Shared Services at Cummins

I am Shared Services Exchange right now at the lovely Chateau Elan Winery & Resort outside of Atlanta.

Let me share some of the insights I've picked up in sessions, which all feature the heads of various shared services organizations at blue-chip companies.

Steve Peterson, executive VP for Cummins, the $11.4 billion engines/power generation/components/distribution company, reports that his firm moved from an environment that had 60 to 70 different desktops in use, over 200 different laptop models and 4,000 software applications to a company with a single desktop, a single type of laptop and a greatly reduced number of applications. How?

One rather obvious technique was simply putting a price on every single component it provides. It's $85 a month per person for a computer, which includes hardware, software and support. .If you want to use Lotus Notes, that's $20 a month. Where business units or plants want to hold onto their old platforms, he said, "We're going to start charging big bucks for things being used by fewer than 10 people.”

That same standardization and automation approach has been used in HR administration, supply chain, call centers and order processing.

Prior to shared services, the businesses had no concept of cost structures related to the services they were getting. Now they know down to the line items.

The revenue generated through those component charges covers the cost of providing that service. Plus, the shared services organization has a P&L and it is trying to grow the business. The overall goal: "We want to be the preferred outsource services to Cummins,” said Peterson. The clock is ticking; after five years of mandated use of the shared services organization, the businesses can decide to go to outside vendors.