Summary of Our New Market Report: The State of Latin America Shared Services in 2019
The SSO Landscape in Latin America
Every year, SSON’s global market survey highlights significant progression in Shared Services models. The past few years have shown a clear trend away from transactional, human-based work towards knowledge-driven activity enabled by data and automation. Yet, and despite the anxiety unleashed by “automation”, this has not translated to obvious job losses. Instead, Latin American shared services organizations (SSOs) are developing new competencies and taking on growth without adding headcount, frequently by leveraging new Centers of Excellence and expanding into new services and geographies.
The top Latin American locations for shared services include Brazil, Mexico, Costa Rica, and Colombia.
Latin American shared services can be characterized by two trends: first, the shared services landscape in the region is maturing; nearly one in three SSOs is 10 years old or more. Second, more than half of SSOs only serve regional customers. What this means is that for the mature segment, the low hanging fruit that drove the model originally (i.e., time and cost) has been well and truly harvested. Today, these shared services are leveraging the process expertise and knowledge they have developed (and combined) with innovative automation and new data analytics capabilities – re-positioning themselves as the brains of the enterprise.
The top functional services for 2019 are very similar to those found in last year's report (State of Latin American Shared Services Centers in 2018), with the majority of service falling under HR and F&A. The majority of SSOs in Latin America, or 66%, use a multi-functional operating model.
The majority of SSOs also are leveraging Centers of Excellence and over the past year, CoEs have risen in demand and use. Last year, respondents cited new services being added in the areas of Change Management, Data Management, Automation, and Process Improvement. This year, we see these types of services being solidified in CoEs and in roughly two-thirds of global SSOs.
This emphasis on CoEs marks a critical milestone. It recognizes shared services’ future value proposition in terms of the added value delivered beyond process excellence. In other words, shared services is no longer mainly about transactional proficiency and improvement. The insights a modern SSO can offer the business, such as a thorough understanding of services processing, automation, and data analytics, will set it apart from the rest.
Nearly half of Latin American SSOs are planning to expand the scope of their operations this year by offering new services. Around 40% of Latin American SSOs are also planning to scale down their footprint while they broaden their operations as automation becomes more prevalent. This shift is driven by increased automation. But as shared services become more proficient at supporting global businesses, the fact is that many of these services can be provided digitally, and even virtually, via cloud-based services.
Traditionally, the benefits of shared services have been measured primarily in terms of reducing costs and time. This is still valid. However, given the maturity of this sector, these objectives have generally already been met. As a result, the attention is shifting to the benefits of improved process control, process standardization, and process optimization. The consequential effects are measured in terms of reduced risk, better compliance, quality and reliability. Automation, again, features heavily in driving improved controls via rules-based processing. Similarly, automation supports agility – the ability to ramp up or down quickly – enabling shared services to show significant flexibility in reacting to changes in underlying business requirements – for example, in the case of business expansion or contraction. These benefits are also supporting fairly aggressive improvement targets: more than a quarter of Latin American shared services are targeting productivity improvements of more than 10% in the next year, and nearly a third are targeting the 5% range.
Latin American SSOs are split fairly evenly in regards to how they are using intelligent automation. 26% are testing pilots, while another 26% do not plan on implementing intelligent automation (right now). More than half of the shared services that have implemented automation are scaling it. Leveraging and scaling automation as a competency requires a well thought out strategy, however. First, it’s important to get the right internal co-collaborators on board, that is primarily IT and Audit; and second, you will need to take steps to avoid running into a “bot wall”. There are numerous hurdles that need to be planned for, in order to avoid derailment.
While we are still in the early days of automation, IA tool providers are driving the industry further and shared services leaders do not want to miss out on the next great invention. A majority are already planning on integrating chatbots, cognitive solutions, machine learning, artificial intelligence, and blockchain. AI is grabbing many of the headlines. Last year, we asked whether AI was on shared services leaders’ agendas. Although actual implementations were low, more than 60% of respondents indicated they were considering it. This year, these plans are solidifying. Of those intending to integrate additional intelligent automation solutions, more than half are committed to incorporating AI and machine learning in their operations.
The interest in globalized services continues, as 17% of respondents have confirmed full GBS implementation and 15% have partial GBS. A significant segment is also committed to pursuing it in the next three to five years. This interest in the global model is driven predominantly by the urgent need to leverage automation across an increasingly broader scale. The global process ownership conferred by GBS, and the extent of standardization the model implies, are both key factors that determine the ability to roll out automation. In addition, (and this is significant) the ownership of global processes reduces the resistance that automation teams frequently encounter in attempting to scale.
The value-add of knowledge work is what many SSOs are chasing this year and is based not just on doing work, but completing it (in the same amount of time) with a better understanding. A large segment believes itself to be successful in developing road-maps and setting targets. Data analytics and business insights provide the opportunity for SSOs to offer more in regards to consultative and advisory support. These advanced services are often referred to as “knowledge” services, meaning they require understanding, insights and expertise on top of real-time data to deliver value.
The largest talent challenge for Latin American SSOs has to do with hiring and maintaining talent that possess an innovative mindset and have the ability to think outside the box. Thinking outside the box relates directly to the biggest skills deficits: data analytics, automation, and innovative thinking. Overcoming these deficits will depend on the ability of employees to understand the nature of the work being done in order to come up with innovative solutions and insights.
Supporting management in transitioning to managing a digital workforce, alongside a human workforce, presents significant challenges to HR leaders – predominantly in identifying, recruiting and fostering the mindset and skill set required to move forward. One of the difficulties is supporting management in transitioning to a hybrid workforce. This is causing a lot of anxiety, which organizations are countering mostly through change management and training.
Join us at the 13th Annual Shared Services & Outsourcing Week Latin America!
Whether you are a domestic Latin American company assessing your shared services capability, or focusing on optimizing your existing shared services, or a Global Multinational corporation looking to establish a service footprint in Latin America, this cross industry, cross function event will help you unlock your service potential! View the 2019 event guide to learn more. To view the 2019 event guide in Spanish, click here.