SSON Predictions for 2011 in Shared Services & Outsourcing

SSON News and Analysis
Posted: 07/09/2012

As we wave goodbye to 2010 (see our Year in Review) we turn our attention to the next twelve months in shared services and outsourcing and deliver predictions of what our assorted experts think the next year will bring.. here are their thoughts...

Mike Power
Independent Shared Services Consultant

I believe Shared Services and Outsourcing is on the cusp of a new era of growth that will see Industry continue to drive for better operational performance and lower costs.

I believe the single largest opportunity, though, in Great Britain exists in the public sector where the spending cuts will force a radical re-think about the way that services are delivered.

However, while some of that will be achieved by a knee-jerk reaction towards outsourcing, I believe the big breakthrough opportunity could be the creation of new vehicles to provide these services. Britain has a once in a generation opportunity to create new service providers from the plethora of local authority organizations now providing them. These could, for example, take the form of employee co-operative Shared Service operations, working as commercial entities. Such moves would retain the skills of current employees, bring a new entrepreneurial culture to these organizations and creating new sustainable businesses in the UK.It is not hard to imagine this happening and being a real force for change. All it lacks is some vision and determination, qualities of which this country is not short.

Mark Judd
HR SSO Director
Rolls-Royce plc

It feels to me like 2011 will continue the theme of cautious progression as businesses take tentative steps forward.

The imperative to reduce costs to facilitate successful growth, will shape the agenda for new and maturing HR delivery strategies.

However, as the pressure is brought to bear on line managers to deliver the success of the business, shared services will need to ensure the quality of their delivery is truly adding value.

This will require shared service leaders to look through the lens of the main recipients of their services and to challenge themselves as to whether they have got it right.

Also shared service practitioners need to do more to act as integrators across functions and ensure that the sum total of the services that land on the desktops of their customers not only demonstrate an allegiance to common goal and designs but have been sufficiently de-engineered so that they genuinely add value not sap leadership time and energy.

Carina Smith
Head of Strategic Development and Global BPO
CapGemini

I think 2011 will be the year of the re-bid.

Buyers of outsourcing will look seriously at whether their current outsourcing provider is really the right long-term partner. The knee-jerk reactions of the past 2 years and surviving the impact of the recession ill be replaced by a more thoughtful and mature approach from buyers. The age old issue of figuring out how to choose a real "partner" rather than a "provider" will gain serious attention. Therefore companies who are passionate about the value of partnering and collaboration are going to come out on top. I cant wait!!

Tom Bangemann,
VP Transformation,
THE HACKETT GROUP
'SSON Thought Leader of the Year, Europe 2010'

The shared services and outsourcing journey will continue in 2011 and provide exciting opportunities and changes to the people and organizations globally.

Solutions will become more sophisticated. I expect more debate around the sourcing mix, resulting in the growth of hybrid and outsourced solutions, but also extensions to captives. Cross-functional will increase as end-to-end logic prevails. More functions and processes will be added increasingly under one governance roof.

Geographies not in scope previously will come into scope. More mature organizations will venture into skill-based processes and utilize center concepts as COEs for these activities. Organizational setups will change from SSO to GBS (Global Business Services) exhibiting higher maturity levels in process design, automation levels, geo and sourcing mixes and holistic governance. Automation will provide significant benefits again in the future, and the wage arbitrage-automation equation will remain a topic of debate.

Currently there is still a focus on efficiency, especially in the light of volatile environments and the resulting need for more agile organizations. The major shift could be a move towards effectiveness being the more relevant dimension. All other topics will align under this umbrella. The shift is starting based on good efficiency baselines having been achieved by some, but will take longer than 12 months. Automation and outsourcing will increase in "mentions" significantly.

Chris Gunning,
VP Global Finance Shared Services,
Unisys

In 2011, we are going to see more excitement in the CLOUD space, as companies figure out how to best utilize it in terms of transformation of their technology solutions.

On a similar note, organizations will continue to embrace new social computing in terms of knowledge and collaboration through further use of social network forums and enhanced blogging mechanisms, for both internal and external communications.

I think there has to be some consolidation in terms of mergers/acquisitions in the provider space, especially as we continue to see the growth and rise of the Indian and Chinese Outsourcers. I don't believe there is any sign of India slowing down just yet in terms of the shared services and outsourcing industry. They will continue to climb the value chain.

There will also be a further take up of multi-functional type Global Business Serviced captive solutions to expand on single function footprints.

We will also see a lot of changes in the Public Sector across the world, not just in the UK as a result of the recent spending cuts. This sector, I believe will continue to look towards centralized, shared and outsourced models, given the current pressures to reduce costs further.

In the pure Finance space, I believe that more companies will start to look at solutions for compliance, in the statutory, legal and taxation spaces, with most now having cracked the ‘simpler’ elements of transactional finance.

Customer Service and Customer Relationships will become more important than ever, and how we service the customer will be a key differentiating factor.

In summary, we all need to continue to be more creative than ever to survive. Yes, that applies to buy-side, sell-side, all captives and Outsources. Take heed! Those that do not look at creative ways of moving forward, will definitely get left behind. The industry will move further into being an art and not a science!

Philip King
Senior Director
The Hackett Group

In 2010 I was looking forward to a "continued focus across all sectors on exploiting shared services as an asset to deliver organization-wide benefits". I don’t believe that shared services has been able to fully deliver on its potential in 2010 as it has been diverted in general by continued cost pressures, the requirements of coping with restructuring and change and a stranglehold on investment due to the demands of shorter payback and higher IRR thresholds.

2011 promises still further opportunities. At Hackett we speak about efficiency and effectiveness and to be truly world-class you have to be in the top decile for both. Many shared services organizations are still struggling with the efficiency axis, especially as investments have been harder to get in the prevailing economic climate. However, if shared services leaders look beyond their own organizational challenges into the true value they can bring to their business or public sector organization they will see a host of opportunities.

  • Finance - working capital benefits, lowering audit and compliance costs, facilitating improved procurement, taking on more value-added work and doing it cheaper should be the target.
  • HR - the emphasis should be on completing functional transformation and truly liberating and enabling business partners to focus on developing high performance workforces.
  • Other functions - reducing systems development and maintenance costs by standardizing processes, removing customizations and reducing reporting costs by challenging what is produced and creating standard accessible data warehouses.

Agility
Gains in organizational effectiveness will more than pay for the investments required to improve shared services efficiency further. A challenge we have seen organizations in general fall short on is agility – as revenues and tax receipts have suffered, our research shows that organizations have not been able to respond with proportionately lower costs? So in 2011, we’re looking to shared services leaders to play their part in the development of a more agile organization – ensuring that costs can respond to reduced income and capabilities can flex to new challenges.

Happy 2011!

Jim Whitworth
Shared Service Specialist


I predict a difficult year ahead for establishing clear direction forward with companies that have a need (and desire) to change but are now faced with many alterative versions of the Shared Service and Outsourced operating models and much variation in quality and cost. Hopefully, we will develop clearer strategies and offerings to meet clients' needs. Could this be the year when we see the emergence and growth of "ready to wear", nearshore Outsourcing solutions and internal Shared Services without Shared Service Centers (the "virtual SSC" solution)?


Derek Smyth,
CEO,
UBS Poland Services Delivery Center
SSON Best New Captive Services Delivery, Europe 2010

The ongoing cost and margin pressure on companies and governments will result in further growth of the sector in 2011. Furthermore, as the offshoring and outsourcing sector matures and companies get more comfortable with the concept of offshoring and outsourcing, I expect to see an increasing willingness to move higher value-added activities outside of the home location. The logical result of this will be that shared service centers will not simply be convenient places to perform transactional work more cheaply (ie the mess for less) but actually become a core part of the value chain of a company.

SSON News and Analysis
Posted: 07/09/2012

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