Can Blockchain really eliminate . . . ?

Shared Services Centers (SSC) are set up to provide services like Finance, IT, Operations or HR by one part of a group, where that service had previously been established. The funding and resourcing of the services are shared among receiving businesses and the providing entity (SSC) effectively becomes an in-house service provider. SSCs were traditionally set-up for cost reduction through economies of scale and improved process quality and efficiency. SSCs have been leveraging process centralization, globalization, standardization and automation. Theyhave come a long way and have developed robust, proven models for enterprise support.

Levers and Generations – Traditional levers of Shared Services (SS) were People, Process and Technology.

Different generations of SSCs based on underlying levers.

        Gen 1 SSCs are built around centralization of people from different departments or geographies. Later, this also leverages cost arbitrage from lost cost destinations.

        Gen 2 SSCs leverage standardization and re-engineering of business processes to suit multiple business units.

        Gen 3 SSCs, which are more recent, use technology as levers to further enhance value by helping an organization adopt better workflow, reporting, and savings by cloud migration etc. They also leverage levers like operations optimization and robotics process automation. 

          So far, the progression has been in steps. In spite of SSCs achieving greater maturity over the years, a major part of their work is still around connecting disconnected systems (by purpose/or architecture issues) manually; performing large-volume, paper-intensive processes; and supporting transactional activities across IT, HR, Finance, etc. For example, Finance Shared Services still face laborious workarounds for Order Entry, AR remittance, Travel and Expenses, AP Invoices, etc.

          Shared Services today are facing the elimination of tasks that need not exist anymore. Blockchain technology offers SSCs a lever for this kind of task elimination. Trust, immutability, transparency and dis-intermediation are key disrupting features of a distributed ledger system. The race is now on to learn how to best adapt this decentralized system that delivers so many progressive attributes. Numerous organizations across the world are working on various aspects of Blockchain – distributed trust, security, consensus, database, benchmarks and verification, to name a few.

          Blockchain enables decentralized transactions disrupting current business models positively, and is creating an explosion of innovations with it’s key differentiator: “distributed trust”.

          Examples of task elimination:

          • Blockchain based inter-company netting systems can eliminate mundane, interdepartmental reconciliations.
          • Blockchain based supply chain systems can eliminate the need for large teams in the back office tracking consignment and doing mundane paperwork.
          • Blockchain-based trading platforms can eliminate not only  paperwork, but settlement will be in hours rather than days.

          Let's deep dive into one example: the impact of Blockchain on the supply chain.

          Supply chains are crucial to business, and savings in this process area have a direct impact on profits. One of the biggest challenge for a Shared Services supporting an enterprise supply chain is redundant tasks and disintegrated systems that don’t talk with each other. This results in enormous volumes of manual tasks, multiple levels of reconciliation, and higher costs in terms of the supply chain. 

          Typically, it takes days to clear payments between a manufacturer and a supplier, or a customer and a vendor, with legacy paper-based contracts handled by lawyers and bankers, which results in extra costs and delays. Provenance of products and parts are often hard to trace back to suppliers, making defects difficult to eliminate.

          Blockchain offers an excellent opportunity for the Direct Procurement process in the supply chain – from procurement to invoicing and payment, the entire process can be underpinned, supported, and instantly enabled by this Blockchain technology. It presents a shared ‘trusted’ ledger between customers and their suppliers, which significantly supports and enables quick transactions, automatic reconciliation, and provides a real-time view. 

          Blockchain thus acts as the extended system to partners/vendors in the ecosystem, creating real time secure connectivity, and creates value for all the participants in the chain.

          This value includes:

          • Elimination of paperwork – Blockchain based supply chain systems require minimum use of paper work and will leverage Mobility and IoT.
          • Elimination of tracking – Close to real-time tracking and transparency will eliminate the need for manual tracking.
          • Elimination of inter-system data entry – The need for manually connecting systems will not be there anymore.
          • Elimination of manpower-based contract execution – Smart contracts will eliminate the need for manual receiving and sending of information or triggers.
          Shared Services Centers have an opportunity to permanently break the mold of being cast as defined by cost arbitrage, and turn into value-adders. 

          The Indian ecosystem is particularly conducive to developing into a Blockchain hub as there is plenty of talent availability, government support, and access to numerous startups working on newer protocols on the Blockchain platform. 

          Process upgrades and technology developments with Blockchain will witness a quantum leap, compared to other new systems adoptions.

          Disclaimer: The views and opinions expressed in this article are personal and do not necessarily reflect the official policy or position of the writer’s employer.