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Today’s Webinar is brought to you by Everest GroupToday’s Webinar                               Upcoming WebinarCut Your S...
Q&ATo ask a question during the Q&A session   Click the question mark (Q&A) button located on the floating tool bar in the...
Introductions   Michael Fraley                                       Holly Bush   Partner                                 ...
Cut Your SG&A Costs by 30% ormore by Building the Right ServiceDelivery ModelWebinar: July 8, 2010
Four Discussion Topics   1. Understanding   Sourcing in Today’s       Environment                  2. What is a Hybrid    ...
The scope of shared services is becoming broader,deeper and more sophisticated – leading to therethinking of service deliv...
“Best Practice” characteristics are prevalent insuccessful shared services implementationsBest Practice characteristics  S...
Across all SG&A functions, HR, Finance, Supply Chain      & Procurement, and IT continue to be the leading      candidates...
Leading companies are continually moving theirShared Service offerings up the value-chain                                 ...
When considering globalization, it is important to notethat various regions are in different states of readinessNorth Amer...
Four Discussion Topics   1. Understanding   Sourcing in Today’s       Environment                  2. What is a Hybrid    ...
A strong service delivery model should look at alldelivery optionsThe delivery solution should focus on cost, capacity and...
Various delivery models have strengths andweaknesses – this has led to the use of hybrid deliverystructures         Shared...
Four Discussion Topics   1. Understanding   Sourcing in Today’s       Environment                  2. What is a Hybrid    ...
Best performing organizations are moving towardshybrid service delivery modelsRationale  Provides a model that can be proa...
When determining the desired model, organizationsinvariably wrestle with four design dimensions – andthe dimensions are in...
In addition, the organization must evaluate the impactof the service delivery model based on several criteria             ...
Four Discussion Topics   1. Understanding   Sourcing in Today’s       Environment                  2. What is a Hybrid    ...
The business case for moving to a new servicedelivery model should assess a range of inputs•   Future state design tenets ...
Shared services organizations typically see a 30% to40% reduction in costs when they use a deliberate andmanaged approach ...
The business case should not be built on costreduction alone, but also on additional value andbottom-line (revenue generat...
Ongoing collaboration with stakeholders will build theconsensus/advocacy required to successfullyimplement a new operating...
Summary of key messages  A hybrid service delivery model can improve SG&A costs by more than 30%  while enabling back-offi...
Q&A   Attendees will receive an email with a link to download today’s webinar presentation. To access a   recorded audio v...
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Cut Your SG&A costs by 30% of more by Building the Right Service Delivery Model

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Everest Group experts, Michael Fraley and Holly Bush, will discuss how the world’s best performing companies are optimizing their service delivery models by leveraging a mix of shared services, offshoring, and outsourcing approaches.

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Transcript of "Cut Your SG&A costs by 30% of more by Building the Right Service Delivery Model"

  1. 1. Today’s Webinar is brought to you by Everest GroupToday’s Webinar Upcoming WebinarCut Your SG&A costs by 30% of more by ADM Price Benchmarking: Making It WorkBuilding the Right Service Delivery Model in Your Complex EnvironmentSynopsis: Thursday, July 15, 2010Everest experts, Michael Fraley and Holly 10:00 AM CDT/11:00 AM EDTBush, will discuss how the world’s best Speakers:performing companies are optimizing their Ross Tisnovsky, Vice President –service delivery models by leveraging a mix Research, Everest Groupof shared services, offshoring, and Sarthak Brahma, Practice Director, Pricingoutsourcing approaches. Assurance, Everest Group Rahul Gehani, Senior Analyst, Price Assurance, Everest GroupAbout Everest GroupEverest Group is a leading consulting and research firm that comprehensively servesthe Global Services landscape encompassing shared services, offshoring,outsourcing. An industry leader since creating the sourcing consultancy practice in1991, Everest has earned a worldwide reputation for on-going innovation by helpingclients capture optimum value through sourcing strategies and implementation.Committed to thought leadership, Everest is noted for its fact-based analyses andinsights that are crucial to making the right decisions in today’s environment. 1For more information, contact Mark Williamson2010,mark.williamson@everestgrp.com. Proprietary & Confidential. © at Everest Global, Inc.
  2. 2. Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 2 Proprietary & Confidential. © 2010, Everest Global, Inc.
  3. 3. Introductions Michael Fraley Holly Bush Partner Associate Partner Everest Group Everest Group michael.fraley@everestgrp.com holly.bush@everestgrp.com 3 Proprietary & Confidential. © 2010, Everest Global, Inc.
  4. 4. Cut Your SG&A Costs by 30% ormore by Building the Right ServiceDelivery ModelWebinar: July 8, 2010
  5. 5. Four Discussion Topics 1. Understanding Sourcing in Today’s Environment 2. What is a Hybrid Sourcing Model? 3. Determining the Optimal Delivery Solution 4. Building the Business Case for Change 5 Proprietary & Confidential. © 2010, Everest Global, Inc.
  6. 6. The scope of shared services is becoming broader,deeper and more sophisticated – leading to therethinking of service delivery models requiredHistorical context Current State Transactional services were primary Operations are broadening to cover candidates for sourcing of services more than just the transactional Customer facing and expertise services functions (e.g., R&D in typically stayed within the functions Pharmaceuticals) Shared services and outsourcing were More complex, expertise services are either/or decisions being added (e.g., Treasury, Analytics, External providers were left on their Exception Handling) own to deliver services, and were not Shared services and outsourcing are proactively managed converging into an “AND” proposition As outsourcing becomes an integral part of the Shared Services solution, providers are becoming an integral part of the Shared Services organization Best performing shared services organizations are re-evaluating their portfolio of services to determine the optimal service delivery model and how to balance sourcing models to ensure effectiveness and efficiencies. 6 Proprietary & Confidential. © 2010, Everest Global, Inc.
  7. 7. “Best Practice” characteristics are prevalent insuccessful shared services implementationsBest Practice characteristics Service Delivery Model Development – Moving from standalone local or regional operations to a “hybrid’ mix of organizations to best support the customer Sourcing Strategy – Use of the best solutions for the company whether it is outsourced or in-sourced Globalization – Use of global footprint to improve and expand support, including implementation of the COE strategy Entrepreneurship & Organization Development – Well-defined organization and governance structure operating as an independent entity Extension of Portfolio – Moving up the “value-chain” by supporting company specific and non-transactional processes Skills & Talent – HR policies / processes positively impact staffing, development and retention focusing on the development of a customer service mindset 7 Proprietary & Confidential. © 2010, Everest Global, Inc.
  8. 8. Across all SG&A functions, HR, Finance, Supply Chain & Procurement, and IT continue to be the leading candidates for shared services/sourcing Human Finance & Supply Chain & Resources Accounting Procurement Full Service HR F&A SCM BPO Strategy Strategy Strategy Information Mgmt Budget/Forecast Plan – Forecast General Accounting Buy – Source Performance Mgmt Treasury & Risk Mgmt Make – MRP Regulatory & Compliance Mgmt Reporting & Analysis Transactional Move – Fulfillment Recruitment & Selection Fixed Asset/Cap Budget Trans & Logistics Admin BPO Training & Development Accounts Receivable Storeroom Administration Compensation Internal Audit Acnts Warehouse Administration Payroll Payable Proc Admin & Rec to Pay Benefits Tax Call Centers Applications Maintenance Voice & Data Networks Help Desk DesktopITO Data Centers ERP Applications Development IT Strategy 8 Proprietary & Confidential. © 2010, Everest Global, Inc.
  9. 9. Leading companies are continually moving theirShared Service offerings up the value-chain StrategyProfitability Analysis Key processesMergers & Acquisition Transactional processes The New FinanceBudgeting Creation ProfessionalStrategic Planning F&ATreasury strategyInternal Financial ReportingExternal Financial ReportingForecasting Capital budgetingTax Planning Internal auditFinancial Analysis Growing Treasury & risk management OffshorabilityRisk ManagementBudget Management Budgeting/forecasting Regulatory reporting & complianceTax Compliance – Payroll, Management reporting & analysisVAT Tax CurrentAccounts Receivables Offshorability TaxGeneral AccountingCredit & Collections Fixed assetsAccounts Payable General accountingTravel & Expense Payroll Accounts receivable Accounts payableBilling & Invoicing Payroll Accounts payable & T&EPayroll 9 Proprietary & Confidential. © 2010, Everest Global, Inc.
  10. 10. When considering globalization, it is important to notethat various regions are in different states of readinessNorth America Europe Historical start for shared services Shared services started in Europe after the Cross border center processing and captives U.S. Shared services moving to hybrid models Pan-European models currently the trend Eastern Europe for delivery is frequently used Shared services moving to hybrid modelsSouth America Asia-Pacific Slower adoption of shared services with a Country specific shared services more common recent increase Supports long term growth and cost needs Supports multiple objectives – growth, cost, Language is still a barrier time zone, and language Culture, distance, legal, infrastructure Infrastructure limitations still exist constraints still present challenges 10 Proprietary & Confidential. © 2010, Everest Global, Inc.
  11. 11. Four Discussion Topics 1. Understanding Sourcing in Today’s Environment 2. What is a Hybrid Sourcing Model? 3. Determining the Optimal Delivery Solution 4. Building the Business Case for Change 11 Proprietary & Confidential. © 2010, Everest Global, Inc.
  12. 12. A strong service delivery model should look at alldelivery optionsThe delivery solution should focus on cost, capacity and capabilityStrategic drivers Internal Staff Managed Delivery Augmentation Services Onshore / Onsite Shared Cost Services / Nearshore Local Effort-based Capacity Captive Center Outsourcing Contracting Offshore Capability Captive Center 12 Proprietary & Confidential. © 2010, Everest Global, Inc.
  13. 13. Various delivery models have strengths andweaknesses – this has led to the use of hybrid deliverystructures Shared Hybrid – Shared Services / Services & Build, Operate Captive Outsourced Joint Venture Transfer Outsourced Perceived Combines Shared Rapid Speed to value lowest cost strategies for investment and expansion Transfer of Most control best of both reward capabilities operating andPros IP Protection worlds More control Option to financial risk Portfolio risk Leverage transition in- Maximum management providers skills house variable cost Management Management Potentially BOT Price New focus required complexities lower savings Premium management Capital Additional through labor Transition Risk model investment governance arbitrage Perceived lossCons Time to market overhead Potential for of control longer conflicting Requires goals management Not all retain providers will accountability agree to JVs 13 Proprietary & Confidential. © 2010, Everest Global, Inc.
  14. 14. Four Discussion Topics 1. Understanding Sourcing in Today’s Environment 2. What is a Hybrid Sourcing Model? 3. Determining the Optimal Delivery Solution 4. Building the Business Case for Change 14 Proprietary & Confidential. © 2010, Everest Global, Inc.
  15. 15. Best performing organizations are moving towardshybrid service delivery modelsRationale Provides a model that can be proactively managed as a portfolio and that supports the flexibility and adaptability required by unstable economic conditions Enables SSOs to seek out best fit solutions based on the nature of services delivered Outsourcing versus insourcing Offshoring versus onshoring captive versus on-site Regional centers versus functional centers versus centers of expertise Presents SSOs with vehicles to leverage to improve efficiencies, increase effectiveness and value delivered, become more strategic and positively impact the corporate bottom-line 15 Proprietary & Confidential. © 2010, Everest Global, Inc.
  16. 16. When determining the desired model, organizationsinvariably wrestle with four design dimensions – andthe dimensions are interdependent Aggregate scale and scale for individual functions/skills are Scale both important The greater the scale, the more options available to a company In an effort to attain greater scale (and more options), the degree of centralized decision-making and management must be considered Centralization Most companies aspire to greater centralization for global sourcing efforts, but tend to only achieve for captives and to a lesser extent for third-parties Whether or not a company perceives itself as “global” (customer base, operations, etc.) can have a significant impact on both its aspirations (scope, complexity) and sourcing models Globalization Companies whom have customer-facing operations in offshoring geographies tend to approach global sourcing in those geographies with more confidence (perceptions of risk lessened, more likely to consider a captive, etc.) The choice of sourcing model is both practical (what is easiest/cheapest) and philosophical (what is preferred) Outsource/captive Captives are a more complex strategy because they tend to have less variable cost and risk profiles 16 Proprietary & Confidential. © 2010, Everest Global, Inc.
  17. 17. In addition, the organization must evaluate the impactof the service delivery model based on several criteria • Does the service delivery model provide clarity of services provided (what services, by whom, how delivered, and Service Effectiveness, from where) Quality & Value • Will service delivered meet customer requirements and expectations? • Does the model drive productivity and cost management? • Does the model enable leverage of skillsets, technology, Cost Efficiency and/or scale? • Does the model support on-going continuous improvements? • How complex are the technology integration requirements? Technology • Are technological requirements for the model cost- prohibitive? • Can infrastructure be optimized? • Is the model flexible and adaptable to changes in customer requirements, demand, and Corporate Flexibility strategies? • Does the model allow for mergers, acquisitions and/or divestitures? 17 Proprietary & Confidential. © 2010, Everest Global, Inc.
  18. 18. Four Discussion Topics 1. Understanding Sourcing in Today’s Environment 2. What is a Hybrid Sourcing Model? 3. Determining the Optimal Delivery Solution 4. Building the Business Case for Change 18 Proprietary & Confidential. © 2010, Everest Global, Inc.
  19. 19. The business case for moving to a new servicedelivery model should assess a range of inputs• Future state design tenets should be clearly defined and used for model evaluation• A current state understanding should be developed so that expected benefits, costs, and risks of future models can be evaluated• Multiple design “blueprints” of the model should be compared/contrasted to determine optimal fit and cost / savings scenarios• Trade-offs between in-sourcing (on-site, nearshore captive, offshore captive) and outsourcing must be carefully evaluated and approaches to address defined• Technology requirements must be taken into consideration from a cost perspective• The models should be viewed from a corporate strategy and customer perspective, as well as an effectiveness and efficiency perspective 19 Proprietary & Confidential. © 2010, Everest Global, Inc.
  20. 20. Shared services organizations typically see a 30% to40% reduction in costs when they use a deliberate andmanaged approach for implementing a hybrid modelBenefits from hybrid modelPercentage of cost 5 5 15 5 5 100 95 70 60 Before SSO/ Business Shadow Fragment- Systems Cost Process SDM Cost with Outsourcing case organi-- ed work and tools without improve- improve- managed zations environ- managed ments ments Hybrid ment Hybrid implemen- implemen- tation tation 20 Proprietary & Confidential. © 2010, Everest Global, Inc.
  21. 21. The business case should not be built on costreduction alone, but also on additional value andbottom-line (revenue generating) benefits • Effective leveraging of insourcing versus outsourcing models where most beneficial in terms of effectiveness and efficiency while meeting global, regional and local needs Value • Ability to move up the value chain and provide problem-solving capabilities, specialized knowledge, and consulting-related service offerings • Better leveraging of resources • Heightened service quality • Proactive analysis and insights • Increased sales (e.g., through balanced management of internal sourcing, agencies, and technology to turn Bottom-Line Benefits around quality new hires faster) • Avoidance of building duplicate infrastructures for expertise services by establishing COEs 21 Proprietary & Confidential. © 2010, Everest Global, Inc.
  22. 22. Ongoing collaboration with stakeholders will build theconsensus/advocacy required to successfullyimplement a new operating model Leverage stakeholders to understand customer requirements Include stakeholders in model evaluation, especially when you are working the pros, cons and trade-offs Set expectations early on and be very clear as to what the model is and is not (what work will be delivered, how, and from where), and what levels of performance can be expected (e.g., leverage SLAs) Clearly align the SSO model to corporate goals and strategy so as to present the “AND” side of the equation Establish a clear, understandable and executable governance structure Communicate with stakeholders OFTEN – both during and post- implementation 22 Proprietary & Confidential. © 2010, Everest Global, Inc.
  23. 23. Summary of key messages A hybrid service delivery model can improve SG&A costs by more than 30% while enabling back-office processes and strengthening their ability to provide better management reporting Most Multinationals have already moved to hybrid and regional centers (Americas, EMEA, AsiaPac) Outsourcing has become an integral part of the shared service solution, with the providers being an integral part of the shared service organization Organizations that do not use the optimal service delivery model likely will continue to experience rising costs and sub-optimal processes Gaining consensus with key stakeholders is critical to the success of implementing and managing a successful service delivery model 23 Proprietary & Confidential. © 2010, Everest Global, Inc.
  24. 24. Q&A Attendees will receive an email with a link to download today’s webinar presentation. To access a recorded audio version of this webinar, please contact Mark Williamson, mark.williamson@everestgrp.com For advice or research on shared services delivery models and/or outsourcing, please contact : Michael Fraley, michael.fraley@everestgrp.com Holly Bush, holly.bush@everestgrp.com For background information on Everest, please visit: www.everestgrp.com www.everstresearchinstitute.com Thank you for attending todayTo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 24 Proprietary & Confidential. © 2010, Everest Global, Inc.
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