Take a look at shared services models now

1. Shared Services
Costing Models

2. In today’s highly cost conscious environment, enterprise wide cost savings can be achieved by consolidating common work
and infrastructure by using Shared Services units. But Business units often complain that Shared Services end up costing
morethantheytargetedtosaveandalsohavethebelowquestions:-
n“WhataremySharedservicescostsmadeupoff?”
n“Sharedservicescostsaretoohighandaffectingmyproductprofitability”
Shared services are unable to answer these questions due to lack of cost transparency in their cost models. Typical reasons
forlackofcosttransparencyinsharedservicescostmodelsare:-
nUsingcomplexcostingmethodologywhichmakesmeasurement,chargeback andreporttoBusinessunitsdifficult
nLackofstandardizationofallocationlogic
nInabilitytocompletelyautomatethecrosschargingprocess
ITC Infotech’s Shared Service models
Our Shared services models enable cost transparency for
multi-functional and reciprocal services rendered by Shared
Services units. Cost transparency in context of Shared
ServicesistoshowtheBusiness
nServicesitconsumes
nCostofdeliveringtheseservices
nBreaking the cost down to activities and resources involved
inproducingtheseservices
nAllocationlogicforcrosscharging
nOn demand “what - if?”scenarios with respect to
demonstrate how costs change due to change in demand
forservices,resourcedriversandallocationlogic
Such cost transparency for multi-functional and
reciprocal services rendered by Shared Services units
can be enabled using PCM which facilitates various
methods of cross charging of cost for reciprocal
services among Shared Services and eventually
charge out to the Business. Various cross charging
models which reflect reciprocal services among
SharedServicesareasfollows:-
Reciprocalcostingmodel
This costing model makes one time assignment of cost
between Shared Services and eventually charges out
Business for the Shared Services cost. This method is
easy to understand, fairly accurate and facilitates in
tracing cost to the origin. It also differentiates the rate
at which Shared service unit is charged with that
chargedtoBusiness.

3. Business benefits of the models:-
nSubstantial reduction in lead time of calculating cross
charging rates by eliminating manual and repetitive
interventions
nIncrease in frequency of variance reporting which leads to
improvedcontrolofcosts
nDetailed breakdown of cost of each service by the activities
consumedandresourcesutilized
nFacilitates root cause analysis by tracing costs to origin for
eachserviceprovidedbySharedServices
nAvailability of accurate and timely actionable cost data to
analyze performance of Shared Services units and impact
ofitscostonBusiness
Implementation approach
Preparation &
Information
gathering
Blueprint/
Cost Model
Definition
Model
Configuration,
Data
Integration
Reporting &
Dash
boarding
Documentation
& Training
Case study on consulting
engagement
Businessneed
A leading South African bank faced various Business
challenges, while cross charging Shared Services cost,
using their cost models built in PCM. Key Business
challenges were loss of visibility and life cycle view of actual
Shared Services costs allocations, lack of insight into actual
and true product profitability and ability to respond to
Business queries. In order to address them, they felt the
needtoreassessthefollowing:-
nShared Services costing models and its methodology of
crosscharging
nExistingarchitectureoftheircostmodelsinPCM
nInteraction with other transfer pricing applications to
calculatecrosschargingrates
Businessbenefitsdelivered
ITC Infotech suggested change in the costing methodology,
standardization of models and roadmap definition reflecting
how un-exploited features of PCM tool can be leveraged, to
deliverthefollowingBusinessbenefits:-
Change of existing costing methodology into a transparent
cost chargeback method provides visibility toBusiness units
withinsightintocostconstituents.
Improved cost transparency
Recursivecostingmodel
This costing model makes reiterative assignments of cost simultaneously to Shared Services and Business. This method is
accurateandreflectssimultaneouschargingatthesameratetoSharedserviceandBusiness.
SAP Profitability and Cost Management (PCM) is a scalable
and flexible enterprise class tool which enables costing and
cross charging of Shared Services costs to Business across
industries. With its unique cross charging functionality ,
powerfulcalculation engine, “what if” and scenario modelling
capabilities, operational management and forward
planning of Shared Services cost, is responsive and simple to
control.
Availability of actionable and accurate historical cost
information improves forecasting accuracy and control of
ongoingcosts.
Increase in operational efficiency
Shared service centers can work with the Business in
producing budgets and forecast, analyzing operational
results and develop programs to improve operational
effectiveness.
Business partnering with Business units

4. For more information, please write to: contact.us@itcinfotech.com
www.itcinfotech.com
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