Evolution of Shared Service Centers for Staying relevant

At the dawn of this century, the entire world woke up to the concept of outsourcing and offshoring. Until then, in-house outsourcing used to happen in various forms and shapes. The different management books referred to them as centralization of work, wherein the work would get centralised mostly under the head office umbrella. However, the teams continued to report back to their respective units. Not many were aware of the concept of shared service centers then. The centralization of that era has evolved into modern-day shared service centers, further evolving into capability centers. The evolution has taken place primarily due to an effort for staying relevant by delivering business value to the organisation.

1.      Centralization – This was the first and oldest phase wherein the work would move to a central location, preferably under the head office umbrella, and be physically stationed out there. The team members will keep working with the respective units under their supervision. The reporting structure would be to line managers at the respective business units or locations with very little intervention from the head office. There were some benefits like getting centralised reports and information that head office might require.

2.      Outsourcing – This was the second version of centralization wherein the companies decided to hand over the work to a third-party service provider around the mid-nineties to late nineties. The service provider would deliver the work as per the defined worklist. However, the outsourcing service provider will continue to work with respective stakeholders from the different geographies and would be answerable to them. This was the phase when Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) started arriving on the scene. Many consultants started advising the companies in drafting the business-appropriate performance measure parameters. In this phase, companies only got the consolidation benefits.     

3.      Shared Service Center – This phase began sometime around the middle of the first decade. Under this phase, the roles moved to one place with single ownership of the entire process. There would be a single point of contact who would ensure service delivery. All decision-making would take place at the shared service center. Teams stopped directly reporting to corresponding units. This was the phase when the shared service centers started uniformation of the processes, and the role of a Global Process Owner (GPOs) came into being. This role would ensure that any change in the process will be analyzed to ensure fitment across the company and implemented only after GPO’s concurrence. Technology also started invading the process delivery in a big way. Companies also started expecting technological solutions for the process delivery.

4.      Center of Excellence   This phase began at the beginning of the second decade. All the companies and existing shared service centers started moving towards standard operating processes across the organizations with the least possible carve-outs. This would typically be referred to as process harmonization. However, the companies would be constrained as they had limited visibility of the prevailing best practice across the industries. They just had the visibility to their internal process and whatever the teams knew while working in their previous organizations. Around this time, many outsourcing service providers came out with their offerings around process models and toolkits. Over a decade long working with various clients and process technologies, they had more extensive visibility and knowledge of the entire life cycle of any process vertical. This knowledge was practical, backed by an understanding of what could go wrong. This enabled them to draft a process model for various business processes that would be best in class. They started pitching unique global processes to clients. In turn, the clients were also happy to get the best-in-class process that would be far more efficient and productively optimized. The service providers started providing better productivity benefits if clients opted for the standard process methodology without carve-outs. The only carve-outs would be to meet any regulatory requirements. Many companies would decide to keep the shared service center in-house but would standardize the processes by taking these services. 

5.      Global Capability Centres – This phase began a couple of years back. The companies realized that the shared service centers could do much more than just service delivery of the various processes. All departments started looking towards shared service centers to support them on retained processes in case of exigencies like attrition, exploring new solutions, rolling out new technologies, etc. Sensing this hunger, companies have also started building up capabilities around project management, concurrent audit, risk & compliance, business data analytics, CFO insights, data privacy, implementing ABAC framework, learning & development initiatives, sourcing, technology deployment, etc., by staffing up shared service centers with consultants, project managers, leadership pipeline as well as some niche resources. By virtue of having process insights, global capability centers are supporting businesses in driving the transformation agenda. In a way, the journey has started from being process hubs to becoming innovation hubs.

This transition has happened very fast over the last two decades, and I am sure that we have not seen the destination yet of this journey. We will surely see many changes coming our way in the ever-changing business world. I am also sure that shared service cum capability centers will continue to play a pivotal role in supporting business growth.


Written by

Ajay Sharda – Head of Finance Shared Service Centre, Max Healthcare

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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