The Magic Behind Efficiencies

Understanding Business Operating Models

Federated/Distributed Model vs. Shared Services Model

Businesses typically operate under one of two models: federated/distributed or shared services. The shared services model consolidates resources and standardises processes across various business units, fostering increased productivity, faster delivery, and a focus on core competencies. This model can evolve into a center of excellence, driving improvement and innovation within the organisation.

Benefits of the Shared Services Model

Adopting a shared services model brings numerous benefits, including a boost in productivity, increased speed of delivery, and the ability to focus limited resources on activities that support core competencies. Over time, shared services can develop into a center of excellence by bringing together core competencies and like-minded experts to drive improvement and innovation.

Challenges in Shared Services Environments

Operational and Financial Disconnects

Despite its benefits, the shared services model can face challenges, particularly operational and financial disconnects. Operationally, a shared services center that fails to provide the required service levels can restrain business functioning. Financially, disconnects occur when business units fail to pay for their use of shared services, leading to inefficiencies.

Addressing Financial Disconnects with Cost Allocations

Cost allocations and cost transparency are crucial in addressing financial disconnects. Cost allocations involve assigning costs to different services or tools utilised by business units, divisions, branches, or even applications, products, and customers. Direct costs are easily identifiable, while indirect costs are typically allocated based on consumption. For example, the IT department supplying connectivity to various business units needs to determine how much each department uses.

The Role of Cost Transparency

Importance of Cost Transparency

Cost transparency tracks the total cost of provisioning and maintaining products and services. It helps establish what different products and services exist, their costs, and their relationships. Cost transparency provides a clear picture of how much each area of the business pays for each service, enabling better financial management.

Enhancing Efficiencies and Reducing Wastage

Cost transparency is key to increasing efficiencies and reducing wastage. When services are perceived as free, they are often used without restraint. Attaching a value to these services improves resource usage efficiency. Cost transparency creates a positive tension between shared services and the rest of the business, with both sides seeking value for money.

Implementing Effective Cost Transparency

Articulating Products, Services, and Capabilities

Cost transparency helps enterprises articulate what products, services, and capabilities are being purchased and their interdependencies. This clarity is essential for understanding actual costs and making informed decisions. Leading cost transparency tools like MagicOrange provide deeper insights into IT and Shared Services spending.

The MagicOrange Solution

MagicOrange delivers true cost transparency across various shared services. It takes into account all relevant factors to provide a comprehensive view of costs, enabling businesses to make informed decisions and improve efficiencies. MagicOrange’s solution is designed to enhance business efficiencies by providing detailed cost transparency and helping to manage shared services effectively.

The Benefits of Shared Services and Cost Transparency

When to Start?

The benefits of a shared services environment, coupled with effective cost transparency, make it essential to start implementing these practices sooner rather than later. The advantages far outweigh the costs, and early adoption can lead to significant improvements in efficiency and financial management.

Choosing MagicOrange

MagicOrange’s dedicated professional team consists of Chartered Accountants and technology experts with a successful track record in implementing cost transparency solutions at large enterprises internationally. Their expertise ensures that businesses can achieve the full benefits of shared services and cost transparency.

The shared services model, supported by effective cost transparency, can significantly enhance business efficiencies and reduce wastage. MagicOrange provides the tools and expertise needed to implement these practices successfully. By adopting MagicOrange’s solutions, businesses can unlock greater value from their IT investments and drive continuous improvement.