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Most companies are faced with multiple providers who support their businesses in areas such customer support, applications development and maintenance, IT infrastructure, finance and accounting, human resources procurement, facilities management, legal and other functions.

These providers usually operate in one of three ways (or a combination) – shared services, outsourcing, and/or in local department operations. Accountability is to the functional area that is their primary source of funding. All too often, these providers work within rules established by each funding organization, will have different governance structures, and in some cases, no clearly defined governance structure at all.

It is understandable that these support services operate independently as they most likely came into being as a functional initiative and have continued to evolve separately over time.

For example, a decision may have been made to “centralize” all application and development support to better leverage resources. This “centralized” service then evolved into a shared service organization as users became more involved, metrics were put in place and a charge for services implemented. With the realization and formalization of the ability to obtain relatively low cost technical capability offshore, a portion of the work was outsourced to an offshore provider. By creating additional layer(s), not necessarily that visible, IT accountability for service delivery may have been compromised and coordination complexity increased.

This “centralized” service then evolved into a shared service organization as users became more involved, metrics were put in place and a charge for services was implemented. Then with the realization and formalization of the ability to get relatively cheaper programmers from India, a portion of the work was outsourced to an Indian service provider. This added an additional layer that the IT group coordinate while still being accountable for the results.

Over time this may even have evolved into a more complex relationship where several outsource providers were used or total project work was outsourced with the shared service IT department responsible for the budget and results of work completely done by an outsource provider.

If this IT venture was successful the next step may have been to add end user support to the mix and have the end user contact a third party outsource provider with questions or problems. So at some level these support issues are handled by an outsource provider and the local onsite support person was gone.

Similar activities may have happened in HR, finance, customer service and other functions, where portions of the work are being done in a shared services environment, by outsourcing, or a blend of the two.

Most of these “improvement” efforts were not purely for cost reduction. Some predictability and standardization measures were achieved. But cost reduction, not performance, was the primary driver. Resultant concerns over performance, including innovation and knowledge management may have continued to build. Little was done to tie performance metrics to the overall achievement of corporate goals. Research has shown that by the two to three year point, up to 75% of companies describe this “transformation” experience as either very or extremely disappointing.

Typically little has happened to improve performance significantly or to set performance metrics that directly tie to the company’s objectives. In fact, our research has shown that at the two- to three-year point, companies become from - moderately displeased with the results of their sourcing effort to - extremely disappointed.

Most companies have received the cost benefits that they were after initially but, things have since stagnated -- there has been no innovation, minimal service improvement and odds are the business has changed and the sourcing provider has not kept up with the changes needed in the way their support is provided.

We have reached a turning point in the evolution of support services. To receive the full value of support services to the business, two critical challenges need to be met:

  1. The core business (ie the “retained organization”) must not just be involved. There should be full integration with the working of the support organization(s), with access to timely and accurate information, and service levels to enable the ability for people in the retained organization to perform efficiently and effectively.
  2. The support services organizations must be integrated to ensure the cross-organizational decisions and changes can be incorporated and ramifications considered. This is cannot be accomplished through a traditional governance organization, but the management of this comprehensive entity must become an integral part of the company.

Support functions must perform as one unit to provide better, instantaneous, reliable information to facilitate business decisions. We call this model of the integrated comprehensive support services entity the Essential Organization Structure (EOS). The primary goal of the EOS is the integration of services and information to provide seamless service and information to the corporate entity, the retained organization, including operations and where appropriate, the customers.

Some changes may be needed within individual sourcing solutions to ensure better support to the company. However, the tactical, daily operation of the services provided to the customers (e.g., invoice payment, benefit changes, PC support, etc.) will remain within the support services entity (shared service or outsourced solution), and daily governance of that entity will remain with the current governance organization.

Essential Organization Structure (EOS)