What does the SSC landscape look like in Australia?

Barbara Hodge, SSON editor, catches up with some of the speakers at SSO Week 2011,  Australia

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Roundtable participants:

Coretta Bessi, Manager of Procurement, Global Corporate & Commercial Services, Bluescope Steel

Tim Morris-Smith, CFO, Mission Australia

Krist Davood, CIO, Schiavello Group

Brooke Miller, General Manager, BP Elite Customer Solutions

Barbara Hodge: How have developments in the Australian market affected SSO activity over the last 12 months?

Bessi: The extreme levels of uncertainty that we’ve experienced over the past two years -- and the resulting conservatism -- have affected shared services through cash flow restrictions, pressures to reduce discretionary costs, a stringent focus on overhead functions, and an emphasis on achieving short term objectives rather than building longer term relationships or developing sustainable activities. It has been a tough time for all organisations, but the crisis has provided an opportunity for mature shared services and outsourced service providers to shine. Given the financial pressures placed on our organisation, we’ve undertaken opportunity analysis with our outsourced business process providers, renegotiated our service level agreements and commercials, and engaged in further outsourcing and offshoring for back office functions. 

Morris-Smith: One of the things that I have noticed among the not-for-profit sector is an increased awareness of the lack of sufficient scale or expertise to access best-practice models and research. As a result, there’s an emerging conversation about the possibility of perhaps either collaborating to create a captive service provider of our own or outsourcing. Generally, the level of shared services activity in the not-for-profit sector is much less mature – Mission Australia is one of the few to have sufficient scale, which makes a more mature shared services model possible.

Davood: The Global Financial Crisis has cut the capital expenditure available to SSOs.  As a result, decreased capital expenditure has increased the stress on SSOs as they are forced to be reactive.

Miller: Across the Australian marketplace, the Global Financial Crisis appears to have encouraged companies to look more closely at opportunities to gain efficiency through transferring activities to shared services centres. At BP Elite, we have seen increased interest from other corporates trying to understand what we do and how we deliver results, as they start down their own shared services journey.

Barbara Hodge: What are your predictions for the Australian marketplace over the next year? 

Bessi: The Australian market is increasingly being affected by the mega-trends of exponential IT developments, increased focus on environmentally sustainable practices and products, changing work force demographics, and significant cost pressures. In the coming year, my predictions are for varying levels of uncertainty in our two-speed economy, with organisations moving from a "we have gotten through the Global Financial Crisis" mindset to one of "we are now going through even more turbulent and volatile times."

In the medium to long term, I think that there are a lot of opportunities to be found in value added activities such as spend analytics and data mining; evaluating a paradigm shift in what SSOs believe is possible; and continued strong stakeholder engagement through uncertain times in order to control expectations. Those are certainly areas we are looking at.

Morris-Smith: I see a growing interest in the effective deployment of shared services in the not-for-profit sector. We have recently seen larger transactions – such as the purchase by a consortium of not-for-profits of the former ABC Learning business. ABC Learning, when it was listed on the Australian Stock Exchange, had a market capitalisation in excess of A$1billion. A growing realisation of the opportunities related to scale has now been triggered which is, in turn, encouraging a focus on how the back office can strategically enable the purposes of not-for-profit organisations.

Davood: The weak US dollar compared to the strong Australian dollar have created the ‘perfect storm’ for higher levels of SSO offshoring.

Miller: As the Australian marketplace emerges from the Global Financial Crisis, I expect the war for talent will continue to escalate. As a result, it will be more important than ever that the shared services sector offers a strong value proposition and development opportunities to current and prospective employees.

Barbara Hodge: What are the greatest challenges you are facing for the year ahead?

Bessi: We are under pressure to continue reducing discretionary costs and accelerating value initiatives for the organisation. In addition, we need to hit increased targets, year-on-year, with a reduced workforce made up of baby boomers who are now close to retirement age. At the same time, the new Y and I-generations are expecting increased flexibility and career choices, as well as rapid progression. So there will be a need to balance individual needs with talent attraction and retention.

Morris-Smith: The continuing challenge for us in the not-for-profit sector is to persevere in the drive towards best-practice processes, economics and enabling services – and to manage this in an environment where many of us, as individual operators, lack sufficient scale. It is likely that many in this sector will increasingly be open to considering selective use of outsource providers – especially in specialist/expert areas like procurement.

Davood: We’ve implemented a full end-to-end network cloud computing capability.  We’ve also fully virtualized our IT environment.

Miller: The continuing challenge for a services centre is to ensure that the entire team is 100% focused on the customer and his needs. Variables such as the economy, the employment market, the customer offer, ERP, etc., may change throughout the year, but a business services centre needs to maintain its focus and offer a continuous, seamless result, day after day. The only way to achieve this successfully is to ensure your team has a laser-like focus on the customer and maintains a "can-do" attitude to deliver.

Barbara Hodge: How are you moving from administrative supporter to strategic business partner?

Bessi: BlueScope has outsourced transactional activities to our BPO provider, which allows our internal shared services to focus on the paradigm shift and transformational activities that are taking place across the business (eg, spend analytics, automation of processes, and leveraging -- through category management -- corporate services and IT across our global footprint).

Morris-Smith: A key issue here is to hire leaders who understand the concept of "relationship leadership," rather than just "process leadership." Another important factor is to create structures and organisational frameworks that enable stakeholders from across the organisation to meet and seek win-win outcomes. In our organisation, we have leadership councils for key areas such as finance and IT, where leaders from each division (our internal customers) join with national functional executives, such as the CFO and the CIO, to ensure cohesive strategies and to help the shared services teams engage with their clients and partners more effectively.
 
Davood: ‘Strategy’ means transitioning the company to a stronger commercial position.   Strong IT Leadership is the key.

Miller: To be an effective business partner you need to deliver more than just "the process." At Elite, BP’s business services centre for Australia and New Zealand, we have focused on ensuring that we deliver not only specific outcomes to our partners, but also the benefit of insight that our data analysis offers. This requires the development of analytical capability and commercial acumen — but also a curiosity about "the story behind the data," and its implications for the customer.

Barbara Hodge: Are attitudes towards outsourcing changing? What roles do offshore outsource providers play vs onshore?

Bessi: BlueScope Steel follows a strategy of focusing on our core competitive advantage and is a strong advocate of outsourcing non-core activities. We have expanded our service provisions and outsourced additional activities where we have been able to demonstrate increased value through centralising, outsourcing, and standardising.  Our service provider enables us to offshore back-office activities to Guangzhou, in China, to take advantage of labour arbitrage opportunities and an increasing talent pool.

Morris-Smith: I believe the not-for-profit sector is increasingly willing to consider some level of process or expert service outsourcing, particularly where an individual operation may not have the scale, the expertise or the dollars to invest in process improvement on its own. One area that has come to the forefront is procurement, where we ourselves recently used an outsource provider to support some major tenders as we felt we did not have sufficient in-house expertise. Going through such an evaluation is also a great way to benchmark the cost of processes internally – and the conversation helps executives work out whether they want the savings gained from adopting a more vanilla-style, outsourced, process excellence model, or whether they want to carry on with a higher-cost, but more customer-tailored, internal services model.

Davood: Commercially focused outsourcers are the key to the future of SSOs.  Cost competitiveness is no longer the key determination of a good SSO outsourcer.

Miller: Attitudes to outsourcing are becoming more and more sophisticated, as companies become more skilled at managing outsourced relationships and establish a stronger understanding of both the complexity and the value proposition offered by outsourcing. The days of outsourcing being justified by labour arbitrage alone are certainly numbered, if not over.

Barbara Hodge: How are you tackling talent acquisition and retention challenges?

Bessi: BlueScope Steel, the shared services group, and our BPO partner invest in our people to develop their skills and capabilities, and broaden their experiences across our global footprint. This includes developing our talent beyond their functional and business unit boundaries through secondments, project work, and rotations. Our service provider provides an opportunity, through offshoring, to tap an additional talent pool of strongly educated, motivated and aligned employees in new markets.

Morris-Smith: Again, I would emphasize that great leadership is the key to winning the talent game. If people realise your organisation is doing good things and has good leaders, people will want to join you – and stay. Selecting the right management team; retaining and motivating them through a clear vision; providing interesting work; being willing to engage in continuous change; and showing a commitment to fair pay, are all critical elements. We use a few very effective tools such as individual leadership development plans, mentoring programs, 360-degree feedback, benchmarked salary reviews, and an intentional approach to wider HR/organisational development. There is nothing new here, but in 2011, to retain staff, we can't afford to go light on HR and the organisational leadership aspects of what we do.  

Davood: I leverage staff in roles, which I know they enjoy and are challenged by.

Miller: Elite has a strong focus on ensuring our employee value proposition supports our goal to attract and retain the best talent. We regularly survey our employees to ensure we understand their values and motivations, and then review the components of the value proposition to ensure there is alignment. Similarly, we focus on the development of leadership and technical capabilities, and align these to potential career paths throughout the organisation.

To take part in this discussion and meet the speakers, attend Australasian Shared Services & Outsourcing Week 2011 April 11 - 14, 2011, Palladium at Crown, Southbank, Melbourne, Australia