Finnair: Customization through deeper involvement in the Airlines Industry

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Understanding clients’ core business helps Finnair’s SSO tackle the dilemma of balancing standardisation with customers’ increased desire for industry-specific specialisation.

Patrik, can you describe how the Finnair Shared Services Centre is set up?

Patrik Forsstr÷m: Shared services is mostly captive for Finnair. We have two captive centres, one in Helsinki, which is actually decreasing in size; and one in Tartu, Estonia, which is growing. In addition to this we also have some of the processes – mainly for passenger revenue accounting – outsourced. As far as the type of services we provide, we have the pure financial accounting processes as well as some financial services we provide for our travel agencies, called Travel Agency Services.

We take care of the full passenger revenue accounting process, the majority of which are provided by two subcontractors – one in Krakow, Poland and the other in Bangkok, Thailand. We also run some of our frequent flyer loyalty program support, and support our revenue management and pricing teams, so we have a broad variety of traditional financial accounting and some customer-related tasks.

The services we provide are strictly to the Finnair Group. We cover Finnair, the airline, and the different supporting functions – Finnair Technical Services, Catering, and so on. In addition, we support two of our group travel agencies, two business travel agencies, and a leisure travel service provider.

We chose Estonia because it’s really near Helsinki – it’s only a 45-minute flight from Helsinki to Tartu, and we have a good supply of well-trained young people in Tartu. Estonia is very competitive as a very near-shore option.

Are your customers global?

Most of our customers are in Finland, but if you talk about the airline of course we have sales offices all around the globe, and we provide support for all those locations, so we have quite a global approach.

Can you share examples of the kinds of benefits you’ve reaped through the shared services? I understand that you’ve achieved some fairly significant improvements?

On a general level, what we’ve achieved on all the services we re-engineered and moved to Estonia is a cost saving of 60-75% per transaction. So we have achieved quite significant savings using the service centre in Estonia compared to Helsinki. The journey started by first centralising the activities to two shared services, one for travel agencies and the other for the airline functions, and then we merged these two to one centre in Helsinki. The centre in Estonia is fairly new – about 18 months old.

We hear a lot about shared services being based on commoditisation, but today’s clients are looking for customisation. How are you tackling that dilemma at Finnair?

If you talk about financial services, one solution does not always fit all. If you do the purely transactional part – accounts payable – you’ll probably arrive at quite generic a solution. I think customisation, for us, could relate to Travel Agency Services, which are very specific tasks based on the business requirements of our customers. We have a similar setup for Passenger Revenue Accounting, where we do part of the business analytics for our customers and we really dive into customised, specific tasks for specific customers.

We’re really seeing a split, aren’t we, between the standardisation that drives shared services and the need to provide customers with a more specific kind of service relative to their own business. This speaks very much to "verticalisation," which is increasingly emerging. What is the connection between verticalisation and customisation?

That’s a very good question. Let’s take reporting; there is very standardised form of reporting, which has been in shared services for a while. When you move into business analytics, however, where you provide specific information based on data to your customer, where you actually learn about the customer’s needs, and where you take a more holistic approach in delivering information for specific customers so they can make business decisions … then you are moving into a customized world in the vertical domain, away from commoditisation. You begin to have a deep understanding about specific areas of your customer’s business.

Creating greater value for clients, is that it?

It creates more value, definitely. Actually, you take part in defining the value creation need with your customer. It’s a collaboration whereby, together with your customer, you find a solution to their need and then deliver the service. In fact, you might further develop the service based on your input to the customer. We are very deeply involved in our customer’s core business, in understanding it.

Presumably there’s a cost to be paid for this though?

Of course. You develop different skill sets for specific customer that you might not be able to use for other customers. Although I think that when you have a kind of business intelligence pool in your shared services, some of the tools and knowledge you gain can be used for solving other customer’s needs, and that justifies the captive shared services model.

I know BPO doesn’t currently play a big role in your model, Patrik, but do you get a sense that the BPO industry is preparing itself to offer increasingly vertical solutions to the marketplace?

Yes, I think so, based on discussions I have had. In our shared services, we have worked with some of the larger providers, like Accenture, and I believe that they are already providing some of these specialised services to their clients, as we do from our captive centre.

The issue about moving tasks to a provider is that you also lose some of the knowledge, the control. I think that we have still a lot to do in our captives, even though in the long run I think that more and more of the more business-specific tasks probably will go to service providers.

Patrik, it’s been a pleasure speaking with you. Thank you so much for your time.