Six trends that define the shared services age today
Article10.10.2012 Comments (0)
We are in the third wave of shared services
Ask any European shared services director where they will be in September that year, and the answer is unanimous. They will of course mobilise themselves, and possibly their deputy and travel, with intent and enthusiasm, to the annual Deloitte Shared Services and BPO conference.
This year Cannes welcomed 560 shared services leaders. Despite the rain and absent Riviera climes, the event threw a warm and nurturing glow over blossoming relationships and burgeoning knowledge. 560 people left the event on Thursday evening happier and more confident, with questions answered and problems resolved.
No wonder this event boasts a waiting list.
As a delegate, moving from the plenary sessions to the streamed sessions, from the case studies to the panels to the interviews, and all via the networking area where sponsors mingled and educated passers by, I became very aware of the pace of things at this event. The programme is geared to keep the energy high and the mind alert and the expansive venue is there to keep the body trim.
The programme of speakers is always strong, with solid representation this year from Oracle, BP, Lexmark and AP Moller Maersk. But there’s one session I am choosing to focus on in this article, and this is the opening session from Deloitte’s European Shared Services and BPO Advisory Team Lead, Peter Moller.
The theme of his session has a déjà vu quality about it, but this is its pleasure and its purpose. Like a reliable graph, it allows you, year on year, to chart the rising lines and dropping trends that have now come to shape this industry.
Moller first presented his ‘one slide special’ back in 2003 when I started attending the Deloitte Shared Services and BPO conference. The ‘one slide special’ has returned each year, taking on a different form from the previous year, depending on developments of the time like outsourcing or the expansion of reach enjoyed by shared services. If you took each slide from each year you would have a 3D living and breathing graph that has come to sculpture this evolving landscape.
The graph lines extended up and down this year as Moller drew on the following six areas to help us understand this market better.
1. Shared services continue to move up the value chain
The important word here is ‘continue’. The long march up this ill-defined chain started a number of years ago, and like most developments, the pioneers have made headway, whilst the mainstreamers keeping up the rear, and the laggards behind them, see this as a milestone yet to reach.
It’s ‘ill defined’ because everyone has a different perception of what the word ‘value’ means. But what Moller honed in on undoubtedly resonated with all the audience as developments that suggested ‘value’:
- Retained finance and its demise. Ask yourself how much of the finance function is left in the business? This will give you an idea of the sense of ownership the company has granted its SSO. Moller is seeing less and less staff embedded in the business. The companies that have 50 per cent of finance staff or 2000 FTEs in the business are surely depriving their SSOs of real leverage in the key areas of cost effectiveness and business efficiency. According to Moller, Oracle and Coloplast have only five per cent of finance sitting in the business.
- Shared services as a model works. This is why nearly all fortune 500 companies follow the model. And it’s been tested and refined for 20 years for the business world generally to appreciate that its benefits could be applied to other parts of finance, and not just the rules based, transactional bit. So Moller sees a further layer added to the shared services framework, and this is in the activities away from the obvious. Now businesses and SSOs are together redesigning processes and bifurcating functions so maximum activity can be managed by the SSO. Some activities involve critical face to face components, and these surely remain local. But the events leading up to, supporting, and following on from these face to face activities qualify themselves, on the whole, as perfect for shared services. An example of this is that many businesses feel that MI should remain local. Shell is a business that has brought 700 people into its SSO to handle MI. Local MI handling is negligible in comparison.
- This shift means that the dynamic of staff in an SSO is changing. Teams are no longer crunching and entering data (automated and electronic tools are there for this purpose), but instead judging and advising. From my perspective this is putting a new pressure on recruitment, retention and development of talent in an SSO.
2. Business services rather than finance services
Shared services has been the chosen child of finance. But this relationship is changing as shared services is growing up. According to Moller, a recent Deloitte survey* illustrates that 90 per cent of SSOs run finance, 60 per cent HR and 50 per cent IT.
Most experts in this field will talk predominantly about scale, and by spreading the model across the functions, you are expanding the benefits that come from volume. Now you can share locations, tools, have a single governance structure and leadership team and report to a Global Business Executive, who has a reporting line straight into the CEO.
The net of this over and above the cost benefits that come from scale is the following:
- Decisions happen quicker. Because Finance, HR and IT are in one location and has one governance structure, decisions happen with the fluidity denied when SSOs run as towers.
- Shared services has a seat at the table. It’s on the board, rather than sitting at the back of finance or the back of HR. It has a strong voice projecting to the right and powerful ears.
3. Outsources gain share, but slowly
According to Moller there have been 850 major finance multi-process outsourcing deals, and half of these have taken place since 2007. It’s not quite glacial pace, but nor is it Arabian thoroughbred either.
It’s an interesting dichotomy. According to Moller, outsourcers are sharpening their skills. With 20 to 30 finance clients, BPO’s expertise inevitably deepens and strengthens. One proof of this is the very survival of relentless and repetitive tendering questions that consultants ask on behalf of clients on a weekly basis. If they fail to answer these questions successfully, they fail to be shortlisted. Without upping their game, their exclusion from the shortlist the following week, or the week after that, leads to certain death.
Add to this mix that these outsourcers are brands that graduates and the local workforce want to be associated with. This means that staff stick, and with that attachment comes the enhancement of expertise and knowledge.
So why aren’t shared services directors tripping over themselves to handover the work to the super experts?
Herein lays the second part of the dichotomy. Whist outsourcers become arguably more attractive, shared services have seemingly become more nervous about the outsourcing notion. Fear of bad PR, resistance from workers’ councils and general paranoia associated with ‘waning control’ can be enough to put a CFO and leadership team off outsourcing.
Simpler cases just feel their processes haven’t reached the zenith in process standardisation to warrant a clean and healthy hand over to a third party.
This all means that the pace of outsourcing is slow. For now.
4. Shared services find better ways to work in a multi-ERP environment
There is no disputing that the number of SSOs running off a single version is on the increase. Within the birth year of sharedserviceslink.com in 2007, Hackett spoke of there existing 10 SSOs globally that ran off a single instance. The surveys we run today suggest that between 30 and 40 per cent of SSOs now have a single instance.
Moller’s point here however, is that should your business not have the luxury of a single ERP instance, SSOs are developing well in this environment because of technology enablers that link various systems together, extracting data seamlessly to provide the single version of truth that we hold so highly.
However, despite this technology being available, Moller observes that only a few companies have made significant progress in its real application.
Interestingly, outsourcers are working particularly well with multi ERP clients, setting up interfaces that liaise with a multi-ERP landscape.
5. Data is evolving into insight
According to Moller we are in the third wave of shared services evolution. The first was consolidation where the likes of Kelloggs, Whirlpool and Intel strove to realise benefits through centralising activities, standardising processes and consolidating systems.
The second wave came in the form of off shoring. And the third wave is the wave that most SSOs are on, or at least want to be on, today. And this is the continuous improvement wave, largely defined by the use of data to self-improve.
An example of this is the help desk. Almost without question now, help desks log calls and log reason codes behind calls. This data is translated into information which quickly tells a story and illustrates the real problem over and above the perceived problem. Problem solving energy can be expended efficiently and in the right part of the business. Our relationship with data is changing and we are using it now as a tool.
6. A new breed of being – the global process owner
Think about it. Five years ago did you hear of such a title? With the appreciation of the benefits that come from end to end process treatment, comes the need for an end to end process guardian. Moller talks of these guardians as the ‘lighthouse’ looking out for best practice and seeing it’s implemented globally this year, and adhered to next year and for the next ten years after that.
Moller’s high regard for this position in an SSO is apparent when he describes a scene that a global process owner leaves as “looking like a crime scene”.
These global process owners now have control over the processes they are seeking to influence. This means people involved in the process globally are finally reporting to them, not their local shared services leaders. This control and ownership gives teeth to the global process owner and real momentum to the SSO.
Compare these six trends to those heralded in previous years and there you’ll have before you the various pathways crossing and peaking, mapping out for you the developments and trends of this ever developing industry which keep us guessing, debating and excited about where it will take us next.
If you are interested in attending the Deloitte Shared Services and BPO conference 2013, email Emma Lawson at email@example.com
* The biannual Deloitte Global Shared Services Survey 2011 in which 700 shared services centres participated.
** Photo credit: Peter Kaminski