Shared Services and Outsourcing

What are shared services? 

Shared services serve as centralized business operation processes that are utilized in different segments of an organization. 

Shared services are applied to administrative functions that are usually performed in different locations or departments of a business. Examples of these job functions include:

• Finance and accounting 
• Payroll
• Inventory management 
• Recruitment and hiring 
• Information Technology (IT) 

Today’s technological innovations have been significant factors in every company’s utilization and effectiveness of shared services. This operational model allows various departments to focus on their particular roles and limited resources to support the company better. 

Shared services are also applied through partnerships that are developed by various businesses. One example of this is when companies that occupy the same building establishment share maintenance or telecommunications services.  

Lastly, shared services can also be applicable on the internet. Application Service Providers (ASP) are one example of shared services found on the internet. 

ASP providers let businesses access certain applications they need for their daily operations. These applications help them avoid purchasing certain software or special systems to use individually. 

Shared services vs outsourcing 

Outsourcing refers to the act of contracting out parts of business processes to a third party. Outsourcing has been around since 1970, long before shared services were made into being. These third-party providers are now referred to as Business Process Outsourcing (BPO) companies. 

BPO providers have a wide range of services offered to companies of all types and sizes. 

A shared services model functions within business organizations. This serves as a viable solution for companies that have unique and specific requirements. 

Both outsourcing and shared services are considered strategic practices businesses utilize to support their daily operations. On top of that, both these practices help businesses save on costs. 

In terms of which service model is more suitable to a particular company, it will generally vary depending on the business requirements, goals, and objectives. 

Advantages of shared services 

Below we have outlined the benefits of shared services: 

• Unlike outsourcing, businesses will not be required to share private and sensitive information with third parties. 
• It is easier to adapt to the changes, in particular, business and market trends. This is because shared services consist of internal teams with an in-depth understanding of the organization. More so, they have established work relationships with different departments within the company. 
• It helps improve the organization’s overall performance, efficiency, and productivity. 
• It helps reduce operational costs as businesses do not need to hire additional employees and invest in added resources.  

Although it is an advantageous operational model, it will have certain drawbacks if it isn’t implemented correctly. Among these downsides include the lack of flexibility on certain operational processes or unclear service accountability within the organization. 

Examples of shared services within the company that can also be outsourced 

In connection with the possible drawbacks of shared services, businesses can also avoid them by outsourcing. 

Here we have four examples of shared services that companies can also choose to outsource: 

Payroll 

Payroll is a repetitive, manual, and time-consuming process. Payroll outsourcing services involve tasks that are related to employee play. This includes the calculation of individual employee timesheets and wages and applying required deductions.

Depending on the outsourcing provider, payroll outsourcing may cover direct payment to employees on the company’s behalf. Other payroll outsourcing companies also offer to file payroll taxes. 

Accounting and Finance 

Outsourcing accounting and finance is a common practice in middle-sized and large-sized companies. Through outsourcing, these businesses can leverage accounting and finance professionals at a fraction of the costs compared to hiring in-house accountants. 

Inventory management 

Organizations that outsource their inventory management can focus more on other important aspects of their business. It is more cost-effective and it frees up their time and resources. 

Outsourcing also lets businesses access the latest technologies used in inventory processes through their outsourcing providers. 

Recruitment

Recruitment Process Outsourcing (RPO) helps businesses hire the best talents that are well suited to their company. RPO providers are experts in terms of talent acquisition. They keep track of the latest recruitment trends, recruiting technologies, and recruitment processes. 

If you are looking to outsource any of the job functions discussed above, you have come to the right place! 

Head over to our Guides page. We have lists of Top BPO companies around the globe to help you choose your outsourcing provider.