Taking shared services to the next level

April 2013

Talking about shared services is like opening Pandora’s Box – the debates over which processes a shared service centre (SSC) should include are endless. No matter what your definition is, the concept is evolving from solely a cost saving exercise to one that delivers value across the organisation.

To support a corporate through increasing economic uncertainty, the shared services model is evolving from function-centric to one that is focused much more on business value, according to Joel Roques, Managing Director EMEA and Asia, The Hackett Group, speaking at a SunGard client event in London. Corporates are looking to improve visibility and control, process quality and overall business performance by implementing best practices around collections and payments.

Twenty years ago the first wave of shared service centres (SSCs) had one goal: cost reduction. They achieved this through lowering the cost per transaction, labour arbitrage, greater automation and process standardisation. These SSCs were focused on functions, transactions and unit cost reduction.

Since then the model has evolved to stage two: service level excellence. Many SSCs are now much more focused on accurate and reliable reporting, cash optimisation and reduced error rates. Corporates want a higher level of standardisation across the enterprise and performance technology improvements, effectively developing knowledge centres of excellence. This is the first step towards global business services (GBS), where the SSC is adding value to the corporate by bringing multiple functions inside.

Today there are a few “world class” corporates, as termed by The Hackett Group, which have reached stage three of the evolutionary process: strategic business enablement. In this model, the SSC provides enhanced decision-making, operational agility and resource optimisation. It is a service oriented standalone entity with an end-to-end process orientation and a commercial performance profile. Importantly, it is a centre for innovation.

According to The Hackett Group’s research, 59% of SSCs are in stage one, 33% have reached stage two and only 8% are truly strategic business enablers. Roques points out that it is very difficult to reach stage three, which needs a high level of maturity in the SSC as well as substantial support from within the organisation. “It doesn’t make sense for every company to aim for stage three because the effort to get there may prove to be too great,” says Roques.

The Hackett Group’s research indicates that world-class GBS organisations have nearly twice as many finance activities in their service scope compared with their peers: 43% versus 26%. In addition world-class organisations have moved nearly half of the finance function’s scope into GBS, including accounts payable (AP), cash application, collections, credit and customer billing. Less integrated are areas such as tax planning and capital and risk management.

Hand-in-hand with GBS is the concept of global process ownership, which covers the span of authority, process breadth and organisational reach. This addresses the end-to-end process, where there is a dedicated person responsible across functional boundaries. By thinking holistically about how each area impacts another, GBS can truly tap new sources of value and increasingly deliver business insight as they evolve.

But it also means changing the corporate’s governance structure, says Roques. “A C-level executive should be responsible for GBS and in charge of the budget. It should have a business unit under them, engaged in commercial negotiations with internal clients/stakeholders.” He adds that although necessary in the beginning, service level agreements (SLAs) tend to disappear at stage three because of the trust built up with internal clients.

Interestingly, GBS tends to attract the best in the organisation – with other business units continually trying to poach the talent. “It used to be that if you misbehaved, you were sent to the SSC,” says Roques. “But now it is seen as a hothouse of talent, with new best practice ideas and dynamism.”

This insight was first published on www.treasurytoday.com