IT's role in shared services remains unclear

More than a decade after the inception of shared services -- whereby an independent business services group provides human resources, payroll, finance and other support services to business units -- many practitioners say they're still not sure whether it makes sense to bring IT operations under that umbrella.

That's partly because shared-services groups are supposed to produce cost savings by consolidating disparate support units into a single entity, and it's not always clear "how much more bang for the buck you get through consolidating the IT organization," said Stacy Brandom, senior vice president at J.P. Morgan Chase in New York. Brandom was a speaker at a shared-services conference here yesterday that was sponsored by The Conference Board .

Indeed, shared-services practitioners remain split as to whether it's in their best interest to include their IT organizations directly in a shared-services outfit or to simply align IT activities with the efforts of the group.

"I don't know if they all need to be under the same umbrella, so long as they apply common management practices" in measuring customer satisfaction or creating service-level agreements, said Leland Forst, CEO and managing director of The Amherst Group Ltd., a consultancy in Greenwich, Conn.

One thing is certain -- some organizations that have established shared-services groups have had trouble generating new efficiencies after their initial cost savings. That's why Swiss Re America Holding Co., an Armonk, N.Y.-based reinsurance company that set up a shared-services group four years ago, folded the infrastructure side of its IT organization into its shared-services group last week, according to Joyce Heske, director of human resources shared services.

"We haven't achieved the kinds of cost savings we anticipated with our shared-services model, so we're hoping this will help generate additional cost savings," she said.

For its part, Armstrong World Industries Inc. in Lancaster, Pa., includes payroll, human resources and finance in its shared-services operations -- but not IT, said Claudia S. Holtry, manager of human resources and shared services for the company. To achieve additional cost savings, the US$3 billion-plus maker of floors, ceilings and cabinets is looking into the possibility of outsourcing some business processes, such as unemployment benefits, that might be run more cost-effectively by a third party, she said.

General Electric Co., which has been running a shared-services group since the late 1980s, aligns itself with IT divisions that are dedicated to each of its core business processes, said Jane Ann Westpheling, general manager of the Fairfield, Conn.-based conglomerate's global services practice. Her group has had solid success in digitizing and outsourcing some of its operations, including more than $200 million in travel savings, from automating travel and expense processing and holding the chief financial officers of each business unit accountable for their monthly travel spending, Westpheling said.

Still, for many shared-services practitioners, the role of the IT organization remains a constant sticking point. "If you centralize operations too much, you take away control. If you decentralize too much, you give up too much control," said Nathan E. Cagle, vice president of human resources at Union, N.J.-based NUI Corp.

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