectly reasonable business model, provided it is the user’s business model it works for. If paying 5% of total costs up front will save me 10% then that is great.
Unfortunately a number of these Shared Service offerings are based on the supplier’s business model and paying 10% of total costs up front to save 5% is not a winning pitch!
3. The Incomprehensible
“We promise to undercut any competitor and provide free biscuits for all users!”
Now I understand business models, private sector firms are there to maximise shareholder value in the same way I am here to maximise taxpayer and societal value.
So why do people present me with Shared Service offerings which do not make economic sense for the supplier?
Sometimes this is a loss leader, well selling tins of baked beans at below wholesale prices is a loss leader, delivering a complex mission critical service should never be a loss leader!
Loss leaders also tend to have a sting in the tail, that remarkably cheap car which requires solid gold head gaskets or that MP3 player which can only be programmed in Linear B.
Sometimes it is down to perverse incentives – the sales team are incentivised to close the deal at any cost. I can think of at least one major outsourcing and ICT services firm which ended up being bought out by a rival for that very reason. Their sales team let a contract which netted them big bonuses but almost killed the company itself.
And sometimes it is down to the fact that the supplier simply does not understand the business model or they have forgotten something very obvious. Like the travel firm who spent a fortune on a new IT sales system which significantly increased business, unfortunately it was selling all holidays at cost so the more business it did the more money it lost!
“Well it’s a new area for us but digital engagement is in many ways a lot like plumbing, and Barry does have his own van”
I always welcome new players – entrepreneurs and SME’s in particular – getting involved in service delivery and new offerings.
But this strong support and engagement is not the same as “magical thinking”. If I am looking for someone to work with on a critical service then I expect professionalism.
That’s not about lots of barriers or red tape or people in suits. It’s about being able to trust partners to deliver. That is the key metric I judge service providers and partners on – be they multinationals or one man bands. I want to work with people who are delivery focused, committed to quality and success and who are as committed as I am to excellence, customer service and proper engagement.
5. Unclear Objectives
“And whilst window cleaning will continue to be at the core of this Shared Services offering, we are pleased to announce that we are bringing in nuclear waste recycling services as well.”
Good services grow and develop over time, this is how it should be. But too many Shared Services start from the premise that their window cleaning service will automatically become all encompassing.
I am not in the business of subsidising other people’s plans for world domination, #evilCIO has his own plans!
Focus on making the core service a success and growth will follow organically.