Shared Services Analysis

The business units across PPS became increasingly dissatisfied with the returns obtained from their investments in ICT, costs were rising too rapidly and technology was changing rapidly such that it could hardly keep with the latest developments to match its capabilities and skills development for the staff. The current performance level of ICT services based on the annual internal customer satisfaction ratings is less than 16%.

To overcome such issues, PPS decided upon the shared services route by collecting the various in-house ICT activities together in a shared service environment. The focus of this analysis was that PPS took a managed approach in determining which ICT activities/operations that were

1Value for Money does not simply refer to price alone. It also includes quality, timeliness, service levels and other intangible

performance measures

candidates for potential coalescing into a Shared Service Centre (SSC). The list of SSC possibilities for ICT activities/operations within support processes were IT procurement, inventory management and IT support services, which included IT infrastructure management, maintenance and support.

After the activities within the support processes that are collected have been determined, the decision of whether to collect them in a shared service operation is based on the three key considerations mentioned in Section 2.4.3.2 (Shared Services Strategy).

PPS created a SSC as part of the overall business strategy to achieve a higher level of tangible results. One of the key tangible benefits was the consolidation of common ICT activities across all of its 160 business units and the standardisation process helped the SSC work off the same processes and standard ICT. The remaining 74 business units that previously did not have ICT support (they found the in-house ICT support cost high and its service performance level unsatisfactory) now all participated in the SSC operation. This created economies of scale and improved span of control and thus help PPS to realise cost reductions and operational efficiencies more easily through critical mass.

The SSC could gain economic benefits from specialisation. The SSC could specialise in providing critical ICT services in the relationships with customers. After bearing large system development costs, the SSC would face relatively small incremental costs as the new setup made use of the standardised ICT systems, thus obtaining substantial economies of scale.

Furthermore, the technological and organisational resources and expertise acquired during the development and operation of a Standard Operating ICT system was successfully transferable to other systems, resulting in economies of scope.

An economy of scope came from the ability to derive greater value from one large external entity as compared to a collection of smaller internal ones. According to Thomas and Tom (2006), economy of scope resulted from being able to perform many ICT activities to support strategic business functions through the single SSC rather than in many parts of one or more ICT activities. As such, SSC delivered in overall economy of scope for the PPS through reduction in risk, increased in service performance and reliability.

Shared services have large potential for a variety of other critical applications. Shared use could make ICT infrastructure management and application exploitation to be used more efficiently.

Sharing of ICT services introduced new opportunities, especially large governmental organisations like PPS, to outsource non-core ICT activities and to utilise capacity of their ICT infrastructures more efficiently. approach enabled the business in PPS to achieve its strategic goals.

During the study, PPS also analysed the different SSC arrangements, where the organisation started to develop a global SSC to be both run and managed entirely in-house or outsource to service provider. However, after taking into account the speed at which the in-house SSC needed to work and the consolidation of ICT work necessary over many of its 160 individual business units across the organisation, the outsourced SSC was the better option to deliver SSC to PPS over a shorter period. Why is this so? Because of this complexity of consolidating much of the supporting ICT activities of many business units into the shared service operation, the provider-own SSC comes with greater resources to handle the migration of processes, activities and people into a centralised SSC more quickly than in the in-house SSC. This provides for economies of scale and standardisation of process and experiences as SSC pertain to these staff in PPS. The Shared Services Program aims to create high-performance work environments in which staff in PPS can learn, build skills and share resources, responsibilities and information to be workers that are even more proficient. Ultimately, the extent to which staff can work effectively related closely to their ability to collaborate with and learn from each other.

Based on the analysis discussed earlier in this chapter, the top management recognised the need to purse Shared Services Program and decided to outsource to a best source provider to run shared services for the PPS organisation (see Figure 10). The main benefit of such arrangement was to avoid duplication of ICT services and to establish a single Shared Services Centre

(SSC). Shared services are building and Best Sourcing is competing sourcing action categories to meet the PPS’s sourcing strategies. As discussed earlier in Section 2.4.3.2, the adoption of the process-orientation approach and maximising the power of partnership between the best sourcing and shared services options would help PPS to provide improved service performance at lower cost.

Figure 10 PPS’s Sourcing Strategies - Partnership between Best Sourcing and SSC