IT shared services Featured

10:39am EDT September 20, 2006
"Shared services" in a business context means converging or streamlining functions to ensure the efficient and effective delivery of services -- including information technology.

IT shared services typically fall into two categories: operations, such as the data center management, network services, help desk and maintenance; and project-based, such as applications development and systems implementation.

Smart Business talked to Matt Keelan, consulting manager and IT director for Avvantica Consulting, LLC, about factors to consider relative to IT shared services.

What are IT shared services?
IT shared services are the centralization, standardization and consolidation of a company's IT functions. These IT functions often get fragmented as a company grows -- especially through acquisitions when it inherits another company's people, processes and technology. When you consolidate, you get economies of scale, more buying power, shorter vendor contracts and better service. The keys to a successful shared services implementation include a strong technical infrastructure and well defined SLAs (service level agreements).

Elaborate on what you mean by SLAs.
The use of SLAs represents the key difference between shared services and a centralized function. The reason is that SLAs require the provider and consumer of the services to work together to agree on key service attributes such as quality, speed, cost, etc.

As a result, an SLA essentially becomes an 'internal contract' between IT and its internal clients for those services that are to be provided. This contract needs to be negotiated and executed similar to any other formal business agreement. It should clearly define the services to be provided, the time frames within which they are to be provided, quality levels, costs, etc.

For example, 'three-nines availability' (or 99.9 percent uptime) is a common SLA for software systems. This is easily measured by dividing the number of minutes the system was actually available by the number of minutes promised in the SLA.

Do SLAs impact the cost of IT shared services?
Yes; service levels related to IT largely depend on the investment made in a company's technical foundation or infrastructure. This investment should be directly related to two key factors. First, the recovery point objective (RPO) is the amount of data you're willing to lose due to an equipment failure. It's the maximum time between the last backup and the time of failure.

Second, the recovery time objective (RTO) is the elapsed time between the failure and when systems are back on line.

The shorter the RPO and RTO, the greater the required investment. In the end, it is a business decision whether a company needs a 'bronze,' 'silver' or 'gold' level of service. As an example, a bronze level may mean an outage of a week or more while temporary office space is found and new equipment is ordered. At the other end of the spectrum, a gold level of service could mean an outage for as little as five minutes. Depending on the size of the company, the silver and gold service levels usually require a significantly higher investment relative to bronze.

What impact does the technical foundation have on shared services?
Technology 'enables' shared services and determines the SLAs that it can offer. For example, server and network monitoring tools can identify issues and alert IT in time to resolve them before business hours. This greatly impacts the availability (up time) that IT can support. Monitoring tools also allow just a handful of system administrators to manage literally hundreds of servers on a world-wide network. Other enabling technologies include SANs (storage area networks), which centrally store all of a company's electronic information, and auto-loading tape drives, which allow for the unattended backup of terabytes of information. SANs and auto-loaders also reduce the cost of system administration and greatly simplfy disaster recovery.

How are IT personnel impacted by shared services?
Shared services greatly reduce the redundancy found in a fragmented organization. Instead of each location building its own IT department, shared services can leverage fewer system administrators across multiple locations and reduce the number and level of IT personnel required in the field. A more centralized group can also afford to hire personnel with a greater level of skill and experience, since their costs are shared by the larger entity. For the individuals in the IT shared services group, there are typically greater opportunities for professional growth and development.

Are IT shared services for everybody?
They're not. Many companies have regional operations that work just fine on an independent basis. Shared services may make sense if you have highly-redundant IT staff and services, many contracts with the same vendors, or if you're a public company that struggles with the high cost of compliance with the Sarbanes-Oxley Act (SOX). In the final analysis, the decision should be based on the requirements of the business supported by a comprehensive cost/benefit analysis.

MATT KEELAN is consulting manager and IT director for Avvantica Consulting. Reach him at (214) 379-7920 or