Big Changes Hitting Shared Services

Everest Research advises: work with providers whose areas of interest are aligned with your organization’s, such that their investments are going to reinforce what you’re trying to achieve for your business.

SSON’s editor, Barbara Hodge, speaks with Eric Simonson, Managing Partner, Research, Everest Group

Eric, let’s start with what’s been happening in the shared services market over the last two years. What kind of a shift in strategy are you seeing?

Eric Simonson: I would say the last two years have presented a tougher business environment for simply everyone. People have to think more aggressively about what it means to optimize versus just scaling. I think we’ve also seen the emergence of increased connectedness across organizations. Communications are improving and, as shared services matures in many organizations, it’s touching more of the business.

There is a push now towards optimizing that "connectedness", and as a result we are seeing a shift from an activities to a process view. That in turn requires a greater understanding of technology.

If companies are pursuing this shared services strategy to create added value, what are the biggest hurdles that they face internally?

I think the first one that almost everyone faces is that organizations are complex. There’s a lot of pressure to optimize. Everybody wants to be adding value, and re-drawing boundaries or responsibilities is generally a bit vague, and it’s something that happens slowly. I think that has been a challenge, in particular as shared services may be stepping beyond its original mandate.

The second thing that I think is lingering out there is this next wave related to technology. The "people and processes" part has received a lot of attention and has been optimized to a large extent; now people want more ways of interacting with the services they already have – through social media, mobile apps, etc. And so the need for a change in technology and the proliferation of technology skills intersecting with the business processes, I think, also creates a challenge.

We hear a lot about global business services, Eric. But we don’t see that many true global business services. Why do you think that is? What’s preventing more widespread globalization?

For many organizations, internal service delivery is reflective of how they operate the rest of the business, how technology systems are implemented, how business units align, etc. And as you try to go for a true global business services model, you run firmly into those organizational scenarios. It’s a challenge to acquire the mandate, and rally the energy to create the necessary organizational alignment. Some can navigate it pretty well but, for most, it’s a real change as to how things are done, and in most cases, it creates a lot of complexity, challenging long-held concepts of how the organization itself operates, regardless of whether you’re dealing with traditional shared services functions or not.

There’s a lot of new technology moving into this field. What technologies do you think are having the biggest impact on shared services operations at the moment?

I guess my perspective would be that there’re obviously many bits and pieces of tools and point solutions that will always be popping up and that will be used to optimize different things. The broader theme is: what will be the role of Software as a Service solutions? Some of those are potentially replacements for previous functionality within ERPs; others are complements. Those have to be thought about differently. And in addition, the integration of those types of solutions into legacy systems, or even across the SaaS options, becomes a new challenge. So the question is really: when does software as a service work, and what’s the real impact of those solutions, as the knock on effects become clear?

What about the provider side, Eric? How are capabilities evolving?

What we’ve seen with the providers is a greater understanding that moving beyond labor arbitrage is absolutely essential, and, as a result, they need to develop a new "secret sauce". That may relate to tools they are developing, or through an increased industry orientation, through different skill sets, and different frameworks.

As providers are trying to differentiate beyond labor arbitrage, which has provided the bulk of the benefits for the last half a decade or so, I am seeing a lot more differentiation. Not every provider is going after every industry, and industries have sub-segments, so it starts to become a lot more distinct in terms of how they are specializing. And these investments, which are no longer fundamentally about setting up a delivery centre and getting a recruiting pipeline going, have to become more focused. So you’ll have fewer providers in these specialized areas, but a much greater and deeper specialization there.

From a client’s perspective, it would be important to make sure that you’re working with service providers whose areas of interest are aligned with your organizations, such that their investments are going to reinforce what you’re trying to achieve for your business.

Eric thanks so much for your time. We look forward to hearing more from you during Shared Services & Outsourcing Week 2012 in Orlando.

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