Generation 2 shared service centers manage multiple processes, as well as an assortment of internal and external customer groups, using in-house and outsourced delivery vehicles and channels.
Shared services is now an established solution to some of the cost and service quality challenges facing most organizations. The use of shared services is rapidly maturing, and as organizations grow more confident in their ability to deliver shareholder value, many companies are beginning to look beyond the immediate benefits and are adopting a longer term, more strategic perspective.
For many organizations this is leading to:
• Shared service centers with a broader geographic and organizational reach;
• The creation and adoption of sourcing strategies to deliver point solutions within a process (e.g., invoice processing within the purchase-to-pay process) or end-to-end process solutions (e.g., the complete procure-to-pay process);
• An increase in the scope of services offered, with a noticeable general trend up the value chain away from the transactional processing areas into the more complex decision support areas, such as management accounting;
• An increasing use of technology, to remove or automate elements of the process or even the complete process;
• A focus on continuous lowering of the cost-to-serve while maintaining the service quality using Six Sigma techniques; and
• The desire to explore commercialization of the model to serve external customers.
As a result of such influences, there is a trend away from Generation 1 shared service centers, which adopt the simple, one-to-many or even many-to-many relationships. Instead, organizations are moving towards Generation 2 shared service centers, managing multiple processes, as well as an assortment of internal and external customer groups, all supported through a portfolio of in-house and outsourced delivery vehicles and channels.
This increasingly complex and multi-dimensional environment continues to prove challenging for organizations to manage on multiple levels. To ensure success, companies must understand how to deal with:
1. Management of disparate locations and cultures with the rise of mixed delivery models incorporating onshore, nearshore and/or offshore delivery locations overlaid by the use of captive and/or outsourced service providers.
2. Alignment of required outcomes when faced with competing proposed solutions from different parts of the organization.
3. Governance of the resulting plethora of solutions and service management frameworks, which result from the different approaches and solutions used in different parts of the organization.
4. Increasing customer expectations becoming ever harder to manage in an agile and responsive manner.
5. Compliance with a standard process in the face of competing business and customer demands.
6. Globalization, the increasing war for talent and the impact of wage inflation, attrition and costs of retention on the delivery vehicle.
7. The risks of potential service dislocation created by the adoption of multiple provider solutions across multiple geographies, organizations, processes, and applications.
8. Opportunistic service procurement leading to a multiplicity of services and providers with ownership embedded at many different levels.
9. The ownership of process elements that are essential to service delivery success residing outside the shared services management team.
10. Knowledge retention and the ability to manage the process with an understanding of where to locate process failures.
So how does an organization successfully manage the service conglomerate it has created, in order to continue to deliver shareholder value?
PA Consulting firmly believes that if organizations fail to adequately address these areas, they will ultimately fail in their quest to deliver shareholder value.
At a high level, the key areas for an organization to focus on are:
• Develop a shared service strategy;
• Optimize the sourcing decision with consideration of captive versus outsourced, as well as cooperation and collaboration across or within industries;
• Match the expectations of multiple customer groups with the optimization of the delivery model;
• Implement the right commercial, legal, and organizational structure; and
• Deliver a true partnership across process value lines.
This column will explore each of the above over the coming months, detailing what we mean and how the elements must interact to deliver a sustainable solution.
