shared, services, organizations, SSO, companies

Sarbanes-Oxley driving growth of shared services organizations (SSO)

21 Jul 2005 | (Survey)

More companies are interested in establishing shared services organizations (SSO) to help meet the time-consuming and expensive tasks associated with compliance requirements of the Sarbanes-Oxley Act. In fact, companies that have shared services organizations say their compliance efforts were made easier and cheaper, according to a new global survey conducted by Deloitte Consulting LLP.

Eight of 10 companies among 115 global organizations surveyed by Deloitte Consulting reported SSOs made compliance easier, and nearly half said SSOs helped to reduce the cost of compliance. Shared service organizations are internal businesses created by companies to handle non-essential work of a company's business units or divisions, such as general accounting or benefits administration. The SSO provides services to each business unit, usually on a charge-back basis.

"Clearly, Sarbanes-Oxley is the primary external driver behind the surging interest in shared services organizations we have experienced recently from clients and potential clients," explains Susan Hogan, a Deloitte Consulting principal and leader of the shared services practice. "But, we've also noticed a shift in which corporations are moving from holding companies to integrated organizations, and Wall Street analysts are looking for these types of efficiencies."

There is, however, an even greater return for companies that invest in setting up shared services organization -- provided they go about it in the proper manner.

"Shared services organizations established properly, with careful consideration and focus on the continual pursuit of optimization and process improvement, can achieve end-to-end optimization," explains Hogan. "Companies that view shared services organizations as a strategic business asset will get the most out of them."

Chief among the many challenges to creating and properly operating a shared services organization is gaining support at the highest level of the company -- the CEO. Choosing the right individual to lead the SSO is also high on list of keys to success.

"Every shared services organization is not guaranteed success. To be sure, there will be winners and there will be losers when implementing an SSO," Hogan cautioned. "The CEO must endorse the concept and enforce that management invest in the SSO and treat it as a strategic priority. And, the leader of the SSO should be someone with customer relationship and sales skills and not necessarily the best functionally skilled."

Forging relationships with internal customers and implementing good governance mechanisms; developing creative talent management programs that keep SSO employees engaged, motivated and productive; and reducing the number of technology platforms were also cited in the survey as keys to having a successful SSO.

One other key, but often overlooked factor that could affect the degree of financial benefit of an SSO are the tax implications. State and local governments offer credits, incentives and grants to companies that establish business in their jurisdiction. Yet, a majority of tax credits and incentives typically go unclaimed. Twenty percent of survey respondents did not even bother to research the tax options and a further 47% were not sure if tax benefits had been researched or not. Both statistics are strong indicators that many organizations are leaving money on the table.

The survey was completed by shared service leaders from 115 companies around the world, with 64 percent of the SSOs in operation for at least two years. Twenty-one percent of the companies were diversified across multiple industries, and 74 percent of the companies have annual revenues of $2 billion or more.

A copy of the survey report is available online at http://www.deloitte.com/us/ssreport.

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