global business services · pdf filethe goal of a global business services strategy is not...

Global Business Services

Enhancing the Benefits of SharedServices and Outsourcing

Point of View

www.pwc.nl

November,2014

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New approach to managing global sourcing – oneintegrated global business services framework

A well-executed global business services strategy is distinctly different from shared services’ andoutsourcing strategies’ narrower focus.

As more organisations leverage global business service strategies to align business objectives and get

economies of scale, outsourcing is an important tool in accelerating andcomplementing shared services strategies. But executives should be wary of relying tooheavily on uncoordinated hybrid strategies. The goal of a global business services strategy is not only tosource globally, but also to leverage shared services, outsourcing and third-party investments in thebest interests of the organisation.

It is a new approach to managing global sourcing.

How is it different?• It identifies corporate objectives and encourages

internal functions to collaborate with each other andalso with third-party service providers to createbreakthrough, strategic operational capabilities forreaching the desired outcomes.

The result• Standing out in the market• Competitive advantage

Many organisations have shared services and manage outsourcing relationships intoday’s business environment. But most of them are yet to benefit from combiningshared services and outsourcing into one integrated global business servicesframework

Slide 2November 2014Global Business Services

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Agenda

1. The Evolution of Global Business Services

2. Successfully Implementing Global Business Services Strategies

3. Service Delivery Model

4. Global Business Services Governance Principles

5. Case Study


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1. The Evolution of Global BusinessServices


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Global businesses need a company-wide strategyto increase accountability and value

Shared services and outsourcing have matured in various ways. These are frequently addressed as part of aGBS strategy. In particular, customer service, IT, document management, finance and accounting, HRoperations and procurement are frequently part of organisation-wide efforts to reduce costs and refocus oncorporate strategies.

• Increasing consolidation and improvedefficiency and effectiveness.

• Lack of distinction in customertypes/requirements.

• Cost focus metrics and little chargebackmethod

• Functional, local/regional effort.

• Efficient and effective with high servicelevels, embedded accountability andsophisticated chargeback methods.

• Increased BU focus on core business

• Professional management combiningshared services and outsourcing.

• Strong vendor management capabilities.

• Benchmarked quality/pricing withnegotiated, measured service levels.

• Aligned business units

Decentralised

• Fragmented,scattered,inefficient andlack of customerfocus

Degree of accountability, management centralisation and organisational change

Op

er

ati

on

al

be

ne

fits

40+%

GBSFinance, HR, IT,

Procurement,etc.

Finance, HRIT

BPO/Offshorecapture labour arbitrage

Multi-function GlobalBusiness Services

Coordinatedin-housepractices

In-houseshared services

5-10%

10-20%

20-40%

TraditionallyFinance &HR SSC


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2. Successfully Implementing GlobalBusiness Services Strategies


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The 9 GBS commandments

1. Corporate strategy drives global business strategies

2. Adapt global business strategies to suit market changes

3. Invest in innovation to develop ideas and implement solutions

4. Create a culture of open problem-solving, root-cause analysis and leadingpractice sharing

5. Develop a comprehensive multi-process, multi-year plan

6. Get the right mix of professional, experienced staff for governance and focuson their career development

7. Get prescriptive with vendor management activities

8. The right people and culture matter

9. Get rid of silos by developing a cross-functional, cross-business unit globalbusiness services governance strategy


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The 9 GBS commandments will help meet anyorganisation’s strategic objectives

A company’s strategic objectives can be met in the fastest possible way by setting up aglobal business services strategy. This applies to any organisation across industries,specific strategic objectives, variety of reporting structures or alignment of functionalresponsibilities.

But in all organisations, the focus of executives must be on transformation.

The key factors or the ‘Commandments’ of the success of a global business strategy aregiven on the next page.

82%of organisations SSCs make asignificant contribution to theoptimisation of theorganisation as a whole


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Drive corporate strategy, adapt to changes in themarket and invest in innovation

Corporate strategy drivesglobal business strategiesGlobal business strategies mustfocus on enterprise strategies.Keep a tight rein on changeorders, ancillary decisions andstakeholder alignment.

Adapt global businessstrategies to suit marketchangesDespite the best efforts toanticipate needs for scalability,extensibility and flexibility,global business strategies mustconstantly adapt to what themarket demands of thebusiness. No matter themomentum of current strategiesor the effort required to realignglobal business strategies,executives must refocus globalbusiness strategies dependingon market demand. This willhelp optimise enterpriseobjectives.

Invest in innovation todevelop ideas andimplement solutionsWhile most organisations aredissatisfied with the amount ofinnovation they receive fromservice providers, the truth ismost organisations underinvesttheir own resources and effortsto innovate. Only if you invest ininnovation will you reapbenefits from it.

1 2 3


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Solve problems early on, develop comprehensiveplans and get the right people

Create a culture of openproblem-solving, root-cause analysis and leadingpractice sharingA global business servicesstrategy does have its own shareof issues which you may facewhen you try to set it up andkeep it running. Encourageopen, early disclosure ofproblems. Take a problemseriously before it gets too big tohandle. Focus teams on root-cause analysis and sharing bestpractices. Though the twoprocesses may be dissimilar, theteams managing them can learna lot from common transition,management and contractingleading practices.

Develop a comprehensivemulti-process, multi-yearplanWell-planned and executedglobal business servicesstrategies don’t happenovernight. So don’t be over-ambitious and take on morethan you can handle. Develop atwo- to three-year plan tosmoothly achieve objectives.

Get the right mix ofprofessional, experiencedstaff for governance andfocus on their careerdevelopmentThe governance team drives theexecution of global businessstrategies. Acquiring the rightmix of strategic thinking,operational focus andrelationship management skillsis critical to success. You need tocreate clear career developmentopportunities and open newpaths for qualified staff.

4 5 6


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Manage vendors well, collaborate among diversestakeholders and get rid of silos

Get prescriptive withvendor managementactivitiesPoor-quality vendormanagement activities led bybusiness process owners marmany global services strategies.Governance organisations arenot ivory towers. They mustmake sure that business unitsare managing service providersconsistently and reliably bydeploying and monitoringcommon processes.

The right people andculture matterCollaboration among diverseinternal stakeholders canhappen by assigning the rightpeople to lead global businessservices strategy development.But change doesn’t stop with theleadership. It must percolate toall employees. Each employeemust increasingly rely onhis/her counterpart in differentcompanies to devise newstrategies, solve problems andwork collaboratively.

Get rid of silos bydeveloping a cross-functional, cross-businessunit global businessservices governancestrategyA strong governance model isnecessary for business processowners to make the changesnecessary that are good for theentire enterprise.

7 8 9


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3. Service Delivery Model


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Strategic single points of contact and strongplanning build strategic partnerships

One of the most important objectives of a global business services team is to be a strategicpartner to the business. Strategic partnerships create a healthy tension and synergisticbenefits once both parties have visibility of each other’s objectives and opportunities. Buttwo critical investments must be made for this:

Collaborative, strategicsingle points of contact

Business-relevantplanning processes

Strategicpartnerships


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Invest in collaborative, strategic single points ofcontact and strong business-relevant planning

Collaborative, strategic single points of contact are essential investmentsPersonnel decisions fundamentally drive relationships. To reduce risks, many organisations assign either asubject matter expert or a project manager to strategic partnership roles, but they may not have therelationship skills necessary to manage strategic business leaders and service provider management teams.Two things can earn them a strategic seat in their customers’ leadership circles:1. Highly collaborative management styles2. Desire to provide business solutionsThese single points of contact can also represent their customers in the internal planning processes.

Business-relevant planning processes build the foundation of a strategic partnership.The fundamental relationship management tool of a global business services team is a planning processdriven by business objectives. A strong planning process creates both value and vision, based on whichboth organisations can invest and take decisions. The end result is to deliver required service at areasonable cost. GBS organisations that deliver value to their customers become strategic partners.

Strategic partnerships


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Any company’s backbone is its services deliverymodel

The service delivery model of an organisation is key to delivering services to internalstakeholders. It can make or break any organisation’s value or credibility. While the rightmodel can add value, the wrong one can lead to a complete breakdown.

The following leading practices can guide you in setting up the most innovative andsuccessful GBS organisation:

Consolidateservices

by locationand service

provider

Providestandardbusiness

architecture

Deliverservices

as aseparatecommerc-ial entity

Mix localand

globaldelivery

Use labourarbitrage and

offshoreopportunities

smartly


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How to get the right services delivery model

Mix local and global delivery

Don’t rely too heavily on local delivery as ithinders standardisation and limits cross-business efficiencies. But relying entirely onglobal delivery may alienate local customerswho may need customisation based on localrequirements. The most effective and efficientservice delivery models create a perfect balancebetween global delivery with regional deliverycapabilities allowing for local customisation incases where it is mandated.

Consolidate services by locationand service provider

While services may be organised bycustomer segment or product, leadingorganisations frequently centralise basedon geography. Organisations thatdistribute functions across multiplelocations can be unnecessarily complex,except when intended to provide regionaldelivery capability. If organisation chooseto outsource a function, it should assignthe entire end-to-end process to a singleservice provider. Splitting a businessfunction across multiple service providerscan limit standardisation, increasemanagement overhead and decreaseownership.

Use labour arbitrage and offshoreopportunities smartly

Leverage offshore labour for operational andcost efficiency. It is not always about costreduction. Offshore resources can also provideimproved access to skills and languagecapabilities, which are importantdifferentiators for global businesses.

Deliver services as a separatecommercial entity

Running GBS as a stand-alone cost orprofit centre forces has several benefits:

• Focus on both customer-focused andoperational efficiency perspectives

• Strong visibility of business processand technology solution costs andperformance.

• High level of transparency

Provide standard business architecture

In the same way that IT organisations use ITIL methodologies to focuson building a standard service catalogue, a GBS organisation mustdeliver a standard set of published solutions available to all itscustomers. For example, all customers who need an imaging andworkflow solution should leverage the same service, using the sameservice provider.

Servicesdeliverymodel


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Some must-dos for an effective services deliverymodel

1. Appointing a single, global end-to-end process owner provides leadership and commonvision to a process. The process owner is responsible for all process and technology investmentdecisions for the process.

2. Develop and implement standardised processes, policies and procedures. Whether aprocess is used by different business units or regions, the methodology should remain the same.

3. Maintain a constant, strong focus on process efficiency and quality improvements.

5. Provide self-service visibility and analytics to internal stakeholders. Beyond providingvisibility to a global business process owner, GBS needs to make data readily available to itsinternal stakeholders for using in analyses and strategic decision-making.

4. Process owners should focus on eliminating unnecessary and automating work.


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4. Governance Principles


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The challenges are many and varied…

Tackling complexityWhat began as a small initiative has grownto multiple (frequently inter-related)processes, requiring more disciplinedmanagement.

Tackling an increasingly globalised environmentExpanding geography, more providers and more deliverycentres increase the number of diverse stakeholders thatgovernance teams must manage. The simpler days ofmanaging a stand-alone shared service centre are long over.

Escaping from a singular focus onshort-term cost reductionThe cost impact is only part of the long-termsolution, so you must look elsewhere forvalue. Whether it was the economies of scalebrought about by functional centralisation orthe offshore-based labour arbitrage, cost wasking because most early successes were borneby cost-reduction initiatives. But focusingpurely on cost has limitations. So to addvalue, you must emphasise on improvinginsight or enhancing revenue.

Tackling a deficiency in management skills:Organisations realise that hybrid (blend of sharedservices and outsourcing) and shared service modelsoutperform outsourcing on a number of criteria, butmanaging them requires broader skillsOur research has settled the debate on comparative outcomescreated by shared services and outsourcing initiatives. Outsourcingprogrammes ensure the best savings because of offshore labourand forced internal stakeholder compliance with contractminimums. In all other areas, shared service programmes providebetter results, particularly in terms of quality and innovation. Butgovernance teams who are used to ordering service providers tocomply with their contracts or building consensus among internalbusiness units on a standardised service catalogue find managingboth simultaneously considerably more challenging. Gettingservice providers and shared service centres to focus oncollaboration and delivering end-to-end processes is a challenge.

Tackling underutilised shared servicesand outsourcing effortsWith such a large proportion of processes stilloutside shared services and outsourcing, thevast majority of organisations have theopportunity to add significant scope and scale.


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… but can be addressed by the right governanceoperating model

This model has three critical elements.

1. The GBS governance team is responsiblefor defining and building services byleveraging global sourcing alternatives,operating model transformation andlocation strategies. This responsibilitycreates direct accountability to corporatestrategy instead of individual business unit’sgoals.

2. The GBS governance team is responsiblefor performance management andinnovation. This gives the teamaccountability for driving consistent resultsand raising performance expectations.

3. The GBS governance team is accountablefor servicing internal and externalstakeholders. This means the teamfocuses on customers and does not live in anivory tower.


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Structure of a running organisation

GBS

ExecutiveOfficer

ServiceManagement

StakeholderManagement

ServiceDefinition

ServiceProvider

Management

PerformanceManagement

Innovation

ServiceManagement


ServiceDefinition

ServiceProvider

Management


Innovation

ServiceManagement


ServiceDefinition

ServiceProvider

Management


Innovation

Innovation SourcingFinance &

Performancereporting

Executives are recognising the need to:• Create more strategic global sourcing

objectives;• Exercise more control over global business

services decisions;• Drive more innovation from service providers;

and• Manage increasingly complex contracts more

tightly.Our research shows that success largely dependson the degree to which these responsibilities, rolesand processes are formalised in the GBSorganisation.

Ser

vice

1

Ser

vice

2

Ser

vice

n


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5. Case Study


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GBS as a key enabler to leverage a FMCGcompany’s global scale

The organisation has experienced considerable growth in recent years. In line with the company’sstrategic business priorities to capitalise on this growth, the global business services (GBS)organisation is a key enabler to leverage the company’s global scale. GBS aims to deliver to OperatingUnits (OUs) selected business services of the highest necessary quality by leveraging on its scale thatwill, in turn, enable the OUs to focus on consumers, customers and products.

The GBS running organisation has carried out three improvement projects, which are distinct innature, but linked and interdependent.

Finance Shared Services(FSS)

The central provision oftransactional finance business

services to OUs via a cross-border captive finance sharedservices centre in CEE, withan outsourced back office in

India.

Global Procurement(Trading company)

The provision andtransformation of

procurement throughreinforcing existing

procurement modelsand introducing new Centre-Led and Buy-Sell purchasing

models as well as byproviding central

procurement services to OUsvia a Netherlands-based legal

entity.

EnablingInfrastructure

The provision anddeployment of a focusedsuite of solutions at both

global and OUs levels witha formalised data

governance, supported bydata solution, data

readiness tooling andorganisation blueprint.


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In 2014 the GBS organisation comprisesProcurement, Finance and IT, and is expanding

Poland (Kraków)

Servicing: Europe and Global Functions

China (Guangzhou)

Servicing: China (WIP)

India (Hyderabad)

Servicing: Europe

Brazil (Jacarei)

Servicing: Brazil

Mexico (Monterrey)

Servicing: Mexico

The Netherlands

GBS Finance

Global Procurement

Global Informati0n Systems

Finance Regional SSC

Finance Global Back office

Finance Local SSC

Global Procurement Company

Global Information Systems

GBS Finance *

*GBS Finance includes Process Innovation and Global Accounting & Reporting


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Things that work well in the FMCGs servicedelivery model

The Chief Business Services of the company is part of the ExecutiveCommittee which ensures relevance and authority.

The company has an integrated portfolio management programme toevaluate projects in light of the GBS strategy.

Service Delivery Model

1. Consolidates services by location and service provider

2. Delivers services as a separate commercial entity

3. Provides standard business architecture

4. Uses labour arbitrage and offshore opportunities smartly

Service Delivery Model enablers

1. A single, global end-to-end process owner

2. Standardised processes, policies and procedures

3. Focus on process efficiency and quality improvements


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Appendix


This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You shouldnot act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty(express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permittedby law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty ofcare for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or forany decision based on it.

© 2014 PwC. All rights reserved. Not for further distribution without the permission of PwC. "PwC" refers to the network of member firms ofPricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network.

Your contacts at PwC Advisory The Netherlands

Wouter HoffDirector

Thomas R. Malthusstraat 51006 GC | AmsterdamTel.: +31 (0)6 22 38 67 81E-Mail: [email protected]

Iris YatesDirector

Thomas R. Malthusstraat 51006 GC | AmsterdamTel.: +31 (0)6 )6 51 44 63 76E-Mail: [email protected]

Sources

This Point of View is partly based un a number of papers issued by HfS Research andPwC.

The Evolution of Global Business Services: Enhancing the benefits ofShared Services and Outsourcing by Phil Fersht , CEO and Founder of HfSResearch, Tony Filippone, Research Vice President, Governance Strategies at HFSResearch, Charles Aird, Managing Director at PwC and Derek Sappenfield, Director atPwC.

The Three Tenets of Global Business Services Execution: Customeralignment, Accountability, and Economies of Scale by Phil Fersht , CEO andFounder of HfS Research, Tony Filippone, Research Vice President, GovernanceStrategies at HFS Research, Charles Aird, Managing Director at PwC and DerekSappenfield, Director at PwC.

Global Business Services: Getting Strategic About Global SourcingGovernance by Phil Fersht , CEO and Founder of HfS Research, Tony Filippone,Research Vice President, Governance Strategies at HFS Research, Charles Aird,Managing Director at PwC and Derek Sappenfield, Director at PwC.

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