Shared Service Center
A shared service center (SSC) is responsible for the execution and the handling of specific operational tasks, such as accounting, human resources, payroll, IT, legal, compliance, purchasing, security.
A SCC is often a spin-off of the corporate services to separate all operational type of tasks from the corporate headquarters, which has to focus on a leadership and corporate governance type of role. As shared services centers are often cost centers, they are quite cost-sensitive also in terms of their headcount, labour costs and location selection criteria.
Why are there SSC’s?
SSC’s are deployed for a variety of reasons:
- to reduce costs of decentralization, to increase the quality and professionalism of support processes for the business,
- to increase cost flexibility for supporting services,
- to create a higher degree of strategic flexibility.
Reported cost reductions of costs of services organized in shared service center are as high as 70% of the original costs, but average about 50%.
SSC’s are not to be confused with corporate staff departments. Different from staff departments, shared service centers have measurable outputs (by quantity and quality), with costs per unit of service provided. Tasks not organized in shared service centers include corporate control, corporate legal, management development policy, IT-governance and other support typical for the statutory duties of the executive board.
Characteristic for SSC’s is the way processes are standardized. At the end of the day shared service centers have to contribute to the competitiveness and the (financial) performance of the firm. As competition shifts to innovation of business models and in relation to this there is a higher dynamics in the composite customer value proposition to be performed, changes in the customer value proposition need to be translated timely and effectively in (back office) processes. As a consequence standardization of processes cannot be based on “best practice processes” as used to be promoted by IT (enterprise systems) but need to be based on basis of modularity.