To centralize or not to centralize, that is NOT the question?

Cost cuts are on the toplist of business priorities these days in all organizations (small or large, no matter which industry sector they operate in). The trivial question is: how can organizations systematically drive down costs? How can enterprises improve cost structures? The answers are often related to improving operational efficiency; to do more with less. That is indeed the “what to do?” question and answer. But than comes the “how?”.  My recent customer contacts have show that lots of commercial, industrial or service organization make reflection around the “best” organizational structure to maximize efficiency and drive down costs. Should organizations structure (or re-structured) all or part of their operations in a central or decentral way? In today’s economic reality, in comes down to “how to organize lean operations?”. How can one run and structure his business in a more performing (read in first instance “cheaper”) way? For sure in lots of different ways. But often “lean” is also associated to concepts like standardization, harmonization, benefiting from economies of scale, shared services, … It is generally accepted that the effect of centralization or consolidating of services within an organization is adding value (either higher service or lower costs) for a company. Quite often the real value is not coming from the consolidation as such, but from the automatization of the services associated with it. Research has proven that top performing companies use more often shared services than their peers. Besides the many other motivations to centralize, better control (governance, compliancy, security …) and cost reduction (enterprise workforce effectiveness, reduced enterprise process cost, …) are the strongest drivers. SAP has developed on the topic of shared services over the last couple of year, in order to deliver solution which allow companies to “centralize” part of their services or operations if they want to. I dare to say that SAP is probably the only enterprise business application that allows companies (especially large) to operate large scale shared service operations. And as is required in most cases, integrate these with more decentralized operations and processes. I doubt that lots of companies will fundamentally change their organizational form today (rather business process improvements than business process re-engineering), but the question “how to organize lean operations?” is more actual than ever. And than it is always good to know that the SAP Business Process Platform can enable our customers to deal with their business priorities by enabling shared services kind of solutions and/or further centralization of processes. After all this it would be a wrong deduction to say that SAP only support centralized business models. Decentralized business models are equally successfully support by the SAP solutions. And than there is a nice side effect … since there seems to a cyclical movement from centralization to decentralization, it is good to know that the SAP solutions can support both models.