Every buzzword has its day. After advancing standardization as a panacea for shared-services functions, companies are now returning to customization. But it’s not back to square one. Shared-services organizations and service providers continue to standardize non-core processes from Human Resource (HR) to Finance and Accounting (F&A), but are now willing to customize — at a price, of course.

The situation today is different from one a few years back when multiple non-standardized processes resulted in high costs, variation and errors. Most customizations are offered after substantial standardization. There is a method to the madness.

So why is there a sudden desire to customize? There are multiple reasons but the most important ones are the ability to control the extent of customization, the apprehension of shared-services organizations and outsourcing vendors of being labeled inflexible to market needs and the notion that shared services can be used to competitive advantage.

Call this revisionist thinking: Customization 2.0.

In the past decade, shared services have emerged as a competitive differentiator due to process standardization. Take the instance of F&A processes, where process standardization leads to paying suppliers on a more timely basis. This results either in the elimination of interest costs on overdue payments or in the receipt of a discount on early payment. The extra cash results in better pricing of the end product. As the next step some large suppliers may need even better payment terms in return for greater discounts. This is where customization comes in. When the trade off with customization versus standardization leads to greater value, companies are plunging ahead to customize processes.

Standardization Journey

A few years back most shared-services functions were fragmented, geographically scattered and not uniform. The strategy to form consolidated shared-services organizations or outsource processes to service providers triggered the process-standardization trend.

“There has been lot of process standardization due to outsourcing, as the non-core activities move to the service provider, whose functional expertise and best-practices knowledge in the specific process provides pointers for standardization,” says Atul Vashistha, CEO, neoIT, a services globalization consulting firm. “Secondly, with innovative outsourcing contracts such as transaction-based pricing, improving productivity becomes an imperative.”

In an outsourced environment, the standardization of processes across services lines and locations reduces complexity and cost and improves productivity. This acts as a trigger to standardize processes.

“An outsourcing provider often is the real driver for standardization,” says Stefan Spohr, SVP, Bearingpoint. “Providers benefit when they can leverage a single delivery platform for different clients.”

Thomas Cook and WellPoint are classic examples of the benefits of standardization. Due to a history of mergers and acquisitions Thomas Cook’s three U.K. business units — sales, tour operations and the airline — were not operating as an integrated business. The supporting infrastructure of IT, HR administration and finance were duplicated and decentralized across 22 locations. The company engaged Accenture to create a single shared-services center for IT, HR and finance.

“We designed best-of-breed processes for IT, finance, payroll and HR administration utilizing best practices from shared services,” says Kevin Campbell, Chief Executive, Outsourcing, Accenture. “We also delivered treasury and finance organization design to structure the shared-services center.”