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Commercializing Shared Services.

MANY SHARED SERVICES ORGANIZATIONS THAT WERE ESTABLISHED OVER THE PAST few years are beginning to mature and are looking for other ways they can contribute to their parent companies. Given the predictions for growth in business process outsourcing over the next few years, should corporations consider commercializing their shared services--having their internal service organizations compete on the open market for clients revenues, and margins?

To find out what would lie ahead for those that wanted to give it a try, Gunn Partners surveyed their clients and others. What they found was that almost half the companies were considering commercialization, but only about 10% thought they and others would be successful. Even those that don't decide to "go commercial" will be forced to become commercially competent to continue their current operations and services.

A key thing to remember, Gunn Partners says, is that there are three main ingredients for success in a commercialization endeavor, and without each of them, a company probably will fail. They are:

* A market offering that's compelling or unique.

* An entry strategy that's well suited to a company's capabilities and the needs of potential clients.

* Organizational capability to execute according to the requirements of the business model.

Three steps executives can take now to ensure their organizations' success into the future, the group notes, are:

* Become commercially competent, which means running their shared services as a business. Without a dedicated business development manager focused on securing new business, this won't happen.

* Open up to external competition. Only 20% of the companies Gunn Partners surveyed allow their shared services clients to select which services they want, and only 15% let clients buy services externally, which, the group says, means these companies are really operating in a captive market, not an open market.

* Create an independent business unit, which means setting the unit up as a separate legal entity. If a company is going to compete externally, it must be an independent operation with no perception of favoritism to the parent organization.
COPYRIGHT 2001 Institute of Management Accountants
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Copyright 2001 Gale, Cengage Learning. All rights reserved.

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Title Annotation:elements to consider to increase success
Author:Williams, Kathy
Publication:Strategic Finance
Article Type:Brief Article
Geographic Code:1USA
Date:Oct 1, 2001
Previous Article:Change.

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