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Shared Services: Good, Bad, or Ugly? October 4, 2009

Posted by wrivkin in Enterprise Architecture & Business Transformation, General Creative Thinking.
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Paraphrasing Leonard Cohen: “Nobody knows”. At least, apparently, not “CIO Magazine”, which has recently published an article on the issue[1]. The subtitle of the article is just awesome: “Shared services are back in vogue” (italics are mine W.R.). I do not know whether the irony is deliberate, or it is just sub-consciousness, but I bet it will go unnoticed in our community. Actually, we agree with this level of understanding of Enterprise trends, which follows vogue, fashion, hype, but not knowledge! What knowledge, one can ask? Who can foresee the mysterious ways of this incomprehensible object called Enterprise? We can guess about it, but know it?!

However, let us return to the article under consideration. “The idea of IT services shared among industry rivals isn’t new,”-writes its author – “but attempts to establish them have a spotty track record. Previous initiatives, such as an effort in the early 1990s to form a shared travel reservation network called Confirm was started, but never materialized…” Why? Nobody seems to know. Well, maybe I can add my two cents. In the early 2000s I was a part of Alltel’s project called Compendium, which was intended to create standard, component-based applications for shared usage in the Telecomm industry. It failed miserably and, even back then I understood why, spoke from the beginning against it with its major proponent, my boss and VP, risking my relationship with him and my job. Back then I called it ‘competitive edge’. Now I call it ‘competitive business processes’.

Nobody, in their right mind, would share them. It does not matter whether we have Cloud computing, SAAS, open source, and all the other technologies and methodologies that the author listed in the paper. Technically, it was all possible 20 years ago, and it is so now. Business-wise, it made no sense back then and it makes no sense now.

All this makes even more mysterious to me the call for a common reservation system, made in the same paper by the CIO of Intercontinental Hotel Group. It is mysterious, because it seems to contradict IHG’s current Business Model. It is no secret (see their website), that a few years ago the chain sold almost all their hotels and became a franchise. This substantially increased their capital in the bank but made their reservation system the only source of their revenue. The revenue per room with this EBM has decreased four times compared to what it was before the Big Sale (again, see the public data on their website).

For me that means one thing: if the chain fails to create a reservation system with a substantial competitive edge over their rivals, who still own their hotels and have corresponding revenue streams, it may mean the chain’s business failure! This is exactly what would happen, if they all use the same reservation system.

So, when IHG’s CIO says: “With the advent of cloud computing, I think that’s going to open up the doors to this type of collaboration”, it is an example how methodological confusion can lead to some IT decisions with potentially unsafe business consequences. My humble advice to IHG and others in the same situation is:”Please choose wisely which door you are going to open up.”

So, what, thou shalt not share? Aye, thou shalt, but only the processes and services that have become commodities and do not bring a competitive edge. Enterprises have always shared their power and telephone providers. Now the time comes to share technological resources and commodity services. However, if you are about to share your EBM’s core business processes – your intellectual property, your competitive advantage – think more than twice! Especially if Information Processing is your main line of business.


[1] T. Hoffman ‘Common Ground’. CIO Magazine September 1 2009 p.38