A shared service is a capability that is centralized within an organization or group. The capability is wrapped in a service with a well defined service contract with the expectation that all teams use the service unless they can justify a reason to go their own way. Shared services are a common operational strategy designed to reduce costs by eliminating repetition of effort. By providing a service in one place, there is an opportunity to optimize and standardize it at scale. The following are illustrative examples of shared services.
Human ResourcesBusiness capabilities such as human resources are commonly run as a shared service. This allows an organization to manage risks such as legal or compliance risks from one center of competency.
Information TechnologyOperational capabilities such as an internal IT department. Allowing business units to go outside of IT and deal with technology vendors directly has a variety of risks as business units may not have the capabilities to manage things like architecture, compliance, data and information security.
Help DeskProviding a single point of contact for information technology support and inquiries.
Data CentersSpecialized facilities such as data centers can be wrapped in a service contract and operated using IT service management frameworks.
Project Management OfficeInternal consultancies such as a project management office that provides consistent program and project management using a set of methodologies.
Information SecurityInformation security is often centralized and offered as a service. For example, information security may offer consulting, security testing and incident response services.
ToolsOffering technology tools such as mobile devices that are standardized across an organization.
PlatformsOffering platforms such as cloud platforms or database services in one place across an organization or team.
|Type||Business StrategyOperational Strategy|
|Definition (1)||Doing something in one place that was previously replicated in many places across an organization.|
|Definition (2)||A centralized business function or capability that is wrapped in a service contract with the expectation that it be used by an entire organization or group.|
|Value||Cost reduction by reducing duplication of effort.Achieving economies of scale.Improving quality of services with standard methodologies and service level objectives.|
|Risks||Shared services can represent a bottleneck and single point of failure. In many cases, duplicating the same service in many places has resiliency advantages.Shared services initiatives tend to be painful from a change management and project management perspective. They commonly run over budget.There is overhead in having all teams rely on an external team for a critical service. In many cases, teams are most productive when they have control.A tendency for shared services to become inflexible and bureaucratic in imposing standards, technologies and processes across an organization.|
|Related Concepts||IntegrationEconomies of ScaleSingle Point Of FailureSLAServicesBusiness Strategy|
This is the complete list of articles we have written about business strategy.
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