Q&A: Elaine Harrison, Alsbridge
(Alsbridge plc recently published its 2008 SSC Research Study, authored by senior manager Elaine Harrison. SSON caught up with Elaine to discuss the study and its findings - and to get her own take on what she saw as rather surprising results...)
SSON: Elaine, what was the intention of your recent study?
Elaine Harrison: The whole purpose of the research study was to get an idea of how mature shared services organizations are at the moment – because some of them of course have been around since the mid ‘90s – and to see what real progress has been made. We talk about best practice, and what best-in-class should look like, and what I was really trying to identify were a number of dimensions on service process, technology et cetera, where people fit. It wasn’t intended as a benchmarking exercise, rather self-assessment - we sent in a number of questions based on five dimensions on which people assessed themselves.
When the results came out – scored one to five, with five being best practice – on average, scores were in the region of between 2.8 and 3.2. and I was a little disappointed with that, actually; I was expecting people to be more in the 3 to 4 range. When I looked at the results I realised that some 40 per cent of the people who responded had been in operation for less than three years, and I thought that might have skewed the results a little because normally shared services spend between 12 and 18 months in the stabilization process before they start on any reengineering. But then when I looked at the results again, that group on their own weren’t actually doing too badly…
Then I looked at the ones which had been in existence for over five years and only around 37 per cent of them were scoring 4 or 5! So the lesson this has given me is that shared services, even the mature ones, have got to a position that is acceptable, if you like, but they don’t seem to be taking that extra step to get to the next level. On technology for example they have done very little on automation; some have gone to having a single ERP but all of the technologies we’ve got at the moment – workflows, OCRs, scanning technologies et ecetera – aren’t being used, and these have been around for a long time.
For fifteen years we’ve been talking about straight-through processing, and it can be achieved, but no-one seems to be investing the money in it. So I started wondering why this was happening; I think possibly it’s to do with shared services being back-office, out-of-sight-out-of-mind, and all resources and investment have been going into the front office and core systems. That’s probably at least part of the reason – and that’s a little surprising as well.
SSON: Did you find that the areas in which you saw a surprising level of deficiency were those areas which normally require a high level of investment, to onboard new technology et cetera?
EH: No, not really: I think the pieces that are deficient are those where you need some serious senior-management support to mandate in terms of standardization; without that mandate it doesn’t happen, and people tend to opt out if you don’t tell the business what you’re trying to achieve. That’s definitely part of it too. There are other aspects. Charging mechanisms for example are very simplistic in most organizations: there’s no real transparency of what services they’re providing, and the costs, and I think there’s possibly an element of mistrust between shared services and the business units because they don’t really see what they’re getting for their money. Whereas if you move to an outsourcer you DO have that level of transparency; it’s looked at from quite a different angle.
SSON: To what extent do you see these processes being outsourced?
EH: Well that wasn’t really part of the study: one of the questions I asked though was about who’s thought about offshoring, first, and actually I would say about 60 per cent of them had already considered offshoring though some hadn’t already done it, and around ten per cent had already outsourced as well.
SSON: What was the geographical distribution of the SSOs you analysed?
EH: I went for European shared services but some had global models.
SSON: So by "offshoring" you mean offshoring from European locations?
EH: Offshoring from European locations to either nearshore locations in Eastern Europe or global locations like the Philippines or India – there are so many nowadays… But I think the landscape is changing and the fact is that shared services are going to have to step up a gear if they’re going to survive – because if you have a look at it, offshoring locations are sprouting up everywhere with huge, huge labor arbitrage benefits.
Outsourcing providers have really strengthened their game and are presenting serious competition to the captives now. You’ve got instances of captives divesting and selling themselves to service providers – the latest being Aviva selling their captives to WNS – and I think some of the Indian providers trying to get a foothold in Europe are looking at getting in by buying captives, which I think will happen increasingly over the next one or two years.
Captives are going to face serious threats from, firstly, the prospect of offshoring to get real savings and secondly, outsourcing – because actually offshoring and creating a captive in an offshored environment can be a real struggle, unless you’re a big-brand name with a big presence in that market, you know? There are so many big brands out there, there are service providers who have huge organizations that can offer people some real, good career-development paths, which the smaller captives can’t do – so they suffer huge attrition rates and they really struggle to recruit. And if you’ve not been in that market anyway you struggle even to set up a shared service center these days. So people who don’t have big experiences in a market to set up a captive would certainly pick outsourcing.
SSON: Do you think that’s the underlying message of your study?
EH: My real message is that captives have got a bit lazy – they’ve sort of been plodding along, and I think the time has come when they’re really going to have to step up their game because if they don’t, I think the outsourcing decision is going to be made for them. They need to be at least as good as an outsourcer; at a minimum they need to be able to compete with what an outsourcer can provide in terms of the quality of the service and the cost of the service. That’s where they need to be getting to – and I don’t think they are at the moment.