Although segments of the global economy continue to show improvement, organizations continue to face cost pressures. As such, decision-makers continue to look for ways to optimize their organization’s operations.
For shared services organizations, there are abundant opportunities for applying more efficient approaches for optimizing information technology resources, including hardware, software, services and people. Some of the most popular approaches currently being exploited include the use of cloud computing environments, Software as a Service, open source computing and server and storage virtualization techniques.
While much has been published on the benefits and challenges surrounding each of these approaches, there’s another huge opportunity for gleaning cost-efficiency gains that’s just beginning to emerge. A small but growing number of CIOs are actively exploring the possibility of sharing software, infrastructure and IT services with industry competitors and regional partners to eliminate under-utilized assets, streamline operations and slash costs. While the notion of inter-enterprise shared IT services isn’t entirely new, there are several reasons to believe that the time for what IT economics expert Howard Rubin has coined as ‘Technology Commons’ has finally arrived.
As Rubin and several CIOs pointed out in an Aug. 2009 CIO Magazine cover story on the topic, the proliferation of high-bandwidth networks -- coupled with the emergence of cloud computing and the expansion of the open source movement -- have laid the foundation for making shared IT activities between organizations feasible. CIOs in several industries are currently exploring the potential for sharing IT resources between one another, including the world’s top hotel groups, the top 25 research universities in the United States as well as players in the real estate and insurance industries.
For example, a group of hotel operators which include Starwood Hotels & Resorts Worldwide and InterContinental Hotels Group are actively exploring the possibility of sharing a common hotel reservations system to help reduce their transaction processing costs. Although the discussions are early-stage, it’s an intriguing development for a group of companies that have historically tried to use these systems to differentiate themselves on how they calculate room rates and availability for customers. In the most recent discussions, hotel leaders have been exploring the potential for sharing a platform for handling more mundane transaction processing tasks while separating the pricing and room availability functions for their own organizations.
Going forward, Tech Commons may offer a good fit for other types of ordinary business functions. For instance, if your company is an international re-insurance company, operating and maintaining a general ledger system isn’t core to your organization’s business, is it? For routine but necessary business functions like this, Tech Commons could become an appropriate and cost-effective alternative.
For any type of Tech Commons to work, there are significant legal, security and other types of issues that would have to be addressed. For instance, any group of organizations that attempts to share a commercial software system would have to work through licensing and usage rights with the provider. Meanwhile, commons participants who decide to set up a third-party entity to operate a shared IT service for them would have to agree on how to structure, staff and fund the business.
Most CIOs I’ve spoken to on this topic believe that an LLP or LLC-type organizational structure would probably work best for a shared IT service since it probably would be too much of a distraction for most IT departments or shared services organizations to operate such an entity themselves – particularly if the operation or activity isn’t core to their company’s business.
There are a lot of factors for executives to consider here. Still, with the massive amount of redundant hardware and software systems in use across the globe, it’s a concept worth exploring.