The German Economy is Leveraging Shared Services

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Ilan Oshri

SSON’s resident "Professor" corners Eva-Maria Winteroll, the head producer for Shared Services & Outsourcing Week Germany (November 20-23 in Berlin) to find out what’s driving developments in this market.

As companies around the world are increasingly tailoring Centres of Excellence to priority regional markets – and there are even signs of pulling outsourced services back inhouse, it’s important to understand the development of shared services across European markets – and Germany in particular. Eva-Maria Winteroll is responsible for putting SSON’s flagship German event together. Here is an excerpt from Ilan Oshri’s interview with her.

Ilan Oshri: Eva-Maria, what are some of the recent trends in the shared service landscape both in Germany as well as in Europe?

Eva-Maria Winteroll: I’m responsible for putting together SSON’s Shared Services & Outsourcing Week Germany, now in its seventh year, so I can talk specifically about the German region. Compared to the UK and other European markets Germany is a late mover on shared services. In Europe, especially the UK, shared services started about 20 years ago – while German firms started paying notice only about 10 years ago. Germany is making up for it, though, because 75% of the country’s big companies – ie, those making up the DAX index – are now operating a shared services model. There is also a huge potential for mid-size companies in Germany to run shared services, however – I am thinking specifically about suppliers to the automotive sector, for example. German firms are moving into shared services because they recognize that there is value in this business and operational model, even with relatively small-scale.

Ilan O.: How are German firms strategically developing the shared service business model?

Eva-Maria W.: In Germany a lot of shared service centres run as captive, probably about two thirds of them. From various studies we get the feeling that many firms are happy to keep their shared services captive and possibly use BPO providers selectively – ie, moving into a hybrid model.

Ilan O.: And in the German context: what functions are most commonly moved into shared services centres and how does this affect the business model that German firms adopt?

Eva-Maria: Generally speaking, in Germany transactional processes had traditionally often been moved into an outsourced model. But with the emergence of shared services we are now seeing more of a mix in sourcing business models than before, as firms are looking for various solutions to the question: "Where can I shave off cost?". This generally leads them to operate in a hybrid mode. Take, for example, Daimler: for the Finance function they run one centre in Berlin, where they have very specific, high level functions for Germany, which also require language skills. But they also have a centre in Barcelona and they’re now moving to the Philippines with their very transactional processes. So this kind of "multi-layer" model, or half-structure, is one that quite a few organisations in Germany use.

Ilan O.: Tell me about the challenges that shared services in Germany face, in particular when it comes to the consolidation of business processes. How do you see this evolving?

Eva-Maria W.: I think the biggest challenge – and it’s also the source of the most common mistake organisations make – is treating this as a ‘lift and shift’ exercise. Many organisations took the whole organisation and moved it somewhere else, to gain advantages, but they didn’t look at the processes before-hand. So there was already a lack of standardised processes and that created problems – especially when it comes to managing talent.

Ilan O.: While challenges will always present themselves, we do see massive growth in this sector. Which business function do you think is the biggest candidate for shared services in Germany at the moment?

Eva-Maria W.: What we are experiencing in Germany at the moment is a lot of potential and investment in the procurement area. It is about indirect procurement, where massive savings can be introduced. So my answer would be mainly in procurement, but we are also seeing growth in functions like the supply chain and legal processes.

Ilan O.: And what is your view on the effect of consolidating business functions in shared services and the organisation’s ability to effectively manage its value chain?

Eva-Maria W.: I think that these two elements, consolidation and the value chain, are central to understanding how to manage multi-tower models. In the end, it is about managing end-to-end processes; it is about recognising synergies, and therefore moving specific, productive functions into a shared centre. So it’s not just about outsourcing a function, but more about, "Look, if we have a finance shared service centre, perhaps we can add value by adding some procurement functions there?" That is how we should look at the value chain.

Ilan O.: Innovation is an interesting area. To what degree are you seeing innovation happening in German SSOs?

Eva-Maria W.: Well, I am concerned that innovation may become a buzz word and so I am constantly asking: "Well, what is innovation really?" I think that in our context [shared services] for many organisations it’s still about costs. But I would also say that innovation in shared services is often about flexibility and agility. You change your business model; you become agile; you change your delivery model; and you constantly benchmark. It might not be big, but it will help you compete.

Ilan O.: And what do you think is driving change at the moment in the shared services and BPO market?

Eva-Maria W.: I think what is driving change in the BPO market in Germany is technology-sation – adding more technology to solutions. Many organisations at the moment are investing in automation and data analytics that drive process improvement and change. This is one of the main topics we’ll discuss at the German SSON week in November.

Ilan O.: Many thanks for sharing your views, and good luck with your upcoming event.