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When is “Shared Services” not “Shared Services”
S S & OAustralasia Shared Services & Outsourcing WeekSydney
10 – 12 May 2010
Index
The issue of Shared Services Value Leakage
Approaches to maximise Shared Services ROITransitionService Improvement
Proprietary & Confidential. © 2010, Everest Global, Inc.2
The importance of improving value from servicesThe evolving business landscape emphasizes the importance of capturing service value
Market developments
capturing service value
Unprecedented economic pressures permeate the marketCompanies face enormous pressure to achieve “more withpressure to achieve more with less”
SSO users’ developments
SSO’s must mature –t “l h i
SSO developments
Cost pressure is more i t th dmost “low-hanging
fruit” has already been pickedExpectations from SSO’s are more
intense than ever, and SSO’s are seeking to further consolidate work among fewer centres / processes
Importance of improving value
sophisticated –complexity of scope has increasedSSO users are focused on ensuring value
pAdvanced technology has become “table stakes”, while innovation has emerged as a key
from SSO services
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on ensuring value capture
emerged as a key value add
The Shared Services strategy typically creates key expectations around cost savings, quality of service, and risk control … and risk control …
Expected benefits Description
The SSO business case sets specific expectations regarding cost savings and how / when it will achieve those savings
Cost savings
Quality of service expectations are typically defined in the form of SLAs, however a collaborative approach between users and the SSO is best to ensure business goals are met
Quality of serviceSSO obligations
SSO is best to ensure business goals are met
Risk allocation is determined by factors within the SSO’s accountabilities, SLAs, and associated responsibilities It is important to
Risk controlassociated responsibilities. It is important to embed oversight into the quality and efficiency of the services being delivered
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… however, common pitfalls often limit the ability of SSO’s to realise expected benefits from the strategy
Shadow organizations
ILLUSTRATIVE
gcreate duplicate effort and costs
A fragmented work Inadequate system Reduced b fit fA fragmented work
environment leads to suboptimal utilisation of resources
q yand tools to enable the to-be processes may result in savings leakage
benefits from the SSO’s
efforts
Proprietary & Confidential. © 2010, Everest Global, Inc.5
Index
The problem of Shared Services Value Leakage
Approaches to maximise Shared Services ROI TransitionService Improvement
Proprietary & Confidential. © 2010, Everest Global, Inc.6
Enterprises typically seek ~20-30% cost savings through their SS strategy
ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55
15
100 95
5 5
6070
Before SSO
Business case
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Shadow organisations create duplicate effort, reducing the savings benefit
ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55 Example: A stakeholder community that was
receiving local customised reports from the 15
100 95
5 5affected organisation. To ensure they continue to receive these reports, they hire an additional FTE to continue this effort
6070
Before SSO
Business case
Shadow organis-ation
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A fragmented work environment creates duplication of effort, further eroding savings
ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55
Example: In a specific country (wave) where processes are redundant across multiple divisions, with multiple people in each division performing a small part of the in-scope processes. To achieve savings, some di isions ill need to red ce staff hile15
100 95
5 5divisions will need to reduce staff while others hold constant. How to rationalise the effort across divisions become a difficult problem to solve
6070
Before SSO
Business case
Shadow organis-ation
Fragmen-ted workenviron-ment
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Lack of systems and tools to enable the to-be processes may result in savings leakage
ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55
Example: Technology is not available in some locations to enable automated payments requests from the financial system to the local bank. As a result, the buyer retains an organisation to15
100 95
5 5the buyer retains an organisation to perform this task
6070
Before SSO
Business case
Shadow organis-ation
Fragmen-ted workenviron-ment
Systemsand tools
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These common pitfalls, if not controlled, can undermine the cost savings identified in the SSO business casebusiness case ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55
15
100 95
5 5
6070
Before SSO
Business case
Shadow organis-ation
Fragmen-ted workenviron-ment
Systemsand tools
Cost without managed transition
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Furthermore, a rigorously managed transition can help target additional savings opportunities such as process improvementsprocess improvements ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55
Example: When headering invoices in an AP process, it was no longer required to capture date of invoice because of the timeliness of the invoice scanning process
15
100 95
5 5
g p
6070
Before SSO
Business case
Shadow organis-ation
Fragmen-ted workenviron-ment
Systemsand tools
Cost without managed transition
Process improv-ements
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Tools and experience also can be leveraged to increase savings through additional SSO scope
Example: SSO brings central scanning and electronic invoice
ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55
scanning and electronic invoice technology to the solution, enabling transfer of a larger portion of the process and additional savings
15
100 95
5 5
6070
Before SSO
Business case
Shadow organis-ation
Fragmen-ted workenviron-ment
Systemsand tools
Cost without managed transition
Process improv-ements
SSO improve-ments
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By actively managing the transition, SSO’s can expect to meet or exceed the benefits identified in the business casebusiness case ILLUSTRATIVEBenefits from SS strategyPercentage of cost
55
15
100 95
5 5
6070
Cost with managedtransition
Before SSO
Business case
Shadow organis-ation
Fragmen-ted workenviron-ment
Systemsand tools
Cost without managed transition
Process improv-ements
SSO improve-ments
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The transition plan should strengthen the alignment to the business plan and key business needs by improving process effectiveness while driving out costsprocess effectiveness while driving out costs
Formulate TransitionStrategy
Migrate to TargetOperating Model
Manage ContinuousImprovement Ethic
1. Map to-be environmentProcessPeopleTechnology
2 Id tif i t
1. Validate Target Operating Model in local context
2. Assess delivery readiness3. Transfer knowledge4 I l t i ti
1. Establish continuous improvement infrastructure and programs
2. Execute core programs3 M it d i t2. Identify improvement
opportunities vs. current state3. Prioritise and sequence
opportunities (business case)
4. Implement migration 3. Monitor and communicate results
Drive Process with Active Program Management
Manage Stakeholder Expectations and Organisational Change
Drive out unnecessary costs
Define most efficient process while maintaining compliance integrityRationalise roles to ensure
Ensure quality of service
Rationalise processes to meet stakeholder needsWork with stakeholders to
Ensure appropriate controls
Foster collaborative team approach between users and SSO to share and manage risks
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appropriate skill sets and trainingDefine scope to minimize shadow organisations
maximise process effectiveness within construct of Target Operating Model
Index
The problem of Shared Services Value Leakage
Approaches to maximise Shared Services ROI TransitionService Improvement
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Service Improvement ChallengesSubstantial improvement can be achieved by pulling four key performance levers but several barriers must be addressedperformance levers, but several barriers must be addressed
Minimize value leakage Disjointed functions and processes
Performance Levers Barriers to Success1
Minimize value leakage across SSO portfolio (including transferred and retained in-house work)
Disjointed functions and processes lead to shadow organisations that are created to account for perceived gaps in operations
2Create a culture of innovation and continuous improvement
Users and SSO’s have divergent agendas – users request increased investments in innovation, while SSO’s seek funding to investImproving
value from 3Ensure consistency and quality across service delivery
Lack of end-to-end service visibility causes parties to be unaware of the repercussions of service changes and reduces ability to make positive impact
value from SSO services
3
Build a collaborative relationship between users and SSO
y p p
Users and SSO’s become occupied with adhering to the “contract” (rules) and are not able to focus on achieving
t ll l
4
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a greater overall value
An effective Service Improvement process involves distinct phases to identify opportunities, capture benefits, and sustain value over timebenefits, and sustain value over timePhase 0 Phase 1 Phase 2 Phase 3
Implement Service Improvement
Establish Collaboration Lock in
sustainabilityAssess OpportunitiesAssess Opportunities
ObjectivesSet ground rules for collaboration
Assess and identify improvement areas
Ensure quality of services & optimal service model
Support ongoing innovation & continuous improvement
ImprovementFramework sustainabilityOpportunitiesOpportunities
Define the to-be operating environmentImplement service i t i iti ti th t
Identify expectations & implement programs that embed innovation &
ti i t
Identify comprehensive list of service improvement initiativesC t li i
p
Key activitiesDetermine improvement opportunities evaluation criteria to ensure
h i l improvement initiatives that achieve/exceed benefit expectations Create detailed work plans to direct effort & communicate to
continuous improvement into daily processesCapture a comprehensive list of key inputs to identify innovation opportunities
Create preliminary business case based on facts and market realitiesPrioritize & sequence initiatives into implementation waves
comprehensive value captureDefine framework to ensure improvement opportunity investments and benefits are shared equitably
stakeholders
Major outcomes
Visibility into the end-to-end process; identifies,
i iti &
Implemented initiatives that meet or exceed expected b fit th h i
Organisational approach with regular cadence that
i ti &
Rules of engagement & accountability defined to
i i S i
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prioritises & sequences improvement initiatives
benefits through rigorous implementation program management
ensures innovation & continuous improvement
maximise Service Improvement results
Service Improvement drives substantial value for the SSO and users alike
User benefits SSO benefits
CLIENT EXAMPLE
Business case improved Short term: 70 additional FTEs t iti d t SSO t
Operating scope expanded by 13% (FTE basis); visibility into ~50% dditi l thtransitioned to SSO at
substantial savingsLonger term: visibility of opportunity to shift over 300 dditi l FTE’
additional growth
Secured substantial user engagement t t d t d300 additional FTE’s
roles to offshore SS
Compliance risk reduced d t t l it d
to support end-to-end process optimisationefforts
D li i k d d ddue to stronger clarity and accountability for key activities (for both user and SSO responsibilities)
Delivery risk reduced due to visibility into user-retained activities and clarity on all handoffs
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Service ImprovementTM resultsA facilitated collaborative approach between users and SSO to produce a mutually beneficial outcome1produce a mutually beneficial outcome
Reduced overall delivery cost Innovation delivered
Eliminated redundant activities Aligned objectives
1 2
Everest Service ImprovementTM
Eliminated redundant activitiesStreamlined communications and handoffsEnhanced automation
Aligned objectivesStructured environment for fostering innovationTransparency
Process and interface
optimisation
Organisational tuning / skill
rationalisation
Technology and Governance and fautomation
improvementsperformance management
Business case improvement
Business-aligned services Meaningful partnerships
Clear definition of roles and responsibilitiesIncreased visibility and control across services
Optimised scopeAligned interestsValue-based expectations
3 4
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3 4
1 Service Improvement is a Trademark of Everest Global Inc.
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