By early 2007, the shared service centre had stopped being an experiment run by a handful of large multinationals and become the default answer to a question every CFO was being asked: why are we processing invoices in fourteen countries fourteen different ways? The timing was not accidental. Romania and Bulgaria joined the European Union that January, extending a nearshore map that already included Poland, the Czech Republic and Hungary. Indian captive centres had matured past the pilot stage. Telecom costs had collapsed. And most importantly, the ERP consolidation programmes of the preceding five years had finally produced something a shared service centre requires and cannot function without: a common system of record.
What a Shared Service Centre Actually Is
The Hackett Group's definition remains the most precise: an organizational entity where transactional activities are consolidated for one or more functions, focused on process standardization, cost reduction and continuous improvement, and managed through metrics. Read that carefully, because three of the four elements are about process discipline and only one is about cost. The centres that succeeded understood the ordering. The ones that failed read it as a relocation exercise. The typical 2007 scope was accounts payable, accounts receivable, general accounting, payroll administration, and often travel and expenses. The typical justification was a cost-per-transaction reduction of thirty to fifty percent, built from labour arbitrage plus the efficiency of specialisation.
Why It Worked When It Worked
The genuine benefits were larger than the labour savings, and they came from consolidation rather than location. Standardisation became enforceable. When fourteen countries each ran their own process, no policy could be applied consistently. When one centre processed everything, the process was whatever the centre did. Measurement became possible. Cost per invoice, days to close, first-pass match rate, query resolution time. Most decentralised back offices had never measured any of these, because there was no comparable unit to measure. Specialisation improved quality. A clerk processing one transaction type all day makes fewer errors than someone doing eleven different things between interruptions. Controls improved. Segregation of duties is easier to design and evidence in a single organization than across a federation of small local teams where one person frequently did everything. Career paths appeared for process owners and continuous improvement specialists — roles that simply did not exist in a distributed back office. Hackett's benchmarking has consistently found that the highest-performing finance organizations operate at a substantial cost advantage over typical peers, on the order of forty percent. Almost all of them use consolidated service delivery. The correlation is real; the causation runs through standardisation.
The Failure Patterns, All Avoidable
Lift and shift. Moving a broken process to a cheaper location produces a cheaper broken process, plus a transition cost, plus a knowledge loss. The savings show up in year one and the service quality collapse shows up in year two. Standardise first, then move. No retained organization design. The centre took the transactions; nobody designed what stayed behind. Local finance teams kept their headcount, quietly rebuilt the capability they had lost, and the business paid twice. Metrics that measured the centre, not the process. The centre reports a two-day invoice processing time, and the business reports a six-week payment cycle. Both are true, because the four weeks the invoice spent waiting for approval in a business unit sits outside the centre's measurement boundary. This is the single most common source of the credibility gap between shared services and their internal customers. Knowledge loss at transition. Experienced staff who knew which customer disputes every invoice and which supplier ships short were made redundant. Their knowledge was never documented because nobody knew it existed until it was gone. Attrition in the centre. Nearshore and offshore locations with dense concentrations of service centres develop competitive labour markets. Turnover above twenty percent destroys the process knowledge the model depends on, and training cost quietly consumes the arbitrage. Coordination overhead. Every handoff between the business and the centre creates a queue, an email chain and a query. Poorly designed handoffs can consume most of the theoretical saving.
Designing One Properly
- Standardise before you consolidate, and consolidate before you relocate. Three sequential decisions, frequently collapsed into one, which is why so many programmes fail.
- Design the retained organization explicitly. Who owns supplier relationships, exceptions, policy, and the commercial judgement calls? If the answer is unclear, the business unit will keep a shadow team.
- Measure end to end. Requisition to payment, order to cash, hire to retire. Centre-only metrics are the primary instrument of self-deception in shared services.
- Own the process, not just the task. A centre that executes steps without authority to change them cannot improve anything, and will spend its life escalating.
- Plan for attrition in your location choice, your documentation standard and your training model. Assume the people who transition the process will not be there in three years.
- Automate after standardising, not before. Automating a non-standard process multiplies variants rather than eliminating them.
- Check the data map. A centre in another country processing employee and customer records is a cross-border transfer, and residency rules now constrain location choices that were purely commercial in 2007.
Standardise
Define the common process, exceptions and end-to-end measures.
Consolidate
Design task ownership and the retained local organisation.
Assess relocation
Evaluate location, staff continuity, handoffs and data constraints.
Automate
Choose automation for the agreed process rather than multiplying variants.
Qualitative summary of this article's source text, not a measured outcome or performance estimate.
What Happened Next
Shared services did not stop evolving. Multi-functional centres became global business services organizations with end-to-end process ownership. Robotic process automation arrived in the mid-2010s and mostly automated the handoffs that consolidation had created. AI-based document processing is now removing the transaction volume that justified the headcount in the first place. That last shift changes the economics fundamentally. When processing cost approaches zero, labour arbitrage stops being the point, and the remaining value of a shared service centre is exactly what Hackett's definition put first in 2007: standardisation, measurement and continuous improvement. Centres built purely for cost are now the ones being restructured.
Common Questions
What is the difference between shared services and outsourcing?
Shared services consolidates work into an entity you own and staff. Outsourcing transfers it to a third party. The process design questions are identical; only the employment and commercial model differ.
How much can a shared service centre save?
Process consolidation and standardisation typically deliver meaningful reductions in cost per transaction, with location arbitrage adding further savings. Programmes that relocate without standardising routinely deliver a fraction of the business case.
What size company needs shared services?
It is driven by fragmentation rather than revenue. Any group running the same back-office process in several entities, countries or sites with different methods has a consolidation case, even at modest scale.
What is the most common shared services mistake?
Moving processes before standardising them, and measuring only the portion of the process that happens inside the centre.
Shared Services Design Review — Outpace assesses your back-office fragmentation, designs the standardisation work that must precede any consolidation, and defines end-to-end metrics and a retained organization that prevents duplicate capability rebuilding in the business.