Sharing Services, Cutting Costs

Feature Article | October 10, 2011 by Heather McIlvaine

Large, global enterprises can greatly benefit from a shared services center (image: Fotolia)

Large, global enterprises can greatly benefit from a shared services center (image: Fotolia)

Every type of business must overcome certain obstacles in order to run efficiently and cost-effectively. Large enterprises, however, face particular challenges, both logistically, due to numerous employees spread across several sites, and technically, due to many disparate ERP systems that process a high volume of transactions.

For many years, large enterprises that want to overcome such obstacles have chosen to implement a shared services center. To learn more about how financial shared services has evolved and its current role in business today, SAP.info spoke with Susie West, founder and CEO of sharedserviceslink.com, an organization that focuses on educating the financial shared services community through conferences, master classes, and webinars.

Shared services was first applied to the inefficient structure of the accounts payable process (screenshot: SAP)

The first step to cost savings: Accounts payable (screenshot: SAP)

Flashback to the 90s

“In the early 1990s, large-scale organizations with a high number of transactions realized that running accounts payable (AP) on a decentralized basis was highly inefficient,” explains West. “Companies had AP departments in multiple locations using different systems and different processes. There was no visibility and no consistency, which led to high cost and bad processes.” Financial shared services came about as a way to solve this problem.

The shared services concept comprises four parts: centralization, in which the function – for example, AP transactions – is carried out in one geographic location, consolidation of many ERP systems into a few or one ERP system, standardization of processes, and automation of those processes.

Together these actions are carried out by a shared services center, which essentially treats the rest of the business as a customer set within a framework of service level agreements and charging mechanisms. “This takes a back office activity like AP and changes it from a not my problem mentality to a service-oriented, how can I help you mentality,” says West. Furthermore, companies can recognize significant cost savings through more accurate and timely processing of transactions.

SAP Shared Services Framework supports both SAP and non-SAP systems on the NetWeaver platform (screenshot: SAP)

For both SAP and non-SAP systems: the SAP NetWeaver Platform (screenshot: SAP)

Shared services today

Today, companies use shared services for a variety of functions and no longer only AP transactions. SAP, for example, provides large enterprises with the software to conduct certain finance, HR, and procurement activities as a shared service. Among these activities are: AP, accounts receivable, general accounting, payroll, data maintenance, and compensation and benefits.

SAP Shared Services Framework runs on the SAP NetWeaver platform and supports both SAP systems and non-SAP systems. SAP ERP 6.0, or another ERP system, forms the transaction basis and executes financial, HR, and other transactions according to process definitions and rules. SAP CRM 5.0, on the other hand, supports the essential communication between the shared service center and the rest of the company.

Although SAP Shared Services Framework supports both SAP and non-SAP systems, many companies that implement shared services choose to migrate to a single system because one ERP instance provides the maximum benefits of shared services. When doing so, companies should prioritize a system that will not only support financial functions, but other pillars in their organization as well. Experienced customers have found they can be most cost-efficient and effective when they include services across multiple areas of business as well as across multiple transactions within each area of business.

New technologies

New technologies are constantly transforming the way companies are able to benefit from shared services. Recently, for example, automation has been optimized through more scalable ERP systems, workflows, improved scanning technologies, and standardized connectivity. And, hypothetically speaking, SAP In-Memory Appliance software (SAP HANA) could deliver insightful analytics on the high-volume of data that is processed in a shared services center.

This will be the topic of discussion at the upcoming event sponsored by shardserviceslink.com: Maximising SAP to enhance finance shared services excellence. Visit the sharedserviceslink.com web site for more information on the event and further insights into financial shared services.

Tags: , ,

Leave a Reply