Managed versus Shared Services

Dear Campus Colleagues,

There are a variety of initiatives that have begun at both UT Austin and UT System that are focused on improving the efficiency and productivity of administrative services.

President Power's Committee on Business Productivity recently submitted its report, "Smarter Systems for a Greater UT." One of the major initiatives being undertaken is a “Shared Services” approach to administrative services.

The UT System Supply Chain Alliance is in the process of soliciting proposals for “Managed Services” for the highly transactional activities within the Procure to Pay business process at UT System’s six health institutions.

Many are also aware of the implementation of PeopleSoft at six of the academic institutions and at UT System Administration under the banner of "UT Share.” UT System has an Office of Shared Services that is leading this and other shared services initiatives.

The objectives of managed services and shared services are similar in that the focus is on reducing administrative costs by centralizing administrative tasks and managing the delivery and quality of service through representative governance. Organizations with highly decentralized administrative services rely on processing by generalists who handle a variety of administrative duties. Centralization organizes administrative tasks around specialists who focus on very specific processing activities such as processing purchases or processing travel reimbursements. There are financial savings and quality improvements possible with both.

The primary difference is how this is accomplished:

  • Managed Services is the practice of aggregating like-kind administrative responsibilities and outsourcing them to an external third party to improve operations and reduce cost. The delivery and quality of the service is managed by the campus via a contractual relationship with the provider. An example of a managed service on the UT Austin campus is Central Receiving and Delivery. Today, MagRabbit provides these services to our campus.
  • Shared Services is the practice of aggregating like-kind administrative responsibilities and insourcing them to an internal organization, often a newly constituted service center of people providing like-kind service, to improve operations and reduce cost. The insourced service organization is managed by University employees. The delivery and quality of the service is managed by a representative governance structure and by service level agreements between the delivery and receiving organizations. An example of a shared service that already exists on our campus is the Payroll department.

UT Austin has chosen to follow a Shared Services strategy and is beginning to develop a governance structure and implementation plans that will identify areas that will benefit most in terms of service delivery and overall cost.

The implementation of new financial, human resource and payroll systems are critical infrastructure components to support this strategy. UT Austin is in the process of identifying an Enterprise Resource Planning (ERP) platform and the resources that will be required for a successful transition.

I look forward to working with you as we develop plans and implement a campus-based shared services model with includes delivery of new enabling computer systems. Implementing shares services and new enabling systems are long-term, complicated endeavors that are expected to extend over many years and will be costly. However, I believe that the benefits of accomplishing these tasks as suggested by the President’s Task Force on Business Productivity far outweigh the costs and set the University on a positive financial course.

Kevin Hegarty
Vice President and Chief Financial Officer