VideoWhat's in a name? Ask Donald Janson, director of the artfully named Common Administrative Resources (CAR) unit at Ingersoll- Rand. CAR by any other name would be known as "shared services," but Janson says that given the highly independent nature of the eight divisions that make up Ingersoll-Rand, and the fact that "shared services has, for a long time, been associated with centralization," the Woodcliff Lake, New Jersey, company decided that new terminology was in order. While the concept--consolidating functions in the name of efficiency--is still valid, Janson says that "shared services" is hamstrung by too many "bad connotations."
But CAR is more than a euphemism; it's an embodiment of what many observers say is the next wave in shared services. And unlike the first wave in the early 1990s, this one will have little to do with centralization.
Instead, Web technology promises to eliminate much of the transaction processing traditionally handled by shared services centers by pushing finance, human resources, and myriad other processes out to individual employees and managers--and even to suppliers and customers. Online forms will not only capture but also act upon the information that employees enter, so that shared services centers can offload data-entry duties and focus on customer service, exception handling, and process improvements.
Ingersoll-Rand's Web- enabled expense reimbursement system from IBM, for example, allows employees to view their American Express bill online and transfer charges onto their expense account with the click of a mouse. That triggers an automatic payment to American Express, while cash reimbursements appear in employees' paychecks. "We have eliminated the accounts-payable process from travel," notes Janson, who previously oversaw shared IT, HR, and finance processing services at Westinghouse's Telecomputer Center in Pittsburgh. And after Westinghouse bought CBS in 1995, Janson designed and implemented the broadcasting giant's shared services center in Manhattan to handle finance transactions.
In a similar vein, Ingersoll-Rand uses an E-procurement system from Oracle Corp. that allows any authorized employee to order indirect materials (such as office supplies) from online catalogs. "Just about everybody can be a buyer now," Janson says. The system is up and running in the company's Huntersville, North Carolina, shared services center, and was being rolled out to 22 additional sites this summer. Janson hopes to deploy the same sort of system for direct materials--the inventory needed for manufacturing--beginning in October, but admits it won't be easy. "Direct materials is much more complicated to address," he says, "and will require bleeding-edge technologies."
Instant Gratification
At Atlanta-based Southern Co., which has had some form of shared services in place since the 1950s, Web technology is fast becoming an important part of the mix. "Even mundane things like making changes online to your insurance plan or your 401 (k) account have allowed us to wring out a lot of costs," says Allen Leverett, vice president and treasurer of Southern. And the company uses Web-based surveys to measure the efficiency of internal business systems and procedures, which also helps to save money by reducing paper and survey-processing costs. Leverett says that in today's culture of instant gratification, employees prefer the asynchronous nature of the Web. "They don't have to set up a time to talk to someone in shared services. They just use the information on the intranet."
"The Web allows for this self-service approach," Janson says, which promises to greatly reduce the manual processing that has been so much a part of shared services operations. If centralization ushered in efficiencies, this new Web- based form of decentralization may, paradoxically, increase them even further.
That's not to say that centralization was a bad or unnecessary step. Shared services became popular a full decade before Netscape's 1995 initial public offering awakened the business world to the potential of the World Wide Web. By 1990, about a dozen Fortune 500 companies had consolidated certain support functions--notably finance and human resources--into physically discrete service centers whose primary purpose was to standardize transaction processing.
Finance folks loved the results of this first wave, and the popularity of shared services soared throughout the 1990s. Since then, the basic concept of standardizing and consolidating common processes has expanded to encompass many other areas of the business, notably IT. A recent survey of 50 Fortune 500 companies by Deloitte Consulting and International Data Corp. revealed an average return on investment (ROI) of 27 percent for traditional shared services projects, driven in large part by head-count reductions averaging 26 percent. "The shared services concept is now embedded," says Bob Gunn, co-founder of Boston-based consulting firm Gunn Partners.
Industry observers consider Gunn the unofficial father of this first wave of shared services, thanks to ground-breaking benchmark studies that he and partner Greg Hackett conducted in 1987 and 1989 while at A.T. Kearney. Even then, says Gunn, "centralization was a dirty word." The more palatable "shared services" term, he claims, evolved from a phrase that occurred to him in the shower one day.
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