Shared Services Inc.? From back-office to profit-maker

Companies have invested millions of dollars and accumulated years of experience in running highly efficient internal shared services operations. Now many are wondering how to unleash the next wave of value. Many believe that the next breakout strategy will take the form of an extended enterprise play, in which shared services will move beyond the walls of the corporation, either as a seller of services to external customers or as a buyer and aggregator of external services for internal clients.

This prospect is attracting a great deal of enthusiastic market interest. Diverse investors — including venture capitalists, investment banks and Big Five firms — are placing big bets on the future of business process outsourcing (BPO). The range of strategies they are funding is dizzying, ranging from simple outsourcing to joint ventures to spin-offs, and even the outright sale of shared services operations to third parties. As any corporate development executive who has met with these would-be dealmakers will attest, the shared services value proposition has moved beyond cost reduction; these operations are now viewed as a vehicle for generating substantial shareholder value.