While growing in scale, it becomes pertinent for an organization to involve themselves in making operational decisions that come with lasting implications. One of the tricky areas of divergence commonly witnessed revolves around those functions that are essentially for support, such as whether such functions should be handled within an organization or outsourced to an external company. In practice, this shared services vs BPO question comes up repeatedly in transformation projects, including those discussed across operational advisory circles such as Viva Sync, where companies evaluate how structure impacts scalability rather than just cost.
Early grasp of the distinction saves costly correction down the line.
What Are Shared Services in Business?
Shared services refer to an operating model that entails the concentration of various shared functions in organizations or businesses. In this model, instead of having Human Resources, Finance, IT, Payroll, or Compliance teams in every unit or division, organizations opt to concentrate these functions into one structure known as “Shared Services.”
The key identifying feature is ownership. The shared services are a part of the organization’s umbrella. They are subject to internal policies and processes and fall under the same governance as the organization’s other operations. The key advantage of shared services is that knowledge and accountabilities build up, rather than being lost every time a vendor is changed.
In many mid-sized and large corporations, shared services represent a foundation for business that serves as a backbone for growth without adding complex layers. When the size and scope of operations increase, consistency becomes valued over speed as a priority.
How BPO Works in Comparison
Business Process Outsourcing refers to the delegation of specific business functions to a third party vendor or service provider. The vendor or service provider offers manpower, infrastructure, and management to deliver the business functions or processes outsourced to them.
BPO is often employed for volume-driven and transactional services, for example, customer service, accounting services, recruitment processing, and IT help desks. The key benefit connecting BPO is fast implementation and known short-term expenses.
The cost of all this is less control. Process changes must be negotiated, customization may not always be an option, and knowledge of the process resides with a third party, the vendor. This can lead to a dependency situation that is hard to reverse.
Shared Services vs BPO: The Structural Difference
The main distinction between shared services and BPO is not based on geographical location, number of employees, and hourly wages. It’s based on control.
Shared services relate to ownership, where execution remains centralized. On the other hand, BPO involves “the transfer of execution and varying degrees of knowledge about operations. This impacts how a firm can respond when a new regulation emerges, new systems are introduced, and when a priority changes.
Those companies that consider the issue of outsourcing a financial consideration can quickly learn that a strategically made outsourcing choice has become a limiting factor when it is already too late.
BPO vs Shared Services as Companies Scale
In the early stages of growth, BPO could work. The capacity to assimilate work quickly allows the management to concentrate on developing the business. However, when organizations begin to stretch geographically or product-wise into new jurisdictions or markets, issues tend to appear.
Change management becomes slower. Exceptions tend to increase. The internal alignment becomes weaker as the execution of the strategy occurs outside the context of the organization. This stage is the point in which shared services tend to be more resilient.
Because shared services teams fall under the same governance and cultural norms as the business, these teams are able to continually improve processes instead of having to re-negotiate them.
Shared Services Outsourcing as a Hybrid Model
In reality, most organizations never adopt a particular model to a fault. Shared services outsourcing has now come into focus in a manner which is considered a mix of these two.
Under this approach, processes and means of control, as well as accountability, are established by the organization, and support in executing them for certain tasks and peak workloads is also taken care of by outsiders. It includes document processing, first-line worker inquiries, and scaling during growth periods.
This approach may bring flexibility without impairing control as long as roles and boundaries are well defined. Otherwise, a lack of strong governance may bring in fragmentation rather than efficiency in a hybrid approach.
The Difference Between IT and BPO in Operational Design
The distinction between IT and BPO assumes considerable relevance in the context of shaping the structure for shared services. IT shared services pertain to architecture, access management, security, as well as system governance. Such domains are highly ingrained in risk management and compliance.
IT BPO goes into the realm of execution, like the support desk, applications support, and/or support for the infrastructure. Although there could be benefits in outsourcing such aspects for quicker turnaround times, lack of ownership of the architecture could prove detrimental in the future.
Due to this factor, IT governance in several organizations is conducted internally even when outsourcing the implementation. This ensures that all aspects of IT balance functionality with control.
Cost Is Not the Primary Variable
Cost comparison between shared services and BPO might not always be straightforward. BPO might seem cheaper at the onset, but the cost of ownership keeps on increasing with the increasing scope, change requests, and increasing complexity of the contracts.
Shared services will necessitate an initial outlay in people and process design. In most cases, transparency and scalability will improve with the increase in scale.
In this regard, rather than focusing on which of the options costs less at the current moment, it is much more pertinent to consider which of these models facilitates growth without working against operational efficiency in the future
Making the Right Choice
There is no universal answer to shared services vs BPO. The right choice depends on organizational maturity, regulatory exposure, internal capability, and growth trajectory.
Some organizations begin with BPO and later transition to shared services. Others adopt hybrid structures from the outset. What matters is treating the decision as a structural design choice rather than a procurement exercise.
Clarity on ownership, governance, and long-term intent is what determines success.
In Conclusion
Shared services and BPO are not opposing philosophies. They are tools with different implications. Understanding what shared services are in business, how they differ from outsourcing, and where hybrid approaches fit allows organizations to design operating models that evolve rather than constrain.
The most effective structures are rarely visible from the outside. They are the ones that continue working quietly as the organization grows, adapts, and changes direction.