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Delivering tomorrow’s companies today

The best companies know that the recipe for success in business contains many crucial ingredients. They include attributes that are very visible to customers, such as superior products and services.

But, just as crucial is a structure that allows them to thrive. To perform at their best, companies need to create a framework that leaves customer-facing parts of the business free to concentrate on delivering quality and value to the marketplace. But what do these structures look like? And how will they evolve in order to support and enhance the businesses they serve?

 

These are the questions this report sets out to answer. It is clear that businesses with vision and imagination have moved beyond tentative steps to improve operational efficiency. They continue to use outsourcers, for example, but as just one piece of the jigsaw.

 

They recognize too that their businesses need more than rigorous attention to cost. This remains vital, of course, but added value, strategic input and analytics are also required.

 

Building an organization of this type necessitates a new way of thinking. Many high-performing companies have abandoned structures that are defined by narrow business functions such as finance or IT. Instead, they choose to focus on delivering standardized, end-to-end processes. They are building multifunctional global business services operations that can transform the way their business works.

 

Companies must follow this lead if they are not to be left behind. In an environment where the global recovery from financial crisis and recession continues to be slow, no business can afford to pass up the opportunity to boost performance. After all, exciting new technology makes it far easier for rivals to press ahead.

 

Global businesses service organizations make it possible for the rest of the company to concentrate all its energy on successful  and sustainable growth. As such, they are perhaps the vital new ingredient in the recipe for growth.

 

 

Shared services and outsourcing: the next step

 

Businesses began to use shared service centers and outsourcing to improve back office efficiency by use more than two decades ago. Finance led the way, followed by IT. The intention was to move routine, transactional work to specialists who were dedicated to processing it more efficiently at lower cost. This left the business free to be more volatile and focus on its customers. Shared service centers were the inhouse solution, while outsourcing firms provided an external option.

 

 

Over the last 20 years, both shared services and outsourcing have become more sophisticated. Other parts of the business, from HR to procurement, have followed finance’s lead. Businesses have explored offshoring, scouring the globe for the optimal location and the best providers. They have experimented with hybrid models using both shared services and outsourcing. And they have taken advantage of steadily improving technology, such as enterprise resource planning (ERP) systems.

 

The results have been impressive, with organizations routinely able to capture improved performance at lower cost from their support functions. Now, however, businesses are ready for the next stage of this evolution. Many organizations have begun to implement a multifunctional approach to shared services.

 

 

“This relates to the handling of all non-core activities of a company, which are more support in character, and which are not a differentiator for the client in adding value for external clients or delivering the product itself,” explains Ernst & Young Shared Services Network Leader Christian Mertin. Typically, this will be achieved through the creation of a single, unified global business services unit capable of managing end-to-end processes.

 

 

The models for this vary enormously — by degree of integration, by geographical location, by single versus multiple centers, by captive provider versus outsourcing (or a mix of the two) and by governance arrangements — but all share the same core drivers.

 

 

Cost savings remains a key objective, but now the target is also to achieve benefits such as scale, process efficiencies, standardization, additional value, career opportunities for employees, talent sharing, innovation, the integration of mergers and acquisitions (M&A) and better use of time for the retained business.

 

 

It is no coincidence that the world’s top performing companies are visible and stand out precisely because

they have achieved many of these benefits. Since the onset of the financial crisis, Ernst & Young has regularly surveyed C-suite executives, board directors and senior managers in large organizations to find out how they run their businesses. This Growing Beyondresearch identifies what it is that high performers are doing differently, so that other business can learn from them.

 

 

The research shows that four factors underpin competitive success in today’s global economy: customer reach, operational agility, cost competitiveness and stakeholder confidence. And the move to a multifunctional approach to shared services supports each of these drivers:

 

 

Customer reach

High performers are more outward looking and focused on the market and growth. Multifunctional shared service operations can support that focus directly, through added-value applications such as analytics, and indirectly by freeing up time for the retained business to spend on strategic matters.

 

 

Operational agility

High performers respond smartly to change but, more importantly, respond speedily. Multifunctional shared service units are key to optimization and delivering that agility.

 

 

 

Cost competitiveness

High performers understand what drives cost and what drives value, and how to optimize them. Multifunctional shared services staff are now focused on both.

 

 

 

Stakeholder confidence

High performers protect performance by engaging more with stakeholders and unleashing their talent. The integration of functions such as HR into multifunctional shared services can accelerate this engagement.

 

So, in today’s increasingly competitive marketplace with increased velocity, there are key strategic reasons to move into a new phase in the use of shared service centers and outsourcing.

 

 

“Companies are at different stages of this evolution,” says Paul Wood, Advisory Partner and specialist in shared services and outsourcing at Ernst & Young. “It is a journey, but the final vision and concept has been programmed by a confluence of several key factors, which means now is the moment for the next step.”

 

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EY ROMANIA SRL