Q&A: Brent Harder, MD COO Division, Credit Suisse




At the forthcoming 10th Annual European Shared Services & Outsourcing Week 2010, to be held in Edinburgh, UK, from 24-27 May, Brenton Harder of Credit Suisse will be taking part in a key panel debate entitled "The Buy-Side Story: Get the Client Perspective on World-Class Shared Services and Sourcing Excellence. What’s on the Cards for the Next Five Years?" In advance of this much-anticipated session, SSON now tackles Harder on what exactly this excellence constitutes, and how organizations can and must go about attaining it in a business landscape which is still very much feeling the effects of the turbulence of the past couple of years…

SSON: Brent, thanks for joining us. You’re MD of the COO Division at Credit Suisse; before moving on to taking a look at the future of shared services and sourcing let’s get some recent history: can you tell us a little about the challenges your organization has faced over the past couple of tumultuous years, and how you feel your own corporate structure allowed you to overcome them?

Brent Harder: You are being politically correct using the word "tumultuous" as a description for the past two years in global financial services... The financial crisis precipitated fundamental changes in the financial services industry, which have profoundly affected the expectations and goals of clients, the type of financial institutions they trust, and their choice of a long-term financial partner. Our strong capital position allowed us to gain significant momentum and client trust through the crisis, and we will continue to manage capital and liquidity conservatively as we strive for top-quartile efficiency levels, while being careful not to compromise standards or growth. A key focus on shared services and sourcing gives us a keen competitive edge in driving top efficiency levels.

SSON: Obviously the repercussions of the financial crisis are still being felt. What lessons do you think the shared services and sourcing space have taken from the events of the last few quarters and how do you think your sector in particular is adapting to the new economic landscape?

BH: Clearly, the lessons learned from the financial crisis point to the critical importance of process visibility, control, and risk mitigation - all essential elements in the shared services and sourcing space. Because shared services provide an organization with the foundation to build strong end-to-end processes to leverage economies of scale and ensure process control through clearly aligned metrics and controls, those organizations with a strong shared services backbone were able to link similar tasks and processes under one umbrella with clear controls, metrics, and unified leadership. This allowed them to not only weather the storm, but gave them a competitive advantage as business improved through better alignment to the core operations of the business.

SSON: Do you think the definition of "shared services and sourcing excellence" is the same now as it was before the crisis? In other words, do you think what made a great SSO in 2007 is still what makes a great SSO now and going forwards?

BH: Any good organization that was selling its services before 2007 was successful because of its process excellence, control, visibility, and leadership… These are still the elements I look for at the start of any sourcing relationship. I need a sourcing organization to clearly demonstrate how it helps mitigate my risk profile through increased controls using visible metrics, SLAs, and/or KPIs. [Thus] no change from 2007 to 2010.

SSON: In terms of the competitive landscape do you think the impact of the crisis has made it easier or harder for buy-side organizations to get a good deal from prospective providers?

BH: Honestly, every relationship should be mutually beneficial if there is any chance for sustained success. The buy-side needs to clearly state what it's looking for in a relationship: cost, control, risk mitigation. And the sell-side provider needs to present a clear picture of the proposed cost to deliver. What's changed in the past few years is that the "Wizard of Oz" solution is no longer acceptable - where I am told not to worry what goes on behind the curtain. Today, buyers want to play a big part in defining what goes into an outsourced process, including its measures and controls. Today, a process needs to be simply an extension of the onshore process - not some "bolt-on" that is managed through weekly conference calls or reports.

SSON: So what do you see as being the critical steps which buy-side organizations need to take when working with providers in order to facilitate that "extension of the onshore process"?

BH: First and foremost, the buy-side needs to be sure that offshore processes will enhance the buyer’s target operating model (TOM). Moving to an offshore model just for the cost arbitrage is not sustainable in the long-term. The buy-side organization needs to have a clue about what it is getting into before the process starts. Therefore, it is an equally important first step to establish clear KPIs and SLAs that will inextricably couple the onshore to the offshore process. Many buy-side companies are not mature enough in process control to even think about KPIs, but they ignore this first step at their own peril.

It’s very difficult to base a sustainable relationship without clear definition around what "good" looks like – and it is NOT all about cost. Performance, security, control, timeliness, and other measures are all critical to quality (CTQ) components that must be considered by the buyer. Secondly, there needs to be a clearly defined migration process from the "pitcher" to the "catcher." The buyer needs to be sure that whatever process is used, the proper structures and processes are mapped and measured before shifting base of operations. Lastly, the buyer needs to understand how site personnel will be managed. Captive vs outsourced models are very different, and the buyer needs to know what she is getting and how she will need to control the resources. Remember my earlier answer that "Wizard of Oz" processing is no longer acceptable. Offshore processes need to be part of the structure of the onshore process, so it’s not good enough NOT to worry about what’s going on behind the curtain.

SSON: Now the world economy seems to be generally moving through a recovery phase what are the immediate challenges for SSOs in strategic terms?

BH: Be proactive. Stop reacting to process breaks, service disruptions, or regulatory changes. SSOs need to be strategic partners in the way a firm manages its processing and production. SSOs are critical partners in the value chain of any business, and it is irresponsible to just wait to be told how high to jump when disruptions or changes occur. Many providers have better visibility into the space they serve, and could be a valuable ally to their partner businesses by sharing insight and advice on how to steer through rough patches. These are the types of companies that I want to do business with... We're all in it together.

SSON: With different economic regions developing at radically different paces do you think the global shared services model will still be viable during the recovery and any return to boom conditions, or do you feel that a regional model provides organizations with a more appropriate focus now?

BH: The global model was and remains viable for companies that need global capability; otherwise, regional models tend to deliver at acceptable rates and output. Therefore, SSOs need to understand their markets and match their delivery capabilities to their target markets. Resist the temptation to be all things to all prospects, as that violates the whole rationale for shared services outsourcing, which is re-allocating assets and processing to those organizations best able to deliver at competitive prices.

SSON: With that crucial phrase "competitive prices" in mind, do you agree with those commentators in this space who believe that the captive model is, if not dead, then at least on its last legs, because of the inability of almost all captives to compete on purely price-based grounds?

BH: I am not convinced that the captive model is dead, for two reasons: capability to deliver; and data secrecy. Capability to deliver in a stand-alone mode requires a high degree of maturity, infrastructure, and applicable labor source. This takes time to achieve, and many shared services firms have taken years to acquire the critical mass in one or two countries to viably operate at a competitive price. Therefore, some countries may offer a better price point through the outsourced model, but other countries still need incoming companies to "incubate" and grow capability from the ground-up by using captives. Data secrecy is another issue that may force companies to stay with their captives. There have been several companies that recently announced in-house rulings that can be quite restrictive as it relates to handling data and client information across borders and outside corporate structures. Captives are the only solution – if they are even permitted to handle cross-border data.

SSON: What should providers be doing to ensure they provide global organizations with regional competitiveness?

BH: If a global organization wants to provide competitive services at a regional level, it needs to have a regional footprint. Period. This can be expensive for a global SSO to provide. But as I said before, I can smell a company that tries to sell me regional expertise delivered 10,000 km away. Don't try to be everything to all prospects. As I've said before, I think it is wise for an SSO to truly match its market to its delivery capability. Don't get too stretched... In the past, I've seen SSO partnerships or marketing agreements that would be beneficial in cases like this.

SSON: Can you go into any more detail on that?

BH: Marketing agreements are working relationships between provider companies offering synergistic services – in this case local and offshore capability. For example, I’ve worked with a local web-developer who works, in turn, with an offshore provider of server services and database storage. Both companies are independent of one another, but work together to market and sell integrated services. Just a quick note of thanks for letting me use the word synergistic…

SSON: You’re welcome!… What steps can and should SSOs be taking to mitigate against the possibility of a return to recessionary conditions in Western economies?

BH: Don't wait for it to happen. Move up the value chain with your key clients by resetting the relationship from a tactical supplier to a strategic partner. Just as I said above, many providers have better visibility into the space they serve, and could be a valuable ally to their partner businesses by sharing insight and advice on how to steer through rough patches. These are the types of companies that I want to do business with... we're all in it together.

SSON: Finally, what do you see as being the big changes or challenges awaiting organizations over the next five years?

BH: It would be easy for me to say that change is the biggest challenge I see for the next five years. You name it... regulatory oversight, process visibility, governmental tax policies are just a few of the macro challenges facing all industries around the world. But that would be too easy. No. The biggest challenge to all industries is the changed consumer expectation for immediate remediation. Take Toyota's fall from grace as a warning to us all that no company is too big to fail. Consumers will punish a company that is slow to respond to its mistakes - whether they are at fault or not. It is a brutal warning to us all that we need to be ready by being visible. My advice to SSOs is to be part of the solution. Share your best practices. Be visible. Make your processing part of the way your clients' do business... be seamless.

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