Shared Services Transformation: Conceptualization and Valuation from the Perspective of Real Options

Decision Sciences, Volume 40, Issue 3, pp. 381-402, August 2009

36 Pages Posted: 31 Mar 2013

See all articles by Ning Su

Ning Su

University of Western Ontario - Richard Ivey School of Business

Rama Akkiraju

IBM Corporation - Thomas J. Watson Research Center

Nitin Nayak

IBM Corporation - Thomas J. Watson Research Center

Richard Goodwin

IBM Corporation - Thomas J. Watson Research Center

Date Written: July 31, 2009

Abstract

In today's volatile global economy, where many organizations face severe pressure to downsize, the “shared services” model, in which a firm merges common functions performed by multiple units into a single service delivery organization, provides an innovative approach to make business more efficient and effective. To successfully implement shared services, firms need to strategically decide whether and how to pursue various service transformation alternatives such as simplification, standardization, consolidation, insourcing, or outsourcing. In this study, we develop the notion of real options into a unique theoretical lens for conceptualizing service organizations and their transformation in an uncertain business environment. Specifically, we view service organization as a set of strategic options that give the firm preferential access to future transformation opportunities. We create a taxonomy of these options, and introduce a decision methodology for valuing alternative shared services transformation approaches. We illustrate this methodology by applying it in a real business case to justify a global firm's decision regarding the transformation of its finance organization.

Suggested Citation

Su, Ning and Akkiraju, Rama and Nayak, Nitin and Goodwin, Richard, Shared Services Transformation: Conceptualization and Valuation from the Perspective of Real Options (July 31, 2009). Decision Sciences, Volume 40, Issue 3, pp. 381-402, August 2009, Available at SSRN: https://ssrn.com/abstract=2238804

Ning Su (Contact Author)

University of Western Ontario - Richard Ivey School of Business ( email )

1255 Western Road
London, Ontario N6G0N1
Canada

Rama Akkiraju

IBM Corporation - Thomas J. Watson Research Center ( email )

19 Skyline Drive
Hawthorne, NY 10532
United States

Nitin Nayak

IBM Corporation - Thomas J. Watson Research Center ( email )

19 Skyline Drive
Hawthorne, NY 10532
United States

Richard Goodwin

IBM Corporation - Thomas J. Watson Research Center ( email )

19 Skyline Drive
Hawthorne, NY 10532
United States

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