GLOBAL BUSINESS SERVICESTaking Business Support Functions to the Next LevelBill Huber, Partner, ISG; and Sue Danino, Partn...
INTRODUCTIONAs economic pressures continue to abound, many corporations are lookingwithin their organizations to determine...
WHAT DO WE MEAN BY “SHARED SERVICES?”                        countries such as India and China. However, we draw a        ...
Global business services organizations literally manage and control most, if not all, of a corporation’s general andadmini...
MANAGING GBS AS A BUSINESSCertain factors play a role in the success of any business. Here are the key characteristics to ...
LOOKING FOR A STRATEGIC PARTNER?Bill Huber and Sue Danino are Partners with ISG.Contact the authors at bill.huber@isg-one....
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Global Business Services: Taking Business Support Functions to the Next Level

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As economic pressures continue to abound, many corporations are looking within their organizations to determine how to improve operations and reduce costs. Cost constraints, efficiency gains and productivity measures are commonly sought to achieve this objective. It is no surprise that development of or improvement in an enterprise’s service delivery model is desired. Many companies have developed some aspect of shared services, and many more have embraced the outsourcing service delivery model as one lever to drive economic improvement. However, we believe there are plenty of opportunities remaining with respect to shared services in general along with some terrific opportunities for an emerging concept called “global business services” to drive significant improvement and manage all service delivery model alternatives.

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Global Business Services: Taking Business Support Functions to the Next Level

  1. 1. GLOBAL BUSINESS SERVICESTaking Business Support Functions to the Next LevelBill Huber, Partner, ISG; and Sue Danino, Partner, ISGwww.isg-one.com
  2. 2. INTRODUCTIONAs economic pressures continue to abound, many corporations are lookingwithin their organizations to determine how to improve operations andreduce costs. Cost constraints, efficiency gains and productivity measures arecommonly sought to achieve this objective. It is no surprise that developmentof or improvement in an enterprise’s service delivery model is desired. Manycompanies have developed some aspect of shared services, and many morehave embraced the outsourcing service delivery model as one lever to driveeconomic improvement. However, we believe there are plenty ofopportunities remaining with respect to shared services in general along withsome terrific opportunities for an emerging concept called “global businessservices” to drive significant improvement and manage all service deliverymodel alternatives.GLOBAL BUSINESS SERVICES ■ BILL HUBER & SUE DANINO 1
  3. 3. WHAT DO WE MEAN BY “SHARED SERVICES?” countries such as India and China. However, we draw a distinction between having a global presence of sharedA successful shared services model typically incorporates service centers and an emerging trend we call “globalthese concepts: business services (GBS).” How is global business services Focused company resources different from having shared services around the world? Process ownership as a key characteristic Critical values of partnering, teamwork and adding WHAT DO WE MEAN BY “GLOBAL BUSINESS value SERVICES?” Effective leverage of tools and technology Accountability by specialists with service focus There are as many definitions of the term “global (internal and external) governance principles business services” as there are companies; however, most of these definitions go well beyond simply having Center of excellence and a company asset for shared services operations around the world. We like to developing talent broaden the definition as follows: Results that emphasize efficiently meeting customer requirements “Global business services:” An integrated compilation of Focal point for company best practices service offerings for any (multiple) support functions within a company. This compilation of service offerings isMany organizations struggle in their quest to set up a global in nature with respect to both delivery centers andsuccessful shared services organization. Often, the customers. The provider of the individual services can bestrategy begins with a consolidation of facilities and either internal or external but must be managed centrallyresources. While this is a necessary step in the early by the global business services organization. The servicephase of a plan, a mere consolidation without a long- offerings themselves are harmonized and end-to-end interm strategy for a service delivery model will not be nature.”sufficient. GBS characteristics typically consist of:Some corporations have a vision that standardization of Standard (“80/15/5 rule”) processes aroundprocesses is the solution. Again, this may be a 1 the globecomponent of your strategy but cannot stand alone. One global organizationAnother common pitfall is a view that shared servicesshould handle only transaction processing at a lower Global process ownershipcost. Transaction-based processes do deliver a high Integrated application suite(s) across thepercentage of the economies-of-scale benefits from enterpriseshared services, but there are also economies of focus Virtual centers of expertise to build and(management skills) benefits that can be leveraged disseminate subject-matter expertise and toolsetsbeyond transaction-based processes. There is also a Practices that result in the organization being runperception that business units may lose control and like a standalone businessinfluence in “giving up” some non-core functions. The Ability to move work from one location to another“shared” in shared services is meant to reflect the for business continuity or to simply takesharing of goals and accountabilities between business advantage of competitive differentials (responsiveunits and the shared services organization, so there and nimble)should be no loss of control. Done properly, establishing Organizational construct that is product- ora true shared services organization will overcome these capability-centric, not customer-centriccommon mistakes and misconceptions.THE GLOBALIZATION OF SHARED SERVICESShared services organizations began appearing in thecorporate landscape of the United States in the late 1 The 80/15/5 rule is a derivation of the Pareto Principle that1980s and have been expanding on a global basis ever refers to this rule of thumb: 80 percent of a process can besince. Today, many large corporations have shared standardized on a global basis; 15 percent of a process can andservices organizations in most of the regions of the world should be standardized on a regional basis; and 5 percent canin which they do business, including several captive and should be standardized on a country or local level.shared service centers in low-cost “destination”GLOBAL BUSINESS SERVICES ■ BILL HUBER & SUE DANINO 2
  4. 4. Global business services organizations literally manage and control most, if not all, of a corporation’s general andadministrative functions. The organization is managed as if it were a standalone business from the parent organization. Inmany cases, in fact, the GBS unit is a separate legal entity. The skills required to manage a single-function global network ofservice delivery centers are effectively leveraged across multiple functional areas — regardless of the service deliverymodel employed. In most cases, it is a mix of service delivery models, from captive offshore delivery centers to domestic(traditional) shared services centers to outsourced delivery models. The latest trend is to establish “hybrids,” wherebyshared services is fully integrated with an outsourcing model for a specific function or even a specific process.GLOBAL BUSINESS SERVICES VALUE DRIVERSAlthough traditional shared services deliver value in many ways, the most visible ways involve capturing cost savingsthrough economies of scale, simplification and standardization. Global business services, on the other hand, are designed tocapture additional value through: Economies of scale: savings driven by leverage/size of organization Economies of scope: savings driven by leveraging management and expertise across multiple service offerings Simplification: savings driven by removing (often unneeded) steps from a process Standardization: savings from having one standard method or process Visibility: value derived from having visibility across an enterprise (e.g., human resources knowing how many engineers there are in the company and where they are located) Access to talent: value derived from the ability to harness the best talent pools in the world Labor arbitrage: savings from lower-cost resources in different locations throughout the world Skill arbitrage: value derived from access to higher-skilled labor (implied at lower costs/ economically feasible costs) Pure arbitrage: value derived from the ability to shift work from one location to another to take advantage of shifts in the factors of productionTYPICAL GBS SCOPE BY FUNCTION AND INDUSTRYAs mentioned above, most GBS organizations tend to manage several general and administrative functions for their parentcompany. Following is a table indicating the scope for six GBS organizations that have arguably advanced the concept thefurthest:Function CPG – 1 Telecom Equip Mfg. Auto Mfg. Energy CPG – 2F&AHRIT InfrastructureIT ADMProcurementCustomer RelationsCREFleetLegalParts ManagementSupply ChainNetwork (core)R&DGLOBAL BUSINESS SERVICES ■ BILL HUBER & SUE DANINO 3
  5. 5. MANAGING GBS AS A BUSINESSCertain factors play a role in the success of any business. Here are the key characteristics to running global business servicesas a business and achieving success: Leadership: establish support from chief financial officer, chief executive officer and business units (a requirement for success) Urgency: develop a sense of urgency in the implementation Costs: define base costs accurately to enable measurement of success Resources: utilize your best demonstrated practices and personnel for input and implementation; budget for and commit internal and external resources from the start Location: ensure easier transition by using a "greenfield" site (new location) Leverage: employ internal leading practices and benchmarks before considering "world class" solutions Implementation: phase migrations and scope expansion; learn from your experiences Measurement: incorporate performance measurements into service level agreements Communication: over-communicate; have change management plans that start from the first dayDIFFERENCES BETWEEN GLOBAL BUSINESS SERVICES AND GLOBAL SHARED SERVICES GBS GSSFunctional Scope End-to-end process perspective; multiple general Transactional components of processes; usually and administrative functions one or two functional areasLeadership Focus Run like a business; can be separate legal entity; Efficiency first, then effectiveness; usually does focused on delivering business value (upstream/ not have a third goal downstream of responsibility)Employment Many career opportunities within GBS; acts as a Career paths have limitations due to size; cross-Opportunities talent pool for organization at large; stepping- unit limitations stone for management talentService Delivery Manages multiple SDMs and optimizes portfolio Typically a single SDM (captive shared services)Models (SDM)UNIQUE BENEFITS OF GLOBAL BUSINESS SERVICESWhen operated like a business, GBS is typically world class with respect to cost and service levels as well as competitivewith the external marketplace. This model allows leveraging of limited management resources with strong skill-sets acrossall general and administrative functions within the enterprise. A well-executed governance organization is positioned tomanage multiple service delivery models across the corporation. A successful GBS organization enriches the enterprise witha deep talent pool. From an operational perspective, GBS facilitates standardization and process improvement through end-to-end process ownership. It is an excellent partner in facilitating the integration of acquired entities.GLOBAL BUSINESS SERVICES ■ BILL HUBER & SUE DANINO 4
  6. 6. LOOKING FOR A STRATEGIC PARTNER?Bill Huber and Sue Danino are Partners with ISG.Contact the authors at bill.huber@isg-one.com or susan.danino@isg-one.com.Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory servicescompany, serving more than 500 clients around the world to help them achieve operational excellence. ISG supportsprivate and public sector organizations to transform and optimize their operational environments through research,benchmarking, consulting and managed services, with a focus on information technology, business process transformation,program management services and enterprise resource planning. Clients look to ISG for unique insights and innovativesolutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience ofglobal leadership in information and advisory services. Based in Stamford, Conn., the company has more than 700employees and operates in 21 countries. For additional information, visit www.isg-one.com. 010512 © Copyright 2012 Information Services Group – All Rights Reserved

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