More and more medium-sized companies are now faced with the question of whether they should perform certain tasks with self-employed specialists or hand them over to service providers. The answer in each individual case depends on many individual factors.
What is the difference between shared services and outsourcing?
Shared Service Centers combine the same processes that were previously carried out at several locations. The aim is to optimise the use of resources (personnel, technology, infrastructure) and to reduce costs by using economies of scale. Shared Service Centers are independent organizational units and are usually organized as profit centers.
In outsourcing, business processes are outsourced to an economically and legally independent external service provider. Services are thus obtained via the market and are no longer provided by the company itself. The aim of outsourcing is to reduce vertical integration, concentrate on one’s own core business and reduce costs by variabilizing fixed costs.
Basically, it is a strategic decision how to deal with processes. The processes must be assessed with regard to their ability to be outsourced. Proximity to the core business, strategic importance and specific know-how are among the factors to be taken into account.
Outsourcing business processes is ideal for processes that are operational in nature, recur and are outside the core business.
The formation of a shared service center only makes sense if business processes take place at more than one location and they can be standardized.
What are the specific advantages of outsourcing for SMEs?
The handover of processes to specialized outsourcing service providers in medium-sized companies frees up resources in one’s own company. The internal processes are eliminated and are provided more efficiently by the external partner. Capital and personnel can be used for strategically important tasks that move the company forward. Staff can be made redundant or transferred to an external service provider. The outsourcing service provider bears part of the entrepreneurial risk. Operational and financial risks are shifted: including the risk of staff absences, demographic change, shortage of skilled workers, personnel development.
Anyone who, for example, cannot or does not want to hire a full-time employee for certain tasks, usually has the disadvantage that a part-time employee is not available for the entire business day or only on individual days. This disadvantage can be eliminated with outsourcing. Since the service provider also works for other companies and wants to offer a good service, it usually offers customer-friendly times of availability, which often extend far beyond its own business hours. When cooperating with specialised service providers, the entrepreneur does not have to worry about being replaced during a holiday or illness, because the service provider offers continuous support.
Investments in organization, information technology (hardware and software) are also the responsibility of the external partner.
Medium-sized companies that opt for business process outsourcing opt for lean processes with clear areas of responsibility and responsibility. You have permanent access to specialist staff and state-of-the-art technology.
The cost structure of the entrepreneur is changing. Fixed costs become demand-oriented variable costs, as only services used by the service provider are paid.
Costs become more transparent and easier to calculate. Cost reduction potential results from economies of scale and synergy effects at the outsourcing service provider, which takes over the outsourced process for many other customers. This is his core business!
In contrast to shared services, processes do not have to be reorganized independently. Expenses for personnel, permanent development and expansion of know-how and the provision of information systems, including their operation and maintenance, are eliminated.
When choosing the right service provider, quality improvements can also be achieved.
However, the effects of a shared service center are not those of outsourcing.
In order to achieve the same cost advantages in direct comparison, e.g. In order to achieve this, the Shared Service Center requires the generation of external additional business.
Outsourcing tasks is interesting in many places
Some things have already been established. This includes the support of data and communication networks by third-party companies. The cleaning of business premises and access control by trained security guards or the company canteen are also gladly handed over to cooperating specialist companies. In addition, administration is considered an outsourcing-oriented area. Commercial processes such as payroll accounting, financial accounting, the process of recruitment are just examples of which tasks can be outsourced cost-effectively from a medium-sized company.
Result
In practice, shared service centers are often unnecessary precursors to outsourcing, because companies expect less internal resistance from them.
It can make sense to combine processes that are very close to the core business and may not be suitable for outsourcing in a shared service center.
There are therefore also constellations in which both models are used in parallel. In HR management, for example, there are shared service centers for the areas of personnel development, labor law and personnel controlling. However, the business processes of payroll accounting, travel expense accounting and applicant management are very suitable for outsourcing and are outsourced from within the company. The fact is that outsourcing in medium-sized companies is associated with some advantages, which can be reflected in quality and costs if implemented professionally.
How do you deal with the issue? Write us a comment – we look forward to your experiences.
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