Most large enterprises have adopted Shared Services to extract significant savings from their operating expenses. Yet, as the model has become part of the business mainstream, the sharp competitive edge it once provided has dulled. When all of your competitors are using Shared Services to drive out costs, where is your leverage?
Moreover, many companies have reached the point of “diseconomy of scale,” where the cost of removing expenses exceeds the value of the reduction. Others have found that dramatic decreases in cost structure have limited their ability to develop new products, expand to new markets, conduct M&A activities, or support their risk and compliance requirements.
Global Business Services, or GBS, is a philosophy supported by an operating model that seeks to extend the value from Shared Services beyond traditional cost reduction. Evolving from Shared Services to GBS can help you broaden strategies to support top-line revenue growth, improve customer retention, and fuel product development. In short, it can help you recapture your competitive edge.
The Competitive Limits of Traditional Shared Services
Shared Services functions provide a range of benefits, but the overriding one is cost reduction achieved by consolidating and standardizing back-office processes in a low-cost delivery center. Over time, the model has seen changes, but the driver has always been the same—addressing costs through standardization, simplification and/or labor arbitrage.
Given the nature of the work, Shared Services functions accrue abundant transactional, customer, and product data— data that traditionally is used almost exclusively to cut costs. With GBS, however, this wealth of information is used more creatively and productively. Consider the maturity curve illustration on page 2.
The baseline for the curve is Functional Shared Services, which focuses on transaction centralization and standardization of a single back-office function, such as HR, F&A, or Supply Chain. At Level Two, Multiple Functional Shared Services leverage the investments made in single-function Shared Services by taking on additional back-office functionalities.
At Level Three, the Shared Services organization is integrated into the company’s value chain and begins to focus on creating value from its cache of transactional data in a work culture of continuous improvement. This is the essence of GBS.
While this evolution is natural and logical, it doesn’t happen with a snap of the fingers, which is why most companies have yet to make the transition. Adopting the GBS philosophy of leveraging more value from Shared Services is a start, but you must also adapt your operations—people, processes, and technology—to create an operating model that supports value enhancement.
That means employees will need to be trained to analyze data gathered during the processing and turn it into insights that will create actionable information. Processes will need to be designed to capture key value-add transactional data, and supporting technologies must have an enterprise focus that results in reports and analytics that give business managers new decision-making insights.
Capitalizing on GBS
So, how can an organization rekindle a competitive advantage with data previously used solely to measure and cut costs? There are four key areas where GBS can have an impact: customer, vendor, employees, and reporting.
Let’s look first at the customer dimension. Your Shared Services organization collects a tremendous amount of information on customer payments—data that traditionally is used to create transactional cost efficiencies such as the number of accounts receivable issues that are resolved on a monthly basis. But that data also holds beneficial clues to customer behavior.