Shared Service Center
Definition
A Shared Service Center (SSC) is an organizational structure within a company or across multiple companies where common business functions, such as finance, human resources, information technology, and procurement, are centralized to serve multiple departments or business units. The primary objective of an SSC is to improve efficiency, streamline processes, reduce costs, and enhance service quality by leveraging economies of scale, standardization, and best practices.
Shared Service Centers typically focus on providing support for the following business functions:
- Finance and Accounting: SSCs can handle various finance and accounting tasks, such as accounts payable, accounts receivable, general ledger management, financial reporting, and financial planning and analysis.
- Human Resources: SSCs can manage HR functions, such as payroll processing, benefits administration, talent acquisition, training and development, and performance management.
- Information Technology: SSCs can provide IT support services, such as infrastructure management, application development and maintenance, helpdesk support, and IT security.
- Procurement and Supply Chain: SSCs can handle procurement activities, including vendor selection, contract negotiation, purchase order management, and inventory control.
- Customer Service: In some cases, SSCs can also manage customer service functions, such as call centers, technical support, and complaint resolution.
- Cost Reduction: By consolidating business functions and leveraging economies of scale, SSCs can help companies reduce operational costs and overhead expenses.
- Process Standardization: SSCs promote the standardization of processes and procedures, leading to greater consistency, efficiency, and control.
- Improved Service Quality: SSCs can enhance service quality by implementing best practices, specialized expertise, and advanced technology.
- Increased Focus on Core Business: By outsourcing non-core functions to an SSC, companies can focus more on their core competencies and strategic initiatives.
- Greater Flexibility: SSCs can provide companies greater flexibility to adapt to changing market conditions and business needs.
- Initial Setup Costs: Establishing an SSC may require significant upfront investments in infrastructure, technology, and personnel.
- Resistance to Change: Implementing an SSC can lead to resistance from employees, who may perceive the change as threatening their job security or work autonomy.
- Potential Loss of Control: Companies may experience a perceived loss of control over certain business functions when outsourcing them to an SSC.
- Cultural and Organizational Challenges: Integrating an SSC into a company's existing culture and organizational structure can be challenging and may require strong change management efforts.
In summary, Shared Service Centers provide centralized support for various business functions, helping companies reduce costs, streamline processes, and improve service quality. While there are several advantages to implementing an SSC, companies should also consider potential challenges, such as initial setup costs, resistance to change, and organizational integration.