Trends in shared services and outsourcing
If you’ve attended Deloitte’s annual Shared Services and Business Process Outsourcing Conference you know that the must-see presentation is led by Peter Moller, European Shared Services and Outsourcing Practice Leader, where he shares his insight on the trends in the market today.
We want to give a summary of the points he made this year as they remind us of what we’re working towards as we make purchase to pay more efficient and valuable.
1) Shared service centres are moving up the value chain
Previously, centralisation projects were focused on rules-based activities, such as matching invoices, paying suppliers, managing cash and reducing cost. Having achieved many of these goals and brought in continuous improvement and more functions to their SSCs, companies’ sights and expectations are expanding. Shared services are moving from transactional tasks to advisory services.
To deliver greater value, companies should also determine whether they have consolidated enough. Organisations with SSCs in place still have around 50% of their finance staff in the business. The reality we are heading towards is that organisations will only retain the CFO,Treasurer, Head of Analysis and Financial Controller in the business. Peter gave the example of Oracle, where 95% of its finance staff members are centralised.
2) Adoption of global business services
Deloitte’s 2011 global shared services survey found that 93% of respondents had Finance in shared service, 60% had HR, 48% had IT and 47% had Procurement. With these centralised the end game he described is to continue consolidation by eliminating duplication between these functions, and sharing tools and locations.
The rise of global business services also adds an attractive rung to the shared services leader’s career ladder as this is a C-level agenda item with a direct line to the CEO.
3) Outsourcers gain market share, slowly
Since Shell lit the outsourcing flame in 1991 with what was then Andersen Consulting, there have been about 850 finance outsourcing deals. More than half of these, however, have been signed in the past five years, which shows the initial slow burn.
During this time, outsourcers have built their skills, climbed the learning curve, designed tools, SLAs and dashboards, and nurtured talent onshore and offshore. On top of this, they are under pressure to continuously improve. It makes sense for companies to take advantage of their experience, approaches and drive, but so far the outsourcing penetration for F&A among large corporations is less than 20%.
Companies shy away from outsourcing for political issues, such as workers’ councils and government pressure not to outsource, in Continental Europe. They fear processes aren’t stable enough or are too complex, they fear they can’t be improved when outsourced, and fear losing control of their process knowledge.
The new approach is to adopt a hybrid model where transactional activities are outsourced and captive centres or centres of excellence take on higher-value services.
4) SSCs finding better ways to work in multi-ERP environments
Companies working with a single ERP are still rare. Most have a number of systems with different teams working on different versions. While consolidation is a good move, new tools are emerging to help people manage a multiple ERP environment.
5) Data turns into insight
Having delivered labour arbitrage, organisations are using the data they can extract from their SSCs’ activities to continue improving, and deliver greater productivity and value. Issue-tracking software on help desks helps to get to the root cause and greater visibility from P2P automation delivers detailed spend analysis and better procurement sourcing decisions.
6) Global process owners gain momentum and teeth
If a company has multiple shared service centres around the world they typically have a variety of approaches and technology choices. The role of global process owners is to look for process best practices and look for ways to implement them globally and keep them as standard. This is a permanent role and one that needs local resource to ensure things don’t change when they look away.