Shared Services

Computerworld - You don't have to sell Jack Cooper on the concept of shared services. Since 1997, productivity cost savings from Bristol-Myers Squibb Co.'s Global Business Services (GBS) unit have yielded the New York-based firm a cool $1.5 billion per year. The cost savings will be reinvested in areas like sales staffing and research "that will increase our competitive strengths," says Cooper, CIO at the $20 billion pharmaceutical company.

In 1995, a Bristol-Myers task force determined that the company could easily cut costs and improve productivity in two key areas: financial-transaction processing and manufacturing. The idea was to consolidate similar functions in each of these two areas across all of Bristol-Myers' global business units. "We didn't need 85 worldwide locations processing invoices," Cooper says.

			Shared Services: A Reading List Shared Services: Mining for Corporate Gold, by Barbara Quinn et al. (Financial Times Prentice Hall, 2000) Shared Services: Adding Value to the Business Units, by Donniel S. Schulman, Martin Hammer et al. (John Wiley & Sons, 1999) Internal Service Excellence: A Manager's Guide to Building World-Class Internal Service Unit Performance, by Richard D. Hays (Summit Executive Press, 1996) Implementing Shared Governance: Creating a Professional Organization, by Tim Porter-O'Grady (Mosby-Year Book, 1992)

A two-year re-engineering effort resulted in an integrated SAP-based enterprise resource planning network run by Bristol-Myers' Princeton, N.J.-based GBS group. The system handles everything from order entry to production sourcing.

"We formed an IT shared services [unit] to support GBS," says Cooper. "We wouldn't have the economies of scale or control of funds if we didn't have one instant service run by one IT group. Now, Wal-Mart gets one invoice showing all of our brands."

Both GBS and the IT shared services unit allocate their operating costs back to the business units. Specific criteria set by business units measure how each group performs.

"For IT, it's on-time delivery within budget and the business unit's satisfaction rating," Cooper says.

Sharing the Load

Bristol-Myers isn't alone. Nearly half of the Fortune 500 have set up shared services organizations, primarily to support financial transactions, followed by human resources and IT activities, according to Martin Hammer, a partner at PricewaterhouseCoopers in New York. The approach has been successful, he says, noting that "some companies have achieved 30% cost savings gains."

Hammer adds, however, that a company should generate at least $500 million in revenue "to benefit from the economies of scale shared services can provide."

Technology enables just about every type of shared service. However, IT isn't always part of an organization's mix of shared services.