Sourcing at Siemens

Interview with Michel E. de Zeeuw, Chief Executive Officer, Global Shared Services, Siemens AG

Barbara Hodge: Michel, how did you settle the single-function/multi-function question at Siemens shared services? What were the main drivers for your decision?
Michel E. de Zeeuw: It has become very clear to us that despite the specifics of each function, there are many aspects in managing a SSO that are similar and that can be leveraged at cross-functional but also global level.
This includes, for example, attrition management, knowledge retention, soft skills training, performance management, quality monitoring and management, benchmarking methodology, supplier demand management, governance for shared services, customer relationship management, financial management, transaction-based pricing, ticketing tools, work flow, KPI reporting, and many others.

All these aspects are better leveraged when shared as much as possible and in some cases become possible only with some minimum critical mass. In addition, for those who think it is important to build a Shared Services brand for their organization, going cross-functional is a more effective way to achieve this.

Barbara Hodge: What are the respective advantages of single-function and multi-function?
Michel E. de Zeeuw: I believe the main advantage of a single-function SSO is simpler governance. Cross-functional centers require setting up another set of cross-functional governance, which may not be relevant for some companies. It is very relevant for Siemens, however, as our regional and country based CEOs are very keen on partnering with Global Shared Services as one provider to support their growth.

The main disadvantage of a single function SSO is its lack of scale, at least potentially. Again this may not always be true, for example in financial services where customer service activities have huge scale just on their own.
Again, the main challenge of a cross-functional model is its customer relationship management framework and governance model. It is a challenge in terms of structure, but also in terms of finding the right skills to manage cross-functional service interaction with internal customers. It is, however, a key function, which largely determines the success of the whole SSO.

Barbara Hodge: What are the key benefits of your model?

Michel E. de Zeeuw: The main benefit in my view is that it provides the opportunity to manage Shared Services as a business. We have enough scale as an organization to invest in all key business processes, including People and Customers, and not just Operational excellence. Even in Operational Excellence there is a lot more one can do with additional scale, for example investing in shared services backbone technology.

Barbara Hodge: You were named "Outsourcing Superstar" by FAO Magazine in 2008. What do you base your strategic outsourcing decisions on?

Michel E. de Zeeuw: There are different sourcing approaches: single strategic sourcing; competitive sourcing, involving a few key players; best-in-class sourcing, per service; and opportunistic outsourcing, to name some key ones. My first approach in terms of sourcing is to understand what my company needs and what it can, and is ready to, do. I will determine what my company needs based on its scale, the expertise available, its shared services maturity level, and its global footprint. Based on this assessment, it is possible to determine what is the best approach in terms of insourcing or outsourcing on the one hand, and in terms of sourcing approach on the other.

Barbara Hodge: Would you share with us your thoughts on the outsourcing opportunities provided by the global markets today?

Michel E. de Zeeuw: I think the market is evolving fast and we are seeing some significant changes in terms of technology, service portfolio, and location opportunities. "Access to talent" is probably something of a red herring, or a "wrong" trend, and I would also suggest that no major breakthrough is happening in terms of automation in the transactional area. I think the Business Process industry is now mature enough that we should see it address these problems and work on standard training schemes, and data standards, for example. It is fine if cloud computing is just a more efficient way of performing inefficient processes, but I would rather get rid of the transactions altogether. I believe that working on data standards for all key data that SSOs and BPOs work on would be a first step to achieving a real breakthrough.

Barbara Hodge: Can you comment on the increasing sophistication/specialization of the BPO provider market? What are some new trends from the provider side that you believe will impact outsourcing activity looking forward?

Michel E. de Zeeuw: There are many more very interesting outsourcing opportunities today, and there will be even more tomorrow. Key BPO providers have extended their portfolios to areas that go far beyond traditional transaction processing, such as Accounts Payable. Some of them have gained good expertise in Supply Chain Management and Analytics, for example, which can address a lot more potential within corporations. Warranty Management, Spare Parts Management, M&A Analytics, Legal Services, and Marketing Intelligence, are also examples of new services that can be onboarded with significant potential for higher business outcomes and additional cost savings.

I believe that with the new technologies emerging, such as platforms, SaaS, and the increased possibilities for mobile working, we will see a significant development of virtual capabilities in addition to existing large centers of scale. This will increase our access to experts and other talent.

To join in the sourcing debate and gain a clearer picture of how changes in the provider marketplace will impact your operations, attend the industry’s largest European event – Shared Services & Outsourcing Week 2011 in Amsterdam, May 9-11.