Shared Services

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Shared Services - Companies that have shifted from decentralized to centralized IT: Part One

While there is limited pre-existing information to fully answer your question, we've used the available data to pull together key findings:
Bunge and Magna International are companies with revenues in excess of $25 billion that have instituted IT shared services models. Valmont Industries, PPL Corp, and Gas Networks Ireland have adopted centralized IT systems, while the Pennsylvania state government is currently adopting a shared services framework for IT and HR tasks. Grant Thorton France has partnered with Provance to evolve its homegrown centralized IT shared services system.

Below you'll find an outline of our research methodology to better understand why information you've requested is publicly unavailable, as well as a deep dive into our findings.

METHODOLOGY

To find relevant examples, I searched for case studies, white papers, or articles at IT industry sources, such as CIO magazine, as well as consultancies, such as Deloitte and Accenture. Many of the case studies I encountered hid the identity of the focus company, so I have not included those examples. I searched LinkedIn for people with job titles related to IT shared services to try to determine when those roles came into being, but that strategy produced few results. While I tried to focus on companies with revenues in excess of $25 billion, I found very few references to the adoption of IT shared services by such companies. I specifically searched for this information for several companies in the Fortune 500, for instance, but the few I encountered, such as Facebook, Proctor & Gamble, and Walmart, appeared to have launched these services longer than five years ago. Because of the dearth of information regarding large companies, I altered the search parameters to look for smaller companies in order to provide as many examples as possible. Relaxing this parameter was helpful in finding some useful examples. In many cases, however, I was unable to confirm the use of a showback or chargeback system, though the practice seems fairly common. Ultimately, I was able to find six examples that meet your criteria. Where possible, I have identified the name of the person who initiated or heads the IT shared services for each company, a description of the project, and types of shared services included.


FINDINGS

Bunge

Ken Schimanski, Global CIO / IT Transformation Specialist, headed up the move from a decentralized to a global IT shared services model for Bunge, an agricultural commodities company. With reported 2016 revenue of $42.679 billion, the company saw a 23% reduction in IT costs with the implementation of the shared services model. The specific types of shared services are not mentioned. While I could not confirm when the creation of the shared services structure was implemented, Schimanski has been with Bunge since 2009. However, Pat Rimoli, Bunge's Director of Global IT Finance, who also notes his role in implementing IT shared services for the company, has been with Bunge since 2015, suggesting the move has occurred since that time. I found no evidence of an outside consultancy's involvement.

Magna International

Magna International, a $35 billion auto parts manufacturer, adopted an IT shared services strategy in 2015, led by CIO and VP of global IT Paul Bellack. The company had long run on a decentralized model, which Bellack equated to running more "like 300 $100 million companies." The company's executive committee determined that the decentralized model was disadvantageous in terms of security, costs, and data analytics. Initially, Bellack made changes that built on the existing decentralized model, while evolving into a centralized IT model, which incorporated security standards, firewalls, and the use of common ERPs across every division of the company. As of October 2017, Bellack stated that the company has "basic enterprise security, a standard user facing platform for 55,000 PCs and 25,000 mobile devices, a single domain and email platform, and we are ready to move to Office 365."


SMALLER COMPANIES

As stated previously, I was unable to find solid data on additional companies that met the requested $25 billion revenue criteria, so I have completed the list with several smaller companies for which I could find relevant information.

Valmont Industries

Valmont Industries, a $2.5 billion industrial manufacturer, launched its IT shared services model when Johnn Kehoe became the company's CIO. When he came on board, he found that the company executives had data on IT costs as a percentage of the company's sales, but they lacked a "central view" of the overall IT spending across five autonomous business units. Beginning with a new company-wide HR platform to be used by all divisions or locations, Kehoe's centralized IT team began the process of implementing a shared services model across the company. The company's five divisional IT leaders came together to adopt a "centralized transportation management system," which began the process of the company's move to a fully shared services system, which extends to procurement, finance, and other business areas. The case study did not mention if or how the company might be using showbacks, and there is no mention of an outside consultancy playing a role in the transformation.

PPL Corp

Eric Slavinsky became CIO of PPL Corp, an $11.5 billion utilities company, in 2014. He is also CIO of subsidiaries, Louisville Gas and Electric (LG&E) and Kentucky Utilities (KU) Company, a role he has held since 2010. When he became the CIO of LG&E/KU, he said the IT organization worked independently from other business areas, and he found that PPL Corp had no consolidated IT plan because of these subsidiary companies working on separate budgets. He approached the executive committee with the idea of adopting a single technology plan and budget. He launched a Technology Portfolio Management Committee (TPMC), which met monthly to prioritize investments.

Gas Networks Ireland

Gas Networks Ireland, a €498 million natural gas network in Ireland, adopted a shared services model when Ian O’Flynn became the head of IT for the company. Working closely with group CIOs to develop a centralized IT strategy, the company established a shared services function, which include the use of new technologies, such as CRM and digital, as well as asset management and mobile field-based mobile solutions. The system has 600 internal customers, as well as "300 external partners who all use our technology to provide field-based services and customer care/call centre capabilities." There was no mention of the showback process or the use of any outside vendors.

GOVERNMENT

Pennsylvania State Government

I encountered a number of references to the use of shared services in government settings, including the US federal government, which adopted this model in 2012. While not a corporation, the Pennsylvania state government was the largest entity for which I found any specific information regarding its adoption of IT shared services. It appears to be embarking on the shift to such services as part of its $81 billion 2017-18 budget year. In its documentation on the adoption of shared services, it notes that it is planning to shift to a shared services model for both information technology (IT) and human resources (HR) purposes with the goal of creating more cost-effective, efficient systems. As of October 2017, an update on the project states that the IT delivery centers are working on matrixing their cybersecurity and technical operations to produce enhanced efficiencies.

RELATED FINDINGS

Grant Thornton France
In 2013, Grant Thornton France, a $4.8 billion consultancy, partnered with Provance to evolve its homegrown centralized IT shared services system. Since it appears the company already had a centralized system in place at the time of this partnership, I offer this case study as an example of a company making use of a third-party vendor to assist in its efforts to fully adopt a shared services model. Upon completion of the integration, Grant Thornton France CIO Bruno De Lattre stated, “Fiscal year 2013 will be the first time we will be equipped with a platform and products that will allow us to deliver efficient IT services to the business.” By adopting the Provance IT Asset Management Pack, the company was able to enhance its centralized IT system to better serve the overall company.

CONCLUSION

In conclusion, Bunge and Magna International are large companies that have successfully adopted an IT shared services model, while Valmont Industries, PPL Corp, and Gas Networks Ireland are smaller companies that have done likewise. The Pennsylvania state government is in the process of adopting a shared services model for both IT and HR, while Grant Thornton France augmented its centralized IT model in 2013.
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Sources