Conferences About Newsroom Careers

 Finance

 Insights

 Expert Guidance

 Tools

 Connect with Peers

 Become a Client

or call +44 (0) 33 3060 3738

Insights / Finance / Article

5 Shared Services Pricing Approaches

April 02, 2021

Contributor: Rob van der Meulen

Shared services organizations can choose from several pricing models. Some incentivize customer
behavior or cost efficiency more than others.

“How should I charge internal customers for the services offered?” There is no single answer to that
question, so it’s important for shared services leaders to select a pricing model based on the balance
between efficiency (how costs are charged out) and its effectiveness in influencing customer behavior
(i.e., accuracy).

Download eBook: The Digital Future of Finance

Recent research from the Gartner Finance research team offers guidance to shared services leaders on
weighing the pros and cons of shared services pricing models.

This article recaps their key points, edited for clarity and length.

How shared services organizations charge

Some shared services organizations (SSOs) don’t charge, while some use a simple allocation
methodology. Others use elaborate activity-based costing to determine variable-based models. One of
the main reasons to charge customers is to encourage them to “do the right thing” for the enterprise
and fund process improvement.

Certain pricing mechanisms can ensure that customers are vested in forecasting or managing their
demand for services and supplying the quality inputs required for shared services to do its job. They
prevent customers from overutilizing or underutilizing services.

Some pricing models provide a basis for accurately reflecting the cost of services and enable
comparisons to external pricing. However, other models can also trigger resistance and lead to “I’ll do it
myself” behavior by customers, leading to reduced customer commitment to working with shared
services.

Gartner research highlights five different shared services pricing models.

Learn more: Shared Services Strategy and Structure

SSO Pricing Model No. 1: Cost center model

This is the most basic model, generally used when shared services is a centralized support group without
separate budget. As a result, the cost is typically borne by the broader organization and not allocated to
business-unit customers directly.

Pros Cons

 Simplest, easiest model with no  Doesn’t provide a granular understanding or visibility

pricing strategy to maintain into the costs incurred for each process/service

 Good option for starting up or for  Doesn’t influence customer behavior, which can lead
the short term until processes to deviations from best practice
are stable
 Portrays shared services as a corporate entity

 Doesn’t accommodate volume fluctuations, leading to

an underutilized or overutilized setup that can impact
service levels

SSO Pricing Model No. 2: Fixed allocation model

This is usually one of the simplest models to implement. Business units are charged a flat rate or a
percentage of costs depending on a predetermined metric (for example, the number of full-time
employees using the shared service). Price is calculated irrespective of the volume or type of service.

Pros Cons

 Provides a simple basis for
allocating costs to different
business-unit customers
 Easily updated as a part of the
budgeting process
 Helps send business-unit
customers a message that they
are, in fact, paying for the service
 Provides limited information on the true cost of the
services provided
 Does not provide business units an incentive to
review their demand for services or partner with
shared services to optimize processes and reduce
costs
 The complexity of the services rendered is not
accounted for, possibly penalizing some customers
and subsidizing others

SSO Pricing Model No. 3: Variable model based on actual volume

With this model, pricing for each business unit varies based on the volume and complexity of services
consumed. Customers requiring a higher volume of service or complex practices that deviate from the
norm pay more than others.

Pros Cons

 Provides business-unit  Requires shared services to diligently keep track of the

customers an incentive to significant amount of information on services consumption
control their use of services
 Shared services leaders may have to prove the robustness
 As pricing is influenced by of this model to business-unit customers, e.g., answering
the demand side, it is easier questions on how the volume and complexity (and
to define accountability therefore cost) of the services are determined

 Enables customers to easily

determine how changes in
volume will impact costs

Read more: 3 Ways to Show How Valuable Shared Services Can Be

SSO Pricing Model No. 4: Market-based model

In this model, price is decided or influenced by external competitive market rates for a similar service.

Pros Cons

 Business-unit customers feel  Can be difficult to source the market price and
comfortable that they are charged determine which best suits shared services,
appropriately for the services they making this model time-consuming to implement
receive and maintain

 Transparent and easy to understand
 Encourages shared services to be
competitive
 Shared services can get trapped into unfair
comparisons
 Costs that aren’t billed to internal customers must
be absorbed by a corporate overhead department

SSO Pricing Model No. 5: Cost-plus model

This model is similar to the previous market model, but adds a profit margin. The shared service
organization therefore acts as a profit center, aiming to reinvest revenue to improve
service, technology or infrastructure.

Pros Cons

 The profit margin enables shared services to focus  There may be no incentive for
 on improving their services and the customer shared services to be cost-efficient
experience
 Business unit customers typically
 As business-unit customers are required to pay don’t appreciate paying a profit
over and above the cost, they have a vested margin for shared services’ internal
interest in how the profits are being utilized to agenda
improve shared services

Learn More: 13 Key Activities for Shared Services

This article has been updated from the November 2019 original to reflect new events, conditions or
research.

Gartner CFO & Finance Executive Conference

Be a part of most important gathering for CFOs to explore potential finance tech providers and get
actionable insights to prioritize technology innovation.

View Conference

Recommended resources for Gartner clients*:

Shared Services Pricing Mechanisms

Shared Services Outsourcing Trends

Process Scope Determination for New Shared Services Organizations

*Note that some documents may not be available to all Gartner clients.

Top 5 Finance Trends and Priorities for CFOs in 2024

Discover how to prepare your finance function to achieve your goals by understanding the top CFO
trends and finance executive priorities for 2024.

Read Now

Subscribe to the Latest Insight

Work Email

Continue

By clicking the "Continue" button, you are agreeing to the Gartner Terms of Use and Privacy Policy.
Explore deep-dive content to help you stay informed and up to date

AI Engineering: The Link Between AI and Business Value

Watch Webinar

Apply Generative AI for New Competitive Advantages

Watch Webinar

Ask the Expert: The Art of the 1-Page Strategy - 4 Simple Steps to Success

Watch Webinar

Impactful Storytelling: Craft a Business Value and Human Value Story to Increase Influence

Watch Webinar

How to Pilot Your Operating Model to Succeed With Digital Transformation

Watch Webinar

Government Finance Leaders, Manage Change Fatigue to Set Your Team Up for Success

Watch Webinar

Drive stronger performance on your mission-critical priorities.

Become a Client
  About Gartner

Who We Are

o About Us

o Corporate Responsibility

o Investor Relations

o Newsroom

What We Do

o Research & Advisory

o Conferences

o Consulting

o Digital Markets

 Get in Touch

Contact

o Contact Us

o Become a Client

o Office Locations

o Technical Support

Careers

o Why Gartner

o Search Careers

o Our Culture

o Careers Blog

 Latest Insights

Resources

o Featured Insights

o Webinars

o Glossary
 o Client Stories

POLICIES PRIVACY POLICY TERMS OF USE OMBUDS

©2024 Gartner, Inc. and/or its affiliates. All rights reserved.

We use cookies to improve your experience

We use cookies to deliver the best possible experience on our website. To learn more, visit our Privacy
Policy. By continuing to use this site, or closing this box, you consent to our use of cookies. Cookie
Notice.

Accept