The battle between whether companies should outsource or make use of shared services continues to be open-ended especially in the world wherein technology and communication plays a vital role. Modern approaches are always on hand yet not everyone is willing to take this risk. The cost and quality of the output are specifically minded by most organizations, making them more skeptical to what form of tactics they should implement.
Outsourcing and shared services are viewed from different angles –to a third party, it merely means an outside workforce is needed to complete the task. Peter Lowes, Principal of Deloitte Consulting LLP, stated that most decisions regarding these concerns are subject to personal opinions as well as past experiences that are irrelevant to the current situation. He viewed these two terminologies in a different manner, wherein outsourcing is highly effective to organizations who want to take advantage of the talent, processes, superior systems and scale economies of the vendor; as well as making cost reduction as their foremost priority. On the other hand, the approach of using shared services is needed by those who want to take control of the current situation, giving rise to a more competitive differentiator.
Outsource to a third party.
Contract with an outside vendor that specializes in the work you need done.
Lowes’ statement indicates that outsourcing and shared services can work well together and should not be treated as a mere either/or decision. The success of an organization is not determined by the kind of approach used but on how well the execution is. Numerous activities can be effectively managed either way.
Susan Hogan, Principal of Deloitte Consulting LL, considers the shared service approach as a steppingstone to a long term solution known as outsourcing. The most practical means for organizations that aim to take control of the processes involved is to make use of shared services that include financial reporting as well as key customer touch points processes—this is highly significant in an organization’s strategy and operation procedure. Hogan explains that one of the main advantages of having shared services approach is that it enables the organization to have a continuous improvement in the processes involved. Since outsourcing can be major threat to those who have outsourced to vendors with insufficient skills and not met the required demands of the company, it is crucial for organizations to take appropriate actions.
Consolidate to a shared services center.
Centralize the work, but keep it in house.
This open-ended debate makes more noise in the part of HR transformation initiatives as every employee of the organization can be affected. In order to cut through this noise, Erica Volini, Principal of Deloitte Consulting LLP suggests that four key questions should be considered in order to determine as to what type of approach one can use at the end of the day.
The four significant questions are:
- The level of required transformation
- When to stop or continue the process: the HR function itself or a business mandate?
- The top priority of the organization, and
- The organization’s culture that supports the outsourcing approach
In conclusion, the answer between these two arguments lies within the current situation of the organization involved. Positive results can be achieved not by the approach used, but on how well the execution is.
For more information visit http://www.deloitte.com/us/debates/sharedservicesoutsourcing