Shared Services vs. Managed Services: Which One is For YOU?

Shared Services vs. Managed Services: Which One is For YOU?

Is your organization considering a reorganization move to shared services in the new year? Or perhaps you’ve heard of the term and are wondering how it relates to IT services?

Let’s first wrap our heads around the concept of shared services, next deep dive into the definition to see how it applies to technology and IT services, then analyze the advantages and disadvantages of shared services vs managed services approaches to your business IT strategy, and finally review how the managed IT services model is different.

Basic concept of Shared Services

The concept of shared services within a large company is based on control and economy of scale. Shared services are usually reserved for Human Resources, Finance, Supply Chain Management, and Information Technology, although other applications can be found.

The idea of shared services is certainly not a new one. Think of the typing pool of the 1950s and 60s. All departments within the corporation sent their work to a centralized typing pool and billed accordingly. Less employees to hire, while still under control of the business.

Shared Services: A Definition and Features

A shared service is a business model that reaches out across the company/corporation to share resources and centralizes those resources for use. The goal then is to create a shared resource pool so that the company can use the minimum number of dollars/resources/personnel to execute the required tasks to achieve stated goals.

By consolidating facilities and employees, and decreasing duplication of effort, companies are finding great economic advantage to moving to the shared services approach.

There are several elements that a shared service model typically includes:

Centralization of resources:  Two examples may be combining two departments to function as one or centralizing several functions into a single department.

Standardization of procedures: In terms of IT, standardizing procedures and policies may include anything from the way documents are labeled for easy access throughout the company to compliance policy and procedure to security authorization protocol, etc.

Expectation to reduce costs: Generally, the move to implement shared services is motivated by ways to reduce the budget. However, many companies have considered this model for its value in increased service quality, improved turnaround times, greater consistency, and increased business value.

Advantages of Shared Services Model (as it relates to IT)

As related to technology services, having a centralized, in-house tech staff can be a viable solution in a large corporate environment. It may decrease duplication of effort within multiple departments and therefore result in an improved bottom line.

Here are several specific shared services features related to IT:

Location Strategy:  In terms of centralizing IT services within a large corporate environment, it makes sense that moving from multiple locations to a single location will reduce costs (floor space, infrastructure, etc.)

“Right Sourcing – Right Job for the Right Skill”: The idea here is that by employing an IT shared services approach, employees can stop doing the many of the non-assigned, tech-related tasks that may have crept into their workday.

Cost Benefits: An analysis will determine if the shared services approach will be beneficial, depending on company size and expected goals. 

Technology System Improvements: Converting older systems and/or standardizing systems across departments (i.e., HR, Finance, Shipping) will need to be considered when moving into a shared services model.

Missteps With Shared Services Model (as it relates to IT)

Being too rigid in implementation: While the concept of shared services is based on efficiency, sometimes the implementation becomes so rigid the future growth becomes hampered, particularly when it comes to technology.

Underestimating the needed infrastructure to support centralization: Often a company plunges into the shared services model without careful consideration of IT infrastructure and network management, only to find the entire purpose of the move has been voided.

Focusing too much on saving $$ on the front end without a continuity vision: Yes, a shared services model can be a cost-savings approach for a large company. But a myopic view on saving money on recruiting professional IT staff may backfire. Here’s where a cost benefits analysis comparing in-house IT staff with managed IT staff may come in handy.

How a Managed IT Services Model is Different

Very often the term “Shared Services” is used interchangeably with “Managed IT Services” or “Managed IT Support.” While there are many similarities,  several differences are highlighted below:

Cost: While shared services can be considered an overall budgeting device, in terms of IT services, the costs associated with outsourcing to a Managed IT provider are typically lower than the costs associated with shared services.

Location: Shared services often come from within a company (though not always.) In contrast, Managed IT Services always comes from outside of a company or organization. Most MSPs provide 24/7 availability for troubleshooting and emergency/crisis situations.

Liability and responsibility: The shared services model leaves both parties involved in the partnership with shared responsibility and liability. In the Managed IT Support Services arrangement, responsibility falls on the provider in most instances.

Contact Us

Our Royal Network IT team has over 50+ years of experience working with companies of all sizes. We are happy to discuss the differences between these two models and how our IT professionals can best serve your company’s business goals and IT strategy. We invite you to have a conversation with us about these practices by contacting us or by phone at 949-236-7700.

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