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Facebook has made people get used to the idea of sharing. Yet, one type of sharing that is pretty much an alien concept to the enterprise IT set-ups in India is the shared services model. On the first look, it looks surprising considering CIOs of Indian enterprises have taken to total outsourcing quite early in their IT investment curve. No other emerging market has such a large number of mature outsourcing contracts as India has seen in the last 5-6 years. Yet, when one looks for a mature shared services set-up, we have very few examples. Of course, there are a few notable exceptions like ICICI Bank and a few others such as Tatas, Aditya Birla, Mahindra & Mahindra and Essar are on that path but are nowhere near their full potential. But by and large, Indian enterprises have decided to give a go to the model, while leapfrogging to outsourcing. In the West, typically an internal shared services set-up has been an intermediate step.

The trend, however, ceases to look so surprising, if we take a little closer look. So, who are the companies that have taken a lead in total outsourcing? Private telecom companies, privatized airports, real estate firms, and a few new financial services companies and now a few organized retail players. One thing common to them is that they are all relatively new players and have taken the outsourcing route to free their management time and resources. Unlike the West, they have not taken to outsourcing for optimizing costs and enhance productivity.

Now, there are no dearth of large enterprises in India who need just that: a better control over cost, enhancing efficiency, and increase in productivity, without really requiring too much of disruptive change. Many CIOs that I have spoken to are grappling with these challenges but have not been able to go for outsourcing because of non-readiness on their part, fear of uncertainty, questions about control or simply lack of management buy-in.

For some strange reasons, a shared services model has never been a serious top-of-the-mind option. Based on whatever little discussion that I have had on the topic, my conclusion is that there are two major reasons for that.

One, vendors pitch outsourcing; there is no commercial push for shared services by anyone. Unlike in the West, outsourcing came as a ready solution for them before there was considerable demand. The supply preceded demand and thanks to Indias hype around outsourcing (because of its offshore industry), many saw it as the perfect solution. The users did not find out the solution neither did the consultants tell them. By the way, this is one reason why Dataquest decided to create a forumIndia Outsourcing Summitthat would be around the corner/have been over by the time you read this.

Here is the other reason. While CIOs would have benefited, often a central shared services unit is hard to justify in terms of RoI only for IT. Today, each of the corporate function like HR, finance, IT and procurement is a silo by itself and there is little co-ordination. A shared services model would be a viable model with multiple services. It is a pity that India, which is a hot destination for global shared services centers, has few for its local companies.

Shared services is not just for companies that are growing at 1-2%. It can be for Indian companies with a 15% growth rate as well. And shared services should not be thought of as an alternative model to outsourcing. It could be the first step on an outsourcing journey.

One good trend is the appointment of group CIOs by the large diversified groups, who have group CFOs as well. These GCXOs could be the harbingers of the shared services journey.