A shared services agreement (SSA) is a contractual agreement between two or more organizations to share resources and services such as finance, IT, HR, and legal services. The purpose of the agreement is to achieve cost savings, improve efficiency, and enhance the quality of services offered by the participants.
Under a shared services agreement, one organization takes on the role of the service provider while the other organizations become recipients. The service provider is responsible for delivering the agreed-upon services, while the recipients pay for the services they receive.
The agreement outlines the services to be provided, the responsibilities of each party, the costs, and the terms and conditions of the agreement. It also establishes the governance structure, which determines how decisions are made and how disputes are resolved.
SSAs are popular among public sector organizations such as local governments and school districts, as well as private sector companies that have multiple businesses or divisions. They are particularly beneficial for small and medium-sized organizations that lack the necessary resources to operate certain functions or departments on their own.
The advantages of SSA include cost savings through economies of scale, enhanced service quality through the consolidation of resources and expertise, and improved efficiency through the elimination of redundant processes. It also allows organizations to focus on their core competencies while outsourcing non-core functions.
However, there are also potential drawbacks to consider. Shared services require a significant amount of coordination and communication between the parties involved, which can be challenging to achieve. There may also be resistance from employees who fear job loss or a decrease in their workload.
To ensure the success of an SSA, it is important to establish clear communication channels and a strong governance structure. Regular meetings and progress reports can help to address any concerns or issues that arise. It is also essential to have a well-defined service level agreement that outlines the expectations of all parties involved.
In conclusion, a shared services agreement is a valuable tool for organizations looking to streamline operations, reduce costs and improve service quality. However, it requires careful planning, communication, and a robust governance structure to be successful. By considering the benefits and drawbacks of an SSA, organizations can determine whether it is the right option for their needs.