3 Megatrends from the 2015 Shared Service Summit Melbourne: Economic Imperative!, Global Business Services has arrived and Untapped Value!

I was lucky enough to participate in this years Shared Service and Outsourcing Network Summit in Melbourne this week.   I came away intrigued and inspired at the further opportunities for ANZ businesses to deliver tangible value from shared services and take steps towards integrated Global Business Service Models.  I saw three megatrends:

1) Economic imperative: the current economic and competitive climate makes optimising shared and Business Services essential

An excellent presentation by Huw McKay (Senior International Economist, Westpac) highlighted the challenges the Australian economy faces in the coming years.  to adapt Driving further value from shared/business services will be an important part of cost optimisation in Australian business.  In my opinion, this cost pressure will also drive an increased focus on offshoring / outsourcing and ensure clients drive a hard bargain with their vendors!

Some of the key economic point I took away included (and there were many more in this excellent session):

  •  The Australian Dollar is likely to lose value against the US Dollar and only be worth $0.73-$0.76 in 15/16.  Clients looking to lock in/renegotiate existing contracts will follow fluctuations with interest!
  • Forecast Capital expenditure in the Australian economy is trending downwards toward 2016, with Services (which form the majority of our economy) switching from growth to contraction.  A clear bellweather of sentiment in the economy!
  • Across the Asia Pacific Huw highlighted some interesting insights relating to India.  Indian inflation and wage increases have been lower than many other offshoring destinations.  The market has reacted favourably to the appointment of VR Iyer as head of the Bank of India.  Indeed Wipro, Infosys and TCS have been holding wage increases for their staff to 2% – a signal that India will remain a cost competitive destination for the forsee-able future!

Global Business Services models are becoming the logical next step for Australian organisations regardless of scale

I chaired an expert panel with representatives from BP, ANZ Bank, Rio Tinto and MMG to evaluate the relevance of Global Business Service models for Australian businesses.

The largest organisations in Australia, which include RIO, BP and ANZ have all established multi-tower business service models providing a range of support and customer facing functions.  They are continuing to evolve these organisations and due to competitive and economic pressures are expecting to seek further ways to deliver value, not just from efficiency gains, but from effectiveness and delivering  value-added insight for the business.  Some key points made that I found interesting:

  • Ken Jefferd (BP’s Leader of GBS ANZ) and Marcantonio Maglione (Global Process Champion Finance from Rio Tinto) highlighted the “hybrid” nature of their business service models with services delivered by onshore, offshore and outsourced teams.  They stressed the importance of effectively communicating, collaborating and continuously working with remote/offshored teams to maximise value and relationships.  Marc also highlighted the importance of ensuring that work is appropriately allocated across BPO vendors and they stick to their defined scope.
  • But scale is not a barrier to GBS!  Lara Higson (GM Business Services) from MMG demonstrated how an Australian business can make a Global Business Service model work with as little as 100 FTE across 4 global locations.  Key factors in this success include Executive sponsorship, alignment to company strategy and common governance/oversight to ensure that each shared service acts in a coordinated way.
  • All of the speakers in the panel discussion highlighted that GBS was an ongoing journey and additional business value continuously needs to be found.
  • David Cecil (Group General Manager GBS at ANZ) highlighted the importance of the alignment of GBS vision, strategy and execution to the overall business strategy.
  • Ken Jefferd made an important distinction.  BP look at internal stakeholders within business units as partners, not customers – for them this is an incredibly important distinction and permeates in the nature of relationship that they have with the business.
  • The speakers highlighted that each of their businesses were working towards delivering further value from GBS – through provision of greater analysis, insight and more value-add activities – there was agreement that there is a lot of further opportunity to do this.  All are moving up the value curves across each of the functional areas in scope.
  • Marc Maglione from Rio Tinto highlighted the importance of Global Process Ownership and the importance of organisations shifting their focus to  process to gain maximum value from Business Services.

Untapped value: opportunities abound for Australian shared service organisations to improve.  Some great pointers on on future direction were on display

What really struck me walking around the conference was how much latent value organisations in Australia can extract from shared services.  Below, a few factors that reinforced this sentiment:

  •  Only 9% of the attendees at the conference considered their organisation to be ‘top quartile’ in terms of operational excellence.  Whilst there may be a few harsh markers… this says it all.
  • Shared Service first generation stalwarts such as Accounts Payable automation remains a major topic of interest for attendees at the conference. Mark Spazani (Finance Manager Shared Services for Victoria Police) and Cynthia Singh Head of Business Services at Downer EDI, and previously Arrium) highlighted the value that can be optained by moving away from paper, increasing EDI and developing an optimal AP transactional framework to ensure invoices are treated appropriately (EDI, P-Card, Three Way Match etc).
  • Clare Lezaja (Finance Director Retail products at Telstra) highlighted the importance of an effective shared service centre as part of enabling Telstra’s redefined operating model.  Without an effective and efficient shared service group (a hybrid onshore/offshore/outsourced team), Telstra will be unable to shift the majority of the focus of their finance function from value preservation to value creation.  Telstra are currently building their finance business partner capability to capitalise on the value creation opportunity.
  • I loved the vision that Morag Eyles (Head of HR Shared Services, ANZ) and team have painted for their team.  With a key factor being helping the business predict the future. For me, predictive analytics and insight will be key factors in all successful Business Services teams delivering value as we move forward.
  • ANZ also demonstrated that Recruitment process offshoring can work.  With Australian based staff coordinating the process with end customers with  Philippines (search/screening) and Indian Based teams (checking e.g. references, financials, and contract completion).  Whilst ANZ are on a continuing journey, significant value and customer satisfaction has been delivered thus far in delivering their more than 17,000 annual positoons.
  • And finally… Robotic Process Automation, its coming!  It was great to hear from Nigel Clarke (Assoicate Director – Global Accounts at Tyco) that Tyco and their outsourced partner IBM are evaluation Blue Prism’s robotics solutions for use in their business services organisation.  I’m excited about the possibilities of Robotic Process Automation (RPA) and can’t wait to see the results.

All in all, I think the future of shared and Business services in ANZ is both challenging, exciting and critical for ongoing business competitiveness.  Watch this space!

If you have insights, takeaways, thoughts from the conference or just alternative perspectives I’d love to hear about them at eanevans@deloitte.com.au .

Global Business Services – Six reasons Australian business has to sit up and take notice

© Ean Evans 2014

Global Business Services organisations have become ever-present in global businesses such as Mars, Proctor & Gamble, BP, Diageo, DHL/Deutsche Post and Siemens. They have delivered significant tangible benefits to these organisation.  I believe these models are highly relevant for Australian businesses and that we will be seeing more of these operating models in Australian businesses and the public sector in the coming years.

 

Is there more to it than just creating a snazzy ‘Global or Group Business Service’ title? 

 

At their core, Global or Group Business Services (GBS) represents a marked shift in how organisations structure their support functions.  In essence, rather than a mixture of separate functional siloes, each with a variety of shared service centres and/or outsourcing arrangements, GBS models deliver value through integrating governance and common business practices across the entire organisation.  GBS organisations typically demonstrate the following characteristics:

 

Multi-function: incorporating multiple functional processes including the typical candidates of IT, Finance, HR, customer service and operations but also industry specific functions such as claims processing (Insurance) and brand design services (Fast Moving Consumer Goods).  Importantly there is high degree of end-to-end integration across processes and GBS teams are often aligned along end-to-end process lines rather than functional lines.

 

Multi-location: typically have multiple locations to deliver services each tailored to the enterprise’s needs.  Common models include: hub-and-spoke, a ‘follow the sun’ network of global centres or the bulk of activity in one (or more) low cost Asian hubs.

 

Multi-sourced: The combination of traditional shared services, outsourcing arrangements and Centres of Excellence within their operating model.  The more sophisticated organisations leave the decision around sourcing choice to the GBS team, whilst holding them accountable to robust service level agreements.  Vendor management techniques are typically common across multiple outsourcing arrangements.

 

Multi-business: Serving a range of internal business customers, selecting leading practices from across the entire organisation and providing them to all business units.1

 

There is lots of good literature on Global or Group Business Service models.   To find out more, see Deloitte (http://bit.ly/1wMX7zQ), International Services Group (http://bit.ly/1vgrCn0) or the Association of Chartered Certified Accountants (http://bit.ly/1BIDTU9).  Definitions aren’t however the focus of this blog.  I’m more interested in what practical GBS lessons Australian businesses can learn and why CFOs and business leaders need to consider them.

 

 

Six practical GBS lessons for Australian business

 

I see Group or Global Business Services as a natural evolution from shared services and functional process outsourcing.  Done right, GBS will help Australian businesses more effectively achieve scale economies from common processing, governance structures and technology enablement tools. At the same time it can deliver operational excellence to internal customers and third parties in a consistent, scalable fashion.

 

I see six key GBS lessons that are applicable to Australian businesses:

  1. A shift in mindset to end-to-end processes:GBS teams are often a catalyst for an organisation’s switch from traditional functional demarcations to true end-to-end process alignment.   This is obvious when you look at the composition of many GBS teams – instead of classical share service team and process groupings such as HR (employee administration etc), or Finance (Accounts Payable etc) GBS organisations are usually defined by process groups such as Hire-to-Retire or Purchase-to-Pay.  This is deliberate.  Typically they also nominate an end-to-end global process owner governing process standardisation and aligning continuous improvement activity that is supported by cross-functional teams.  This will be a major shift in mindset for many Australian businesses and will challenge CFO’s, CHRO’s, CPO’s and CIOs as their teams’ focus and reporting lines evolve.

 

  1. Its more than about just cost saving, but this remains a key driver:All the classic shared service and outsourcing benefits apply:

 

  • Proctor & Gamble’s GBS mantra is enlightening… “The GBS model is all about the AND. We want lower costs AND improve quality AND innovation AND productivity”.  This team also delivered more than US$800m of benefits to its customers.2
  • In another example Siemens’ GBS leader summarised one of the primary drivers for GBS as doing more ‘faster’ and enabling faster deployment of technology and solutions3.
  • In Australia, I’ve seen organisations in the public, not-for-profit and private sector moving to successful Group Service constructs with as few as 150 FTEs across multiple end-to-end processes.  Australian business leaders should be wary however, GBS teams at the smaller end of the scale mean that the implementation needs to be effective first time – the business case may not readily support a ‘second try’.

 

  1. The increased importance of effective vendor management:Australian businesses are seeing an upsurge in outsourcing with many ASX companies outsourcing components of their back office, customer service and operational activity.  This trend means Australian organisations need to learn to equip themselves to effectively manage multiple vendors onshore and offshore and ensure quality and efficiency are delivered hand-in-hand.  As an example,  Suncorp as part of its GBS journey has a central ‘Partnering’ team of more than 25 permanent / contract staff to consistently manage its multiple onshore and offshore outsourcing vendors across Finance, HR, IT, Claims etc.

 

  1. Functional careers and operating models will change: GBS models will challenge traditional back-office functions like never before.  Functional leaders have to re-evaluate their team’s evolving role and pass responsibility for some process delivery to the GBS team.  This delivers a great opportunity for Functional teams to focus on value-added business partnering and business decision support – it shouldn’t be squandered.  At the same time, effective career path development and tailoring of talent development in GBS teams needs to be a key focus.  For Australian businesses an additional challenge will be securing leaders with experience of world-class GBS models to maximise the chances of effective implementation first time.

 

  1. Common governance will test leaders’ ability to influence and drive change:  A challenge particularly for businesses used to high degrees of autonomy and federation – not uncommon across the Australian business landscape.  As Deloitte’s Peter Moller in the UK has stated: ‘Trying to implement finance shared services is like herding cats. And if you’re trying to implement GBS initiatives it’s like trying to herd cats, sheep, goats, dogs at the same time.’.  A strong vision, exceptional leadership and CEO commitment and Board Support is likely required to drive and sustain the change required.

 

  1. Australian businesses can choose to ‘leapfrog’ stages in organisational development: Generally the trends in shared services and outsourcing evolution flow from West to East (from the USA, through Europe and onwards and into the smaller APAC markets such as Australia and New Zealand).  Organisations’ such as WorleyParsons have managed to ‘leapfrog’ by moving directly to Global Business Services and setting up their first significant shared service as a multi-function Global Business Service centre of ~400 seats in Malaysia.   Opportunities abound for organisations and leaders who are bold!

In summary, Global Business Service models can provide significant benefits to Australian businesses who commit to the journey and make GBS meaningful, rather than just a ‘snazzy’ title…   I’m excited at having the chance to watch and support organisations make the most of this opportunity.

 

If you have queries about Global Business Services please contact me directly at eanevans@deloitte.com.au or on +61420546741.

 

Sources:

1 Adapted from Deloitte’s white paper GBS – Better Together.

2 https://www.pg.com/en_US/downloads/company/PG_GBS_Factsheet.pdf

3 How Siemens transitioned to global business services – Michel de Zeeuw, CEO Global Shared Services, Deloitte Shared Service and BPO Conference 2013.