Shared Service Organisations (SSOs) have achieved dramatic improvements in cost and productivity, according a report from The Hackett Group. Owing to this, business expectations are now forcing companies towards a second wave of value creation through complex outsourcing arrangement, the report says.
Hackett's latest Book of Numbers research finds that companies seeking to move up the value chain are implementing a multi-layer shared services model that incorporates transaction processing centers in low-cost regions, centers of excellence, and high-level onsite support for analysis and decision-making. Many SSOs have also expanded beyond finance to incorporate functions such as IT, procurement, and HR -- in fact, an "everything in G&A" approach is leading edge. At the best SSOs executives make sourcing decisions relating to scope and geography within a continuous improvement and customer service culture.
Results from the research, which examines shared service operations at more than 150 global companies, is featured in Hackett's latest Book of Numbers research volume, "World-Class Shared Services: Expanding Beyond the Transaction." The research also features case histories on shared service successes at Hewlett-Packard and Royal Philips Electronics.
"With a nearly 50% increase in use over the past three years, shared services has become the standard approach to corporate finance," said Hackett Finance Shared Services Advisory Program Leader Dr. Penny Weller. "These centers have played a critical role in helping reduce the cost of finance. Today, typical companies spend almost 40% less on finance operations than they did in 1992. World-class finance organisations, which spend only half of what typical companies do, have seen even greater cost reductions."
According to Hackett Finance Advisory Practice Leader Bryan Hall, "Across the board, the results shared services has helped companies generate is quite impressive. Our research finds that 65% of all companies with SSOs have cut costs by 21% or more, with some seeing savings of over 60%. At the same time, they're showing dramatic improvements in productivity, quality, and customer service."
According to Hackett European Advisory Services Director Roy Barden, "As next-generation SSOs move beyond pure transaction processing, world-class SSOs are evolving towards a three-layer model. Most have established large-volume transaction processing centers, often in low-cost labor markets. In addition, they've established centers of excellence which are responsible for service delivery and are the primary interface to the business leaders. These are often much closer to the business geographically. Finally, high-level knowledge workers are likely to be co-located with the business units, so they can serve as on-site business partners. All this puts them in a better position to provide value-added services such as decision support and reporting and analysis. Within this three-layer model, we're also seeing a growth in multifunction SSOs, incorporating a wide range of back-office operations beyond finance.
"We're also seeing several other emerging trends," said Barden. "Many companies are also now making second-phase movements of operations from near-shore locations to low-cost labor markets, and most are already doing significant work offshore, either through SSOs or outsourcers. The use of outsourcers is certainly on the rise. Overall, leadership at top SSOs are transitioning to the role of sourcing strategists, evaluating and managing a mix of internal and external options, including offshoring and outsourcing."
