Trends in shared services and outsourcing; these concern the development of governance structures and new organizational models...
The key trend with regards to shared services governance is the increased use of the Global Business Services model. The last 12 months has seen more and more companies move away from functional ownership of shared service centres, and towards the development of a separate governance structure for GBS, which owns all the services that are provided by the shared service centres.
The new governance structure typically includes a seat for GBS at the leadership table, and illustrates companies considering shared services as a strategic lever for an organisation. This governance model allows a strategic oversight of all processes within shared services, moves towards end-to-end processes rather than functional processes, and provides one voice to the leads in the business divisions.
Global Business Services is generally set up as an independent legal entity, which is an increasingly common trend for organisations that wish their shared service centre to have a true service and process orientated culture, a unique brand, and the commerciality to drive change, improvement and transformation.
In recent Proservartner research, we noted that over half of shared service centres (53%) had more than 1 function in their shared service centre.
There is a definite trend around multifunctional shared services, with Finance being the particular function that organisations tend to migrate first into a shared service centre environment. In a number of shared service centres, once the Finance function has been migrated and stabilized successfully, organisations have more comfort in bringing further support areas (ie Purchasing, HR or industry specific functions) into scope.
An increasing trend is the use of the “pilot” model for sourcing, where organisations tender for a limited amount of scope and give a medium term incentive to the provider of winning the remaining function. This is particularly common with Finance BPO, with the migration of AP activities preceding the migration of the rest of the function.
The benefit of this approach is that the provider focuses on a comparatively small amount of scope, providing a high level of service. This enables an organisation to prove the concept of BPO internally, and significantly eases the change management challenge through stakeholders more easily influenced and senior buy-in more easily achieved.
Hybrid Shared Service Centre
The days of “make versus buy” have evolved, with “make and buy” solutions becoming increasingly popular. Large multinational companies across industries, such as UBS, BP and Diageo, recognise the advantages of leveraging the capabilities of external providers, with the cultural and data advantages that a shared service centre provides.
There are currently three types of hybrid models that exist in the market:
1. Geographic Hybrid: Models where a particular geography may have outsourced and another intentionally keeps its services within a captive shared service centre. This enables a clear comparison for many processes between what is provided by the captive shared service centre and the outsourcing provider.
2. Scope Hybrid: Hybrid models that are separated by scope with non-core, repeatable, measurable, and predictable activities migrating to a outsourcing provider, and activities that are core to the business or cannot be migrated due to data restrictions or culture remaining in a captive shared service centre.
3. Intermediary Hybrid: Fluid hybrid models where the captive shared service centre is the intermediary step for processes prior to outsourcing to the provider. This allows the internal change management required in pulling activities away from the divisions / subsidiaries to be completed; the activities stabilised; and the processes understood prior to transferring to the outsourcing provider.
There has been a definitive increase in the use of transactional pricing methods for shared service centres charging back to their internal organisations, with the trend being to move from a traditional, FTE-based mechanism of allocation to one where the price to the divisions is based on the number of transactions that are taking place for that particular service.
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