The Moreira Chronicles: Bangemann and Zabel on Global Business Services [Part 2]
Over the past year, Pedro Moreira has written a series of columns for SSON summarizing his experience in rolling out an enterprise SSO model to a subsidiary, emphasizing the pros and cons of this approach.
Following the conclusion of this series, Pedro interviewed two well-known practitioners – Tom Bangemann of the Hackett Group and Kai Zabel of Heraeus Group, both highly respected practitioners in the field of Shared Services, with decades of implementation experience. Over the next two months, we are sharing a transcript of these interviews right here, covering the role of the SSO, its evolution and future trends; implementations and operations; and a discussion around GBS and new robotic technology.
Left: Pedro Moreira, Shared Services Expert
Middle: Kai Zabel, Head of Shared Services for Accounting, Heraeus Group
Right: Tom Olavi Bangemann, Senior Vice President Business Transformation at The Hackett Group
Part 2: Global Business Services
PM: From your perspective, what future trends can we expect for Shared Services industry in the next 5 to 10 years? Tom was mentioning the GBS model for instance. So, what can we expect?
Tom Bangemann: Just to explain what I meant with GBS, the vocabulary in this model is used slightly differently; so, depending on how you talk today might be slightly different. What we mean by Global Business Services, or GBS, is basically a more mature version of shared services but it’s also a bit broader in terms of being multi-functional, including all sourcing types. If you have a hybrid model, then GBS would include anything you do yourself in captive centers and anything that you have outsourced because you would run it from your GBS organization. It would also include all types of centers, transactional shared services centers but also what we call COE’s, centers of expertise or centers of excellence, some people call it competence centers. Center type units, which are consolidated and perform certain tasks but they might not be transactions. You might have for example a sourcing COE that is looking into your sourcing strategy and making agreements and selecting supplies and so on, it’s not necessarily very transactional. You might have controlling type activities that are in the COE, you might run your planning processes out on the COE. So you might have different activities like that, which to some extent are maybe transactional activities, but overall people would not consider them transaction. But you can still do them from a consolidated environment.
Long story short, you can have different type of centers but all of these centers would be included in a GBS approach. So, GBS is mostly about the governance. That means: I’m not having 17 centers across the globe and every region or business unit does whatever they want, but rather I have a holistic enterprise wide concept and I have all of these under the one umbrella and that is my GBS organization. They ultimately all do report to one person, it’s a feature of how you set it up, it doesn’t have to be. In most cases it will be, but it doesn’t have to be. You can also have GBS without solid reporting launched into one place. But the point is that you have set up and thought about your overall governance, that’s GBS. In terms of your question about trends, GBS we already have today to a large extent. We actually have a majority of companies already in GBS.
In terms of new trends for tomorrow there are many we can mention but just to throw a few, I think what is the most exciting topic currently is actually technology, because if you look at this shared service/GBS topic over the last 5 years, when we got a new GBS study or research piece I always read it kind of “this one is past life in consulting” you know, there’s always new numbers and new stuff, but it is really always the same stuff. You update your numbers, you update your slides, there is a slightly different weightings and topics and so on, but it was always very similar for the last few years. Now, in the last 1 or 2 years it’s getting more and more exciting because there is so much technology development going on and it’s not only things like robotics, but that’s one of them, there are also things like language translation and all these things that you customize under SMAC, social mobile analytics cloud and all these things. It’s quite exciting because there is lots happening and the outlook is either very exciting or very disturbing depending on who you are.
For example, on the robotics topic, there are great studies in the market from McKenzie and others on how many jobs are going to be eliminated by robots in the next 10 years and if you look at those studies they’re really scary in some ways, you’re sort of going to ask “what is everybody going to do then?” It’s very exciting from a business case or a company point of view, from an individual’s point of view working in this environments, it might be grimmer.
Kai Zabel: I might have a slightly different view of history and the future. Shared services in general was actually enabled by technology. One of the key drivers in the past as well as in the future is technology. I strongly believe that this makes automation one of the key drivers in future as well. A lot of companies do not have a well-developed global GBS organization d So I think that one of the trends in the future will be that those companies which are not the forerunners in shared services will follow and they will extend their scope. The scope development is exactly what Tom described: moving away from transactions and moving more into value based services. Automation will be one of the future trends with IT developments and I expect that location itself will get less important, due to the fact that automation will become even more important.
PM: So you see, for example, companies moving back for to the US or to Europe instead of low wage countries where they were in the past?
KZ: A macroeconomic fact is that there will be salary arbitrage every now and then, but the magnitude of those will decline. If automation becomes more important and salary arbitrages are shrinking location gets less important. At that stage the value based services become much more important. The question whether you can get the right talent rather than whether they are cheap or not.
TB: On that topic I think it’s a huge trend which we obviously can’t be sure, but I think you need to split it up into a few things. So, one is: if you think of the transactional environment, then much of the transactional environment will be automated, with robotics and with other automation. So, in general, staff that works in that environment reduces. But I don’t think the model reduces, and I don’t think it will be taken back, because those people that then govern those activities that are mostly done by robots are going to still stay wherever they are today. So if they sit in Poland or China today, they’re not going to get those people back. That’s one thing.
Secondly, when you think about the added value piece, the more skilled or knowledge base piece which is added, more of that might be onshore and not offshored as before. That’s because you’re getting higher and higher in the skill and knowledge, and depending on where your activities come from, sometimes you actually do struggle with certain capabilities in certain locations. Not yet with things like controlling and so on, but with some other things you can, like if you get into supply chain activities or marketing activities or IT activities.
To give you an example, Statoil is a Norwegian oil company. Nowadays, they produce the software that runs their robots on the sea bed of the North Sea looking for oil and they program the software in their GBS. Now, that is pure core business in regards to an oil company and it’s coming out of a GBS. So the logic was: if I have all technology capability, programming capability and education maintenance capability in this organization, why the heck would I set up another unit somewhere else, to have people do something like that and not utilize the pool of technology capability for that also? It’s a very core process, in their case it’s located in Norway and I doubt that they would move it into some other location, even if they moved transactional activities into some other locations. So, I do think there are some activities that are not going to migrate or maybe even move back (Europe/US) but I don’t think it is transactional ones, I believe it’s more of the value added ones.
But we don’t know, this is our guess…