Q&A: Tom Bangemann, Hackett Group

At the recent 9th Annual Shared Services & Outsourcing Week in Budapest, SSON spoke to Tom Bangemann, VP Transfomation at Hackett Group, about predicted trends in Shared Services for the rest of 2009. While more organizations move towards outsorucing and offshoring, a recent Hackett survey revealed that almost a quarter of automation goals are not being met.

SSON: I am speaking with Tom Bangemann, Vice President of Transformation at the Hackett Group at the 9th annual Shared Services and Outsourcing Week in Budapest. What trends do you see happening within Shared Services and Outsourcing for the rest of 2009?

Tom Bangemann: There is quite a lot of interest with trends and maybe something to start up with is something that I would have thought that I would not have started up with; number one, coming up lately is a topic we all know called automation. And actually there has been a lot of research both in Hackett and outside coming back lately, stating that although companies have been trying to automate for five to ten years, they keep stating automation as their number one target. It is still on a fairly low level. So when we actually measure the automation levels in processes, most of the companies say it has been half of the processes or less that they have been actually able to automate. Although this is not new – I would say it is a re-appearing topic that came back very strongly this year in multiple research. And you kind of wonder, us being here at this event - you would just need to go out and grab twenty different people at twenty different stands and buy an automation solution from them. You know, why is it so difficult and why does it take so long?

SSON: Why do you think it is taking so long for organizations to automate?

Tom Bangemann: I think this topic, like many other areas of Shared Services are maybe not as simple as some people think. On first sight, you can always simplify things like producing an invoice, matching an invoice and making a payment – all these things can’t be that difficult, can they? But of course the devil is in the detail. And when you actually look at automating a higher percentage of the process; people will come up with calculating business cases and looking at whether the technology makes sense in terms of delivering positive payback. So without having done too much detailed analysis on the recent results, my guess is that we will find out the same thing as we found out earlier, which is automation in principle is possible, however it doesn’t always provide a positive business case.

So looking forward – we probably have two options. Either technology gets cheaper and the business case looks better – automation will then increase and that in turn will solve many other issues. Because, if we have no FTEs left, we don’t really need to think about where to put them. And if that doesn’t happen, we will see an increase in offshoring and ourtsourcing, because the only alternative to automation actually is is wage arbitrage. So if I don’t get increased productivity in work through automation, I am only left with moving the work to some other place. And I think at the end the technology solutions and their price will determine this journey to a large extent.

SSON: In your presentation earlier you mentioned some organizations automate and then set up a Shared Service Center or vice versa, they set up the center and then automate. Where are you seeing trends more?

Tom Bangemann: In reality there are both cases, as you said. I would say it really depends on the starting position of the company. It is not one of those things where you should run after the trend, in terms of - if most people do this, then I will do that too. It’s more a question of where am I in my starting position and if I am already on a fairly consolidated business, then automation maybe more interesting for me as a solution than if I am in a really, really dispersed environment. We know from people that are in a dispersed environment need to consolidate first, then standardise, then utilize automation to either optimize or to enhance that standardization. But automating in a very decentralized environment is very difficult. And it typically does not make sense and therefore for the same reasons mentioned in terms of negative business cases, it should actually not come up either in calculating it.

SSON: Would you have any advice for organizations that are present here over the next few days, who are looking to automate more - perhaps building an end-to-end platform or consolidating more processes and automating them?

Tom Bangemann: On the automating topic, companies often get stuck at the business case phase. There is a widely accepted agreement on the benefits of the automation. So companies will see that automating certain parts, putting in new software, new technology platforms would make a lot of sense. However, then they calculate how much it costs and come back with some result that doesn’t really make sense! And I think that there is often a few errors in that calculation, because the benefit depends largely on the scope that I calculate for. The technology that you buy for Shared Services often impacts the operations outside the Shared Service environment and those benefits in many cases are not really counted. So if you would look at the larger benefits and also what we would call ‘avoided costs’ - so which costs in the future would normally incur if the company grows are not incurring because of this new platform - if you included those you would often come to a different view on whether technology makes sense or not. Apart from that, just count all the discussions and all the business cases that you are doing year after year on trying to find a new way to calculate differently to try and get a new technology in place. Maybe it would just be cheaper to finally put it in place and just agree that part of that technology cost is a little like paying taxes – you know you just got to do it , there is not necessarily a pay back on that, but you must have it in place.

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