Over the course of the last several decades, large companies have sought to control costs and improve service quality by consolidating business support operations into a single shared service organization. Specifically within the Life Sciences industry, major product patent expirations are reducing cash flow and decreasing revenues, leaving companies with an urgent need to cut costs while still sustaining growth. Increasing competition from generics in addition to the industry’s high level of M&A activity has left many Life Sciences companies with numerous redundant processes and technologies that limit efficiency and put a damper on growth and innovation.
With added pressure exerted by senior leaders to improve collaboration internally among operating companies, and externally with their customers, teams are forced to find new ways to define themselves as more efficient and effective members of the organization. At the same time, they are tasked with identifying new opportunities for growth, innovation — and of course, increased profitability.
This is obviously a tall order, but not without viable solutions. One option is to adopt a shared model for select functional and business support services. That is, consolidate certain functional and client-facing services and support activities into a shared organization that performs work across all lines of business for the broader organization. One area that a shared service is often most impactful is in the area of IT.
In the case of IT, a shared services model can offer tremendous improvement in efficiency and significant cost reduction. Consolidating facilities and personnel into a single organization can help reduce net headcount, enable greater economies of scale, and decrease duplication of effort. In addition, a stronger focus on process improvement can lead to substantial year-over-year productivity gains after the initial creation.
Advantages of an IT shared service include the ability to go beyond traditional cost reduction and scalability. There’s so much more that can be achieved, including:
By moving from multiple locations to a single location, an organization can reduce labor costs. Other savings may include infrastructure and associated indirect costs, including floor space and building maintenance. The option of outsourcing operational/commodity activities should also be considered to allow the organization to focus on higher value tactics if such an option is appropriate for the organization. We are currently engaged with a client who is in the process of relocating a large portion of their IT shared service to a newly created Tampa, FL location. This move will result in tremendous savings for the client due to lower cost of doing business, streamlined service management and strategic right-sourcing.
“Right Sourcing – Right Job for the Right Skill”
Most employees end up doing some form of non-value-added work or data capture, resulting in a misuse of resources. By creating a Shared Services Organization, non-value-added work can be appropriately reassigned and drastically reduced.
Applying a Cost Benefits Analysis will reveal if the creation of a shared services organization is indeed a sound investment. With this analysis in hand, organizations can better understand what the costs are versus the total expected benefits.
IT / System Improvements
Legacy systems can be converted and business functions can be consolidated into an ERP solution which brings historically disparate technologies to a single platform. For example, we recently engaged on an SAP implementation that enabled the client to implement a standardized HR and Finance platform.
The opportunity to incorporate additional processes and identify opportunities for efficiency may be simplified, increasing the success rate of delivering world-class service with streamlined processes and service level agreements. A recent example of process simplification was the process mapping and process improvement — streamlining their back-office functions including HR, finance, procurement and programs. This resulted in a consolidated single platform and allowed them to realize greater cost efficiencies.
At the end of the day, an IT Shared Service organization can offer improved efficiencies, lower costs, and result in greater overall effectiveness. Having a process – and the right partners – in place will be instrumental toward maximizing such benefits and, ultimately, achieving your business goals and objectives.
Joan Walker | Principal | TayganPoint Consulting Group | email@example.com
Michael LaMonaca | Consultant | TayganPoint Consulting Group | firstname.lastname@example.org