The concept of “shared services” has been bandied about the IT industry for over 50 years. Yet, past iterations of this concept have often failed to meet the needs of corporate executives and end-users from a functional and economic standpoint.

This is because previous generations of shared services were too often built upon cumbersome and costly systems and software which could not scale to give corporate customers greater cost advantages or added features than they could gain from optimized inhouse resources. As a result, only highly specialized shared services, such as payroll processing and basic hosting, prospered in the past.

I was recently prompted to think about what sets today’s Cloud services apart from past versions of shared services when I was interviewed for a SearchCIO article.

Today’s rapidly evolving Cloud services are permitting a growing number of mid-size and large-scale enterprises to gain the full benefits of shared IT and software services. These Cloud services are even expanding the meaning of shared services.

What sets today’s generation of Cloud services apart from previous forms of shared services are the following factors:

• Changing Enabling Technologies: Virtualization, automated self-provisioning, greater security and more scalable service management technologies permit a broader cross-section of users to leverage more economical and flexible resource pooling from public and dedicated Cloud services. Layered on top of these resource pools are more user-friendly applications and data access systems which make it easier for organizations to take advantage of today’s shared services.
• Changing Economics: The rapidly evolving enabling technologies, along with rapidly maturing service delivery business models, permit leading Cloud providers to deliver their services at a fraction of the price of shared services in the past and more attractive bundles.
• Changing Customer Attitudes: Economic and competitive pressures, combined with workforce/workplace requirements are driving organizations to seek more cost-effective software and system alternatives. In the past, businesses either handled their technology and communications requirements internally or outsourced the entire their operation to a third-party. Today, they prefer to ‘out-task’, or selectively source, specific aspects of their IT and business process needs to specialized providers.

These forces are not only changing the nature of third-party shared services from various Cloud service providers, they are also enabling IT organizations to achieve the ideal of becoming internal service providers to their internal and external constituencies, including corporate executives, end-users, customers and business partners. Inhouse IT organizations can build data centers (i.e., private clouds) which emulate the best practices of the leading Cloud service providers. Or, they can serve as the ‘traffic cop’ for their constituents and manage the distribution of Cloud services to meet their needs.

Either approach can also take advantage of another dimension of today’s Cloud services – crowdsourcing. The best Cloud services capture valuable usage statistics to drive continuous enhancements to the functionality and quality of the services. In addition, these services encourage user feedback and peer sharing of best practices in the same way users share their experiences and code in the Open Source arena.

These technological advancements and behavioral changes are changing the way organizations view and utilize shared services.

Disclosure: This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet.

outsourcing shared services