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In your own words, discuss the recommendations for creating an effective shared services. Please refer attachment for example. Attachment is just an example to get an idea. please dont use same content. write on your own words. minimum 500 words. APA format with references. shared_services.pdf Unformatted Attachment Preview Lesson 3 © 2015 Pearson Education, Inc. Publishing as Prentice Hall 1-1 Chapter 7 © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-2 “collaborative strategy in which a subset of existing business functions are concentrated into a new, semi-autonomous business unit that has a management structure designed to promote efficiency, value generation, cost savings, and improved service for the internal customers of the parent corporation, like a business competing in the open market.”(Bergeron 2003) © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-3 Involves more than just centralization or consolidation of similar activities in one location. Must embrace a customer orientation. Sufficient management discretion and autonomy must exist within this type of organization. Must be run like a business in order to deliver services to internal customers. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-4 Shared services promise: Parent organization’s perspective Reduce cost and improve services. Reduce distractions from core activities. Potentially create an externally focused profit center. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-5 Shared business unit’s perspective Increased efficiencies Decreased personnel requirements Improved economics of scale Professionalism Uniformity of service Personnel development Control © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-6 Shared business unit’s perspective Becoming a disruption to the service flow Moving work to a central location thereby creating wasteful handoffs, rework, and / or duplication Instilling an “us” versus “them” mentality within the provider-consumer relationship Lengthening the time it takes to deliver a service © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-7 Additional costs associated with bureaucracy Loss of control experienced by independent business units An increased communication burden Extraordinary one-time costs at start-up © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-8 The push for shared services can come from IT or the business. Motivations from the business are for example: -- Become a “globally integrated enterprise” -- Outsource noncore activities © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-9 Motivations from IT are for example: -- Cost savings and/or control -- Drive agility -- Create a rationalized and simplified application portfolio “The differences between the business vision for shared services and the IT vision, unless aligned, is a recipe for disaster” © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-10 Business Unit Business Unit Business Unit Multi-Tenant Business Services Security Mgmt Common Business Service Delivery Processes Security Mgmt Usage Mgmt SLA Mgmt Network Mgmt Common Supporting IT Infrastructure Components Server Mgmt Desktop Mgmt Storage Mgmt © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-11 Create a transparent process for goal alignment: The centralization process alone should produce sufficient economy of resources (i.e., IT goal) to enable enhanced quality of services (i.e., business goal). © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-12 Develop a comprehensive investment model: -- These investment models require sophistication, understanding, and a commitment from the business as well as IT to make it work. -- “Shared services model is a viable option when the savings from reduction in staffing are greater than the added overhead of creating a management structure to run the shared business unit.” © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-13 Redraft the relationship with the business: A customer service orientation must therefore be instilled within the shared services organization to guarantee satisfaction of the client remains the key goal. “Shared services model must build ”internal sales and marketing” competencies, which require resources focused on communicating with current and prospective customers. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-14 A shared service model for IT arises from the desire of business for a more customer-centric and responsive IT organization. IT shared services model can satisfy IT and business goals but key challenges arise during the development and implementations of the shared service. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 7-15 Chapter 8 © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-16 Unique Common Standardized Commoditized Utility Figure 8.1 Maturity for IT Function Delivery © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-17 Unique: A unique IT function is one that provides strategic (perhaps even proprietary) advantage and benefit. Common: This type of IT function caters to common (i.e., universal) organizational needs. It has little to differentiate the business, but it provides a necessary component (e.g., HR, financial system). © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-18 Standardized: An IT function that not only provides common tasks/activities but also adhere to a set of standards developed and governed by external agencies. Commoditized: These functions are considered commodities similar to oil and gas. Once attributes are stipulated, functions are interchangeable and indistinguishable (e.g., ASPs, network services, server farms, backup services). © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-19 Utility: A utility function is a commodity (such as electricity) delivered by a centralized and consolidated source (e.g., ISPs, other telecommunication services such as bandwidth on demand). © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-20 Figure 8.2 IT Functions Ranked by Maturity Stage © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-21 In-house Insource Outsource Partnership © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-22 Figure 8.3 Delivery Options for IT Functions © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-23 1. Flexibility: Response time (i.e., how quickly IT functionality can be delivered). Capability (i.e., the range of IT functionality). 2. Control: Delivery (i.e., ensuring that the delivered IT function complies with requirements). Security (i.e., protecting intellectual assets). © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-24 1. Knowledge Enhancement: Behind many sourcing decisions is the need to either capture knowledge or retain it. 2. Business Exigency: Unforeseen business opportunities arise periodically, and firms with the ability to respond do so. That is, a quick decision is made to seize the opportunity, and normal decision criteria are jettisoned in order to be responsive to the business. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-25 Identify your core IT functions. Create a “function sourcing” profile. Evolve full-time IT personnel. Encourage exploration on the whole range of sourcing options. Combine sourcing options strategically. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-26 Core Function? IT Function Yes Business analysis In-house Insource ✓ In Future Strategy and planning ✓ In Future Data management ✓ Yes Project management ✓ ✓ Yes Architecture ✓ ✓ Application development ✓ QA and testing ✓ ✓ Application support ✓ ✓ ✓ Operating systems and services Yes ✓ ✓ Networking Partnership ✓ Systems analysis Now but not in future Outsource ✓ Data center operations ✓ Application software ✓ Hardware ✓ ✓ Table 8.3 Sample Function Delivery Profile © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-27 Develop a sourcing strategy Use a decision framework to identify what’s core and what’s not. Develop a risk mitigation strategy Ideally, an outsourcing relationship should be structured to ensure shared risk so both parties are incented to make it work. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-28 Understand the cost structures If you can’t compete in-house, you should outsource. Ongoing cost comparisons are effective as they motivate both parties to do their best and most cost-effective work. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-29 Sourcing has become an integral part of many organizations. IT managers have an incredible range of available options in terms of how they choose to source and deliver IT functions. Based on the framework proposed, organizations can develop more strategic, nuanced, and methodological approaches to IT function sourcing and management. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 8-30 Chapter 9 © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-31 Takes too long. Process may be disconnected from the business objectives. Rigid adherence to annual plans may inhibit responsibility for performance. May inhibit the business needs to be flexible. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-32 Organizational budgeting practice emerged in the 1920s as a tool for managing costs and cash flows. Present-day annual fixed plans and budgets were established in the 1970s to drive performance improvements. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-33 Fiscal IT budget (i.e., those prepared for the CFO): -- Capital expenditures – consist of large expenses spread over multiple years. -- Operating Expenses – consist of the annual costs of running the business. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-34 Capital budgets IT Expenditures that may be capitalized include: ----- Project development Infrastructure Consulting fees Major technology purchases © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-35 Functional IT budgets Used by IT managers as spending plans and are based on: -- Operations costs -- Strategic investment © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-36 Operations costs: -- Costs to “Keep the Lights On”. -- Includes maintenance costs, computing and peripheral functions, in-house support and outsourced support. -- May include operating and capital costs. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-37 Strategic investment: -- Consists of “New” technology spending. -- May include business improvement initiatives, business-enabling initiatives to transform company operations or new technology business opportunity projects. -- May be classified as capital or operating costs. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-38 Cost allocation: -- The process of allocating IT costs to others’ budgets. -- Allocation may be based upon a formula using factors such as size of business unit, prior year spending, or percentage of use of IT services. -- May lead to artificiality in allocating development resources. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-39 1. Fiscal Discipline 2. Strategy Implementation © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-40 “IT Costs too Much”. Demonstrating the realities of business finance has become a significant part of IT leadership. IT budgets may be used to limit or manage demand. Used to hold IT leadership accountable for what it spends. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-41 Budgets link long-term goals to short-term execution through the allocation of resources. Where IT dollars are spent can impact corporate performance. How discretionary IT dollars are spent impacts project outcomes. The budget process reinforces strategic decision making. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-42 Figure 9.1 A Generic IT Planning and Budgeting Process © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-43 Corporate processes: -- Establish corporate fiscal policy. -- Establish strategic goals. -- Set IT spending levels. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-44 Factors that Affect IT Spending Levels Number of competitors Uncertainty Diversification of products and services Affordability Growth Previous year’s spending © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-45 Set functional IT budget – determine what is spent on IT operations and strategic investment. Set the fiscal IT budget – transform the functional IT budget into operating and capital spending categories. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-46 1. Appoint an IT finance specialist 2. Use budgeting tools and methodologies 3. Separate operations from innovation 4. Adopt enterprise funding models 5. Adopt rolling budget cycles © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-47 1. IT finance specialist: -- Understand IT costs and drivers. -- Can manage the translation between the IT functional and fiscal budget. -- Can develop business cases for new projects. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-48 2. ----- Use budgeting tools and methodologies Link IT Budgets to IT Plans. Link IT Budgets to Corporate Strategic Plans. Link IT Budgets to Resource Strategies. Link IT Budgets to Performance Metrics. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-49 3. --- Separate operations from innovation: Split operations costs from new project development costs. Provide visibility to business unit managers to better understand true costs to deliver and service new systems and ongoing services. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-50 4. Adopt enterprise funding models: -- Separates centralized core IT services from decentralized business unit services. -- Used to develop IT operations budgets at an enterprise level. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-51 5. Adopt rolling budget cycles: -- IT Plans and budgets need updating more than once per year. -- Quarterly eighteen month rolling plans enable new projects to be funded more quickly. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-52 The IT budget process can be a critical lynchpin between many different stakeholders: finance, business units, corporate strategy, and IT. IT budgets play a key role in implementing strategy and controlling costs. © 2015 Pearson Education, Inc. Publishing as Prentice Hall 9-53 ... 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