Question

Sherry Shellenbocker, the CFO of a Canadian multinational, was arguing for the establishment of a shared services center. The center would be owned an operated by an external provider. She recommended starting with back-office payment processing for all of the corporations six divisions. Payment processing was a hassle, and Sherry was glad to hand this over to a capable service provider if she can find one. What advice would you give to Sherry?

Shared services is most typically a company-owned service unit that allows for greater efficiencies without giving up control. Sherry should get more clarity on what she is trying to accomplish before moving forward with this initiative.  

She is on a good path. By outsourcing shared services, Sherry will be able to focus on higher value-added activities.

Payment processing should never be outsourced.

Sherry should first determine if the shared services center satisfied the "Rules of Nine" criteria for supplier partnerships.

Answer 1

Solution -

Outsourcing operational activities to a vendor is considered an efficient step as it allows the company to exercise better control and concentrate on their core capabilities. In the case Sherry wishes to outsource the payment processing function which is a back-office function and spans over all the situation six corporate divisions of the organization. Payments processing is a risky affair as funds are going out of the organization. What Sherry needs to understand is that the organization must control the activities that impact the revenue of the organization directly. If Sherry can implement a maker-checker model in payment processing function and outsource only the maker part then the control would still lie with the organization and risk of accuracy is also transferred which can be fixed in the service level agreements.

Sherry must understand the objectives of her outsourcing decision and should act in a proactive manner on setting up the service level agreements for such negotiation that would be acceptable to the organization and safeguard their reputation and control along with providing the advantages of outsourcing.