COVID-19: How shared service centers are weathering the crisis

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Niklas Oldiges
06/30/2020

Shared services are surviving the pandemic relatively unscathed thanks to proactive crisis plans and digitalization.

Currently, COVID-19 is wreaking havoc on business, leaving many losers and very few winners in its wake. The good news for the global business services (GBS) and shared service center (SSC) sector is that, by and large, service organizations around the globe have been able to rely on their effective contingency plans. Most of them have risen to the challenges of lockdowns and social distancing with a minimum of disruption to their services. But there is no doubt about it, the coronavirus pandemic is a tough stress test. Like a receding tide exposing shallows in the sea bed, COVID-19 is unrelentingly revealing the weaknesses of GBS organizations.

COVID-19 is challenging the world

The art behind shared services and outsourcing business is to pinpoint the countries and regions which offer the best possible economic climate for the services concerned – embedded in a stable political and social environment. Ideally, that country should also have an established infrastructure of service providers. Large corporations often prefer to set up their own local subsidiaries to take care of certain tasks for the entire organization, be it accounting, human resources or finance and back office jobs. Some companies also choose the offshore model for contact services such as customer service or social media management.

The global nature of shared services and outsourcing can be a stabilizing anchor for a company’s own business – at least when it is organized so that offshore service centers can plug service gaps at other locations in an emergency. But this has proven to be increasingly difficult in the COVID-19 crisis.

As COVID-19 spread around the world, fewer and fewer service center locations were able to pick up the slack, and working from home quickly became normal.

Several large German companies had mixed experiences in the first few weeks of the coronavirus outbreak. One corporation reported that the switch to home-working went extremely smoothly on the Philippines, where people are familiar with the evacuation of office buildings due to the typhoon season. Another firm met with bigger problems in India, where, with a combination of strict lockdown rules and the fact that the outsourcing organization was not geared to mobile working, desktop PCs had to be shipped to staff at their home address and stable internet connections had to be set up – all under immense time pressure.

Eastern European countries such as Poland, the Czech Republic or Romania are also popular locations for German companies’ shared service centers and outsourcing operations – and they also had tight lockdowns. However, the service companies there have a high standard of contingency plans and technical infrastructure and were therefore able to continue to provide services with very few problems.

Why home-working should be part of every crisis plan

In fact, it was easy to pick the winners and losers in the coronavirus pandemic. Pure outsourcing service providers were least equipped to cope with the situation, while in-house shared service centers displayed outstanding qualities in the stress test. As far as technology was concerned, many were well prepared. Most centers had already provided their staff with laptops. On the other hand, outsourcers were often lacking decentralized computer infrastructure and struggled to install hardware at employees’ homes. This posed many problems and took its toll on service delivery.

Every crisis plan should contain steps to make sure that employees have the means to work securely from home, and as the coronavirus pandemic has shown, this is not only relevant for countries frequently hit by natural disasters or other crises.

One could say COVID-19 separated the wheat from the chaff. There are shared service centers who were battling to adapt to the crisis, and still are. On the other hand, there are service companies who were quickly able to give added support for core business activities with enhanced debt management and planning cost-cutting initiatives, for example.

Digitalization is the game-changer

One other thing that has become clear is that the more digitally mature a company, the more robust it is. This is especially true of contact service providers, but also applies to pure-play administrative service companies. Digitalization goes hand in hand with virtualization, i.e., using software to emulate business and communication processes. It allows processes to be accessed wherever a suitable internet connection is available. Companies with a high degree of digitalization have also often invested heavily in agile business processes and employee flexibility and mobility. This not only advances their business, but also provides a master plan for preparing for crises such as COVID-19.

Digitalization and virtualization are becoming a critical competitive advantage. When there is no need to process paper-based invoices manually, it does not matter where your staff are located.

Communication tools are also available to facilitate web-based virtual meetings, collaboration and learning, and process and documentation software can be used online. The need for personal communication – for onboarding, internal consultations and planning, working meetings of entire teams – and for training and continuing education can be largely met without having to be physically present. This is a massive benefit in times when we are urged to stay at home and/or unable to get to work – and gives a lead over service providers who are not as digitally mature.

What we can learn from the coronavirus crisis

The price we pay for becoming independent of manual processes and physical presence is a huge reliance on IT and the internet. There is a constant threat from cybercriminals seeking to steal data or to extort money by installing ransomware. Attacks on the equipment and connections of employees working remotely have been soaring recently. But this also underscores the argument that digital companies are at an advantage. They had secure IT infrastructure up and running before the crisis set in and escaped the extreme time pressure facing other businesses during the crisis.

We have not yet overcome the pandemic, but some important lessons for GBS/SSC have already emerged:

  • In the future, modern methods of working such as remote or mobile working will feature more heavily in crisis plans.
  • Demand for digitalization and virtualization technologies will increase during and after the crisis.
  • Elements of GBS/SSC business models which failed the coronavirus stress test will be scrutinized and certain countries, service organizations or leadership teams will be replaced.
  • Leading GBS/SSC providers who have actively supported their customers through the crisis will more closely serve as a transformation engine for the divisions and business segments.
  • GBS/SSC, and to a lesser extent, the outsourcing model have proven to be astonishingly resilient. This will strengthen their role as go-to providers of administrative and contact services.

Conclusion

The coronavirus pandemic has provided a tough stress test for shared service centers and outsourcing providers. Most companies were able to uphold their services without being severely compromised. But in some cases the COVID-19 crisis has mercilessly revealed their weaknesses. The winners are those organizations with robust crisis planning and a mature level of digitalization.

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