Charting A New Journey with Shared Services

Posted: 09/05/2019 - 09:29
Charting A New Journey with Shared Services

Now is the time for business leaders to prioritize shared services innovation, rethink their operating model and fully harness the capabilities of emerging technologies. Those that do will reap the benefits; those that do not risk falling further behind their better-placed competitors.  

Deloitte’s 2019 Shared Services Survey has found that leading shared services centers (SSCs) were early adopters of automation and have rapidly become hubs of other innovative work – and that the best quickly realize value in multiples beyond initial cost efficiencies by reinvesting in these operations. To do so, they continually reexamine and challenge their operating model – both at the functional level in finance, HR, procurement and more, and in broader strategy – to find opportunities to move the needle on the enterprise bottom line. 

Several trends have combined to make shared services nimbler, more useful and a better value for businesses: 

  • Cloud, 5G Solve Infrastructure Challenges: Technologies like cloud and 5G mean that SSCs no longer require costly and complex architecture on-site to work effectively. That means more agile, more effective centers that can be built wherever talent and other market factors allow them – without needing to spend on fixed cost data centers and infrastructure.  
  • More Support, Stronger Talent: Markets that support SSCs – even at the country level – have dedicated, proven public policy in place to build capabilities accordingly, in secondary school and in other job-training programs. 
  • Doubling Down on “Global” Business Services: According to the survey, 59% of SSCs have global coverage – up from 21% in 2017. As operations scale rapidly, SSC functions report more to overarching global business services leadership, which drives further integration across the organization. 

Technology Jump-Starts Shared Services Capabilities

Automation and other innovative technologies have reduced transactional work, freeing up capital for reinvestment and redefining shared services in the process. As automation technologies eliminate lower-value work and rote tasks, approximately 50% of the savings are being reinvested in further enabling SSCs through technology, talent, facilities and process improvements. 

The survey, for example, found an eight-fold increase in the number of companies to have automated at least one end-to-end process since 2017. As nine of 10 respondents agreed that digital capabilities were central to achieving organizational objectives, this kind of rapid technological progress has helped companies recoup their technology investments more quickly: 50% of survey respondents recovered their investment within the first two years and 80% within three years. 

In addition to automation, cloud technologies continue to create significant value among digitally-savvy businesses: More than nine out of 10 respondents in Deloitte’s 2018 Global Outsourcing Surveysaid their organizations are adopting or considering the cloud. As business functions either move offshore or fall under the remit of increasingly capable shared services centers, cloud technologies allow seamless interoperability and enable centers to scale rapidly. 

In turn, advancing technology has led to evolved expectations—with SSCs taking on more front-of-house or middle-office capabilities and delivering tangible business value as critical components of strategic areas ranging from procurement to supply chain and manufacturing. Supply chain and sales and marketing, for example, saw growth of 33 and 35%, respectively, in the survey, as SSCs gained greater responsibility to handle and execute integral strategic operations – and open entirely new and disruptive operating models to businesses. 

Tech-Savvy Talent Emerges As A Differentiator

As technology continues to reshape both the nature of work and the capabilities of SSCs themselves, talent needs have evolved dramatically. Labor quality saw a five-fold increase in this year’s survey, demonstrating that talent has become an essential component of SSC decision-making. Without the right talent to perform new, complex and high-value tasks, SSCs will not be able to make the most of the technological innovations at their fingertips. 

This establishes a give-and-take between low-cost and high-value talent, where shared services teams continually work to strike a balance that drives the greatest overall value for the business. 

Each company, driven by different drivers, imperatives and tolerances, approaches the location decision differently. The individual companies’ confidence in its ability to recruit, train and retain talent often dictates the location decision as the availability of talent continues to be a critical and possibly the most significant driver of SSC locations. Some countries have invested in the development of a talent pipeline tailored to the needs of the shared services community. Other locations leave the training and development to the shared services community, with varying degrees of effort necessary to create a quality workforce.  

For reasons, including cost, time zone, talent depth and risk, companies have focused on various locations such as the U.S., Costa Rica, Mexico, Poland and India for North America focused operations. However, each region continues to see strong competition as companies develop and manage to their own, unique set of drivers and criteria.

Culture Development Essential For Top Talent

Survey respondents cited “development of a strong culture” (72%) as a top method to attract and retain talent in shared services.Relatedly, the survey found that compensation was no longer the leading factor for labor satisfaction within a shared environment; strong work cultures and flexible work schedules drove retention more than compensation, and fringe benefits and other costs have made talent more of a cultural investment than in years prior.

Driving this kind of culture change can pose significant challenges for corporate leadership and shared services professionals alike. The most successful businesses – and C-suites – are working towards cultural congruence across their operating model, holding the same standards regardless of where the work is being performed. This truly global mindset leads to creative, collaborative and agile organizations that perpetuate the dynamic culture their businesses – and their talent – demand. 

Challenges Remain – But The Promise Is Real

Still, some “fear factors” remain for businesses looking to make more out of shared services. For one, many leaders believe that the unique, specialized circumstances of their business present daunting challenges. In fact, the modern shared services model unlocks unprecedented agility and can fit seamlessly into most businesses. 

Second, some corporate leadership teams may struggle to achieve buy-in and support from other influential leaders – namely, business unit presidents and functional leaders – without making a clear, strong case for holistic operating model change. This is especially the case when front-office teams may not be aware of the function and utility of SSCs.

Yet it’s clear that SSCs can quickly prove their value, and as technologies improve rapidly, they will be able to shoulder more complex and value-added tasks. Companies that don’t look critically at their business to find opportunities to innovate and improve services will be left behind. It’s essential to get started sooner, rather than later. 

It all starts with a look in the mirror. 


About The Author

Alec Kasuya's picture

Alec Kasuya advises Deloitte’s largest multinational clients on their global services and operating model transformations. He specializes in margin improvement, global market access and operating model and digital innovations. Alec has helped companies across industries start up and expand their service operations in Europe, Asia and Latin America. He is a graduate of Colby College and Columbia University.