SHARED SERVICES IN THE GAMING INDUSTRY

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Shared services is a business delivery model and a concept that has been around for 25- plus years and has gained wide adoption in corporate America, particularly among larger, more geographically diverse companies. But it is still somewhat misunderstood, and in certain industries like gaming, it is only recently being adopted on a wide scale as a strategic initiative.

What is Shared Services?

Here is a definition from Gartner that is pretty comprehensive: Shared services or shared services center (SSC) refers to a dedicated unit (including people, processes and technologies) that is structured as a centralized point of service and is focused on defined business functions.

Shared services may come from several different physical locations, and may involve numerous business functions and IT processes. Execution and long-term delivery may be by internal enterprise personnel or by service providers, or some combination thereof. Shared services historically gained widespread adoption in finance, but has also become quite common in IT, HR, and Purchasing, among other areas. Per a recent survey by Deloitte, Figure 1 below shows the most common processes that are delivered by a shared services center. Shared services gained popularity as several trends converged in the 80s, 90s and 2000s:

  • The need for sustainable cost reductions to maintain corporate profits;
  • The increased global nature of companies required a different approach to servicing multiple business lines and multiple geographic locations;
  • Automation of business processes allowed transaction processing to be handled from virtually any location.

Where is Shared Services Now?

Shared services have matured into a key strategic element for many businesses. Instead of just being seen as a more efficient way of doing business, companies are realizing other benefits, such as:

  • Ability to scale up or down. For example, integration of mergers and acquisitions can often be more successful by leveraging an existing shared services center to take on the additional work of the acquired company (or vice versa).
  • Enhanced controls, as automated processes are almost always more fool-proof than processes that involve multiple sets of people. Allow business units to focus more on the business, since transactional activities are done by someone else.
  • Further cost and effectiveness leverage by locating shared services in desirable markets (low cost, better availability of talent, etc.); or through sourcing/outsourcing decisions.

Winter2013_Complete_Page_011As the trend continues, shared services will likely be leveraged in additional ways. As just one example, Boeing’s shared services center has 8,000 employees and provides 99 services ranging from foundational transaction activities like accounts payable payments to more diverse functions like building maintenance and internal audio-visual creation.

One unique benefit we have found at MGM Resorts is the ability to better develop talent and enhance the careers of our finance teams by giving them a broader experience within the shared services center, since we manage multiple finance activities. They can rotate to learn new skills, find promotion opportunities more readily, and develop additional marketable skills like LEAN process improvement or formal project management skills.

Shared Services in Gaming

Gaming companies have only recently adopted shared services. There are likely a few important factors causing the industry to be behind others:

Size/scale of operations – gaming companies have only recently (last 10-15 years) become large enough and geographically diverse enough to justify investments in shared services. In the past, with just a few properties all located in the same market, the returns would not have been meaningful.

Infrastructure – our industry has disparate systems, is heavily regulated towards manual controls, and operates in multiple lines of business (hotel, gaming, food, etc.). These factors again serve to minimize the returns of investing in shared services, which rely on automation and streamlined business processes.

Historical financial results – until 2008, everyone just figured gaming companies would always be successful regardless of serious cost containment strategies. Obviously the recession changed all that. So now several companies are investing in this model – Caesars Entertainment, MGM Resorts, Station Casinos, and Las Vegas Sands have all moved relatively quickly and meaningfully to implement finance shared services. Many gaming companies had already moved to a central/shared services model for IT services (no need for 13 help desks at my companies’ properties…). Even HR is now getting into the game.

As technology continues to mature/catch up in our industry and as companies re-look at growth strategies, we should see the level of shared services adoption increase. Look for companies to partner with the Gaming Control Boards to allow more on the gaming side; look for further adoption in HR; look for further “value add” activities in finance like analytics.

Rick Arpin is the Senior Vice President and Corporate Controller at MGM Resorts International. Mr. Arpin’s responsibilities include oversight of the company’s Finance Shared Services Center and all aspects of external reporting, along with assisting in corporate finance maters. He was recently named to Treasury and Risk Magazine’s “40 Under 40” list.

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