How is your SSO proving its value?

Tags: SSON


Shared Services & Outsourcing Week, held in Amsterdam earlier this month, presented an opportunity to take the pulse of a large sourcing audience. SSON used instant pulse survey technology (voting via mobile phones) to get feedback from the 700 delegates that had congregated at the Rai conference center – to network, exchange ideas, and hear from some leading practitioners – on their stance towards some of the trends we’ve identified.

Given all the column inches that have been devoted to "working capital" in the aftermath of the financial crisis, an obvious question was: "how much emphasis is there at your company on minimizing working capital as a cash flow driver?" While only 8% said working capital was a "distant" priority when it came to cash flow, and 38% conceded that working capital was important, but viewed primarily as a finance – not business – responsibility; a full 41% acknowledged WC was recognized as having significant potential for cash flow at their organizations.

Managing Working Capital is a priority as part of a company-wide Cash Culture: 41%
Working Capital is managed at a commercial level, but is a distant priority versus Sales and Profits: 8%
Working Capital is important, but viewed as a Finance, not Business responsibility: 38%
What is Working Capital? 14%

So how is cash flow being managed? Most attendees (47%) described contracts as their key point of leverage, though 42% said they managed cash flow according to process; and 11% through technology.

Contracts 47%
Process 42%
Technology Tools 11%

With the focus still on cash flow, delegates were asked about payment terms at their organization: 39% said that company-wide, the standard was 60 days or more; 39% said less than 60 days, and 21% said standards varied by region. Delegates, as well as some speakers, conceded that if there was to be any change to this they would be moving towards an increase in payment terms: 42% agreeing that an increase would most likely be on the cards.

Increasing to longer payment terms: 42%
Staying the same – no change: 36%
Decreasing to shorter payment terms: 21%

While there is much talk of expanding shared services’ scope to manage the order-to-cash process, when asked, only 23% of the delegates said that all activities relating to order-to-cash were managed through shared services, across multiple territories. There is plenty of scope for improvement: 31% said that only some customer-facing and a majority of transactional activities reside in shared services; another 31% say that only those activities not requiring direct customer interaction are consolidated; and a full 15% claim that as of today, they are still performing all activities related to order-to-cash locally, within the business units.

All activities are performed via shared services spanning multiple territories: 23%
Some customer facing and majority of transactional activities in shared services: 31%
Activities not requiring direct customer interaction are consolidated in shared services: 31%
All activities are performed locally within business units and markets served: 15%

While the shared services model has been recognized for the value it provides to the finance function, our questions highlighted the many opportunities that still remain. Supply chain financing, for example, is something that 38% of delegates are not currently considering. Another 38% claim to be considering some development in this area; and just under a quarter of those surveyed agreed that the organization had a program in place for supply chain finance.

Our company has a programme in place/we utilise Supply Chain Finance: 23%
We are considering Supply Chain Finance or are using it to a small extent: 38%
Supply Chain Finance is not something we are using or considering: 38%

Innovation is much discussed among SSON’s members, and the results of the survey were no surprise: 60% of delegates attributed 20-40% of transition to innovation, and 30% of the delegates stated its importance as greater than 60%.

How important is innovation from a transition perspective:
20-40%: 60%
40-60% :10%
> 60%: 30%

Hackett describes three maturity levels for Global Business Services organisations – value-centric; process-centric; and function-centric. SSON asked delegates where they saw themselves. While only 20% saw themselves on the value-centric end of the spectrum, most [61%] conceded that they were at a process and service centric place, focusing on operating excellence. This puts the majority of SSOs on the middle range of evolution.

Stage 1: Value-centric, focusing on strategic business enablement: 20%
Stage 2: Process & Service Centric, focusing on Operating Excellence: 61%
Stage 3: Function-Centric, focusing on complexity reduction (least advanced): 20%

In attempting to measure "appetite for risk" in terms of drivers for offshoring processes, 69% of those questioned said that scale would be the decisive factor; 12% said process complexity; and 19% conceded that both would weigh into the decision.

Most organizations today seem to recognize the responsibility they carry for managing efficient processes. The days of throwing these "over the wall" at a provider seem to be, if not gone, then at least fading. When asked about transitioning, 61% of delegates said they would first fix and then "lift and shift"; 20% said they would fix while simultaneously transitioning; and 20% said they would transfer the process first and then fix it.

Lift and shift then fix: 20%

Fix and then lift and shift: 61%

Fixing, while lifting and shifting: 20%

Where there is an obvious gap in the market is in organizations’ recognition of shared services as a key lever in achieving long-term business strategies. Too many – 36% of delegates – claimed that there was "no plan" which articulated shared services’ role in achieving business outcomes; 21% claimed there was a plan, but shared services was not specifically mentioned as a solution; 10% said their shared services plan was not linked to the organizational plan; and 33% answered that, yes, there was a plan, and, yes, it was linked to an organizational plan. So: room for improvement.

No Plan: 36%
Yes to plan, but Shared Services not mentioned: 21%
Not part of organisational plan: 10%
Linked to organisational plan: 33%

The shifting talent landscape is a reality that shared services leaders are having to contend with. Some of the leading providers, like Cognizant, have made cracking the "millennial worker" a central plank of their new operating frameworks, in recognition of the fact that most of their new generation workers fit into this category, and we all know (or do we?) that talent makes or breaks your business.
Maybe we don’t, though.

SSON asked delegates how they intended to navigate a reduced workforce and shifting global talent demographics over the next 10 years. And here’s a statistic that should make you sit up: a full 50% said that they "did not know". Another 42% said that there was "no workforce plan currently in place". A brave 8% conceded that they had identified a workforce skills gap for the next 10 years; but no one (0%) had a sourcing plan currently in place.

As we evaluate the shared services model, offering increased value is the challenge to most centers. Many thought leaders talk about moving beyond SLA is to business outcomes -- but does this reflect the reality? We asked our audience, and 36% of them stated that SLA was still "too much" the focus of discussion; however 63% conceded that the discussion was moving beyond SLAs, or at least SLA’s element was declining.

How much is the discussion with the customer focused on basic SLAs rather than business outcomes?

Too Much: 36%
Declining: 36%
Lot Less: 27%