Defining the 'shared-services model' ideal

We hear a lot of talk about enterprises moving IT toward a shared-services model. That raises the question: Where do they think they're going?

Roughly speaking, moving to a shared-services model means adopting a centralized, standardized, streamlined approach to IT. Like all idealizations, real enterprises can only imperfectly implement it. Nonetheless, it serves as a useful goal and measuring stick. Common elements and aspirations include:

Service-oriented: IT is thought of as a provider of services to a business--or, in some cases, multiple businesses. Every IT process, asset, and outcome is understood, operated, and judged in terms of services that IT provides, and how they map to business requirements.

Viewing IT as an organization building, maintaining, and operating a collection of business services--rather than one overseeing a collection of equipment and a pile of code--is a radical departure from the historical IT-is-a-cost-center approach.

Shared and consolidated: Many organizations traditionally created IT "silos." Many formed amid line-of-business (LOB) boundaries; each LOB had its own little IT department. Others formed around technology specialties such as servers, storage, networks, mainframes, virtualization, and app development. Financial services organizations have been the most siloed; some have had nearly 100 distinct IT operations.

Unfortunately, silos fragment IT into many little IT shards, introducing gratuitous complexity and variability. One silo does things this way; another does basically the same thing, but in a different way, or with a different product. Silos don't necessarily work together well. Even when they have overlapping responsibilities, silos often work at cross-purposes to "protect" their fiefs. IT as a whole cannot enjoy economies of scale in staffing, training, procurement, and operations. Often, it's hard to even get visibility to see where economies or simplifications might lie.

A shared-services approach consolidates operations, eliminating and minimizing silos, and making them actively cooperate. This consolidation is a prerequisite to globally sharing resources and capabilities.

Standardized and simplified: Consolidation and sharing allows approaches, vendors, strategies, and procedures to be standardized. Vendors can be pared; rather than "one of this, one of that," rational vendor management can be used, such as strategic dual-sourcing. Standardization leads to competition. Less variety also means simpler. Instead of various management approaches (many of them ad hoc), "best practices" can be used. Skills can be shared. External resources, learning, and tools can be brought in, rather than homegrown. And because the systems and interfaces used are regularized, they can be increasingly automated, further simplifying the environment. Standardization and simplification is an iterative process, with each pass enabling further standardization, further simplification. Simplification, in turn, eases scaling, as well as whatever technology or process transitions are required over time.

Agile and effective: Whether you call the desired IT future state agile, flexible, adaptive, dynamic, or whathaveyou, everyone agrees that IT should operate "at the speed of business." IT should be able to wrangle both internal and external resources to design, build, and run the services the business needs.

What the business needs will change over time, given new products, opportunities, mergers and acquisitions, geographic expansion, economic upturns and downturns, and seasonal surges and quiet periods. But whatever that changing mix of needs might be, IT wants to agilely and efficiently satisfy them. That's a tall aspiration, given the relatively static, backroom support orientation of IT of old. But that is the goal of forward-looking IT.

Summing up: A shared-services model seeks to create a virtuous cycle between shared and consolidated, service-oriented, and standardized and simplified approaches in order to establish an agile and effective IT capability.

The shared-services model is a mature conception of what IT is, what it provides, and what it should be. It's not a product, nor a process, nor a methodology. It's an ideal, a target, a desired state. It organizes IT around business outcomes--and, one level down, operationally, around the services that IT provides. It requires a change in thinking, priorities, and operational style--and change is never easy. Nonetheless, we see organizations everywhere adopting large swaths of the shared-services approach--though using varied terminology, and doing so over time, at different paces, depending on their starting points and the urgency of their evolution.