Nearshore Americas

SSON Show Report: Cost Reduction Still Main Driver of Shared Services while Innovation Takes a Back Seat

By Eric Hochstein

Follow Eric Hochstein’s  Tweets live from the SSON Conference: @echoch

As shared services matures in global corporations, executives accept it as a core delivery model. But the fact is, there is little adoption of new and innovative practices, based on what’s being said and heard at this week’s SSON conference in Orlando.

For example, although cloud computing and BPO as a service receives considerable media and attention these days, very few hands were raised when one of the speakers asked the 750 corporate attendees if they had  moved meaningfully toward the cloud. Clearly, cost reduction still dominates the agenda in the  shared services ecosystem.

In informal surveys at the show, about 63% of respondents say that cost reduction remains their primary goal, while speakers continued to claim that more strategic values are permeating the maturing business tactic of shared services. Others said they felt that shared services were becoming more strategic, but there was concern that senior executives continue to require hand holding and reassurance to foster the growth and expansion of the shared services concept.

“In shared services and outsourcing, we have to use the term innovation cautiously, and nowhere near as much as promised. It can happen, but you have to drive it to happen” – Srini Krishnamurthy, Vice President, Mass Mutual

Shared Services as Pacman

“The better you can do, the more you can swallow,” said Ira Fialkow, of the newly formed practicioner’s community Peeriosity. “We’re all still involved in change management. What’s changed the most is the speed. Hearing from peers who have done it and learning from best practices helps to accelerate the change.”

Speakers also agreed throughout the afternoon that shared services successes are the best way for the concept to continue to grow and expand through the corporation. John Gayda, Senior Director of Financial Shared Services at Kellogg’s, said “Shared services needs to be an understood concept at the top of the company and needs to have clear support to expand. But the reality is that doing it right is critical to performance and customer satisfaction.”

“Credibility of shared services is key”, said Mark Kingman, SVP of Disney Worldwide Shared Services “Partnerships with other internal organizations, shared services partners, and with business units and functions are requierd to improve overall end-to-end processes and opens pathways to multifunctional shared, cross-unit shared services.”

Reviewing the past year’s developments, Rakesh Sangani, Editor-at-Large for Shared Services and Outsourcing Network (SSON), the conference producer, commented that although some acquisitions had taken place, including iGate’s acquisition of Patni, KPMG’s acquisition of advisor EquaTerra, and Thompson Reuters’ pickup of Pangea3, in the legal BPO space, there was no blockbuster deal as he had predicted at last year’s conference.

However, he reported that his other major predictions came true. He said that major Indian BPO firms had begun to acquire captive shared services centers, citing the TCS acquisition of SuperValu’s 600 FTE center in Minnesota. He also said that the demand for onshore US services had grown, particularly in US tier II and III cities and in Europe.

Sangani reported that governance models for outsourcing were maturing,  and leading companies were establishing global business units for shared services covering multifunctional areas. He cited Diageo and Unilever as examples of companies moving in that direction. He also said that his data showed that about 53% of shared services centers now cover multifunctional processes but that the organizational models supporting shared services remained siloed rather than separately managed as cross-unit multifunctional units.

In making predictions for the coming year, Sangani stated that observers who believe TPI would be acquired by Deloitte, Ernst & Young, or PricewaterhouseCoopers will be proven wrong, despite last month’s announcement of the KPMG-EquaTerra deal. He doubled down on last year’s prediction that he expected a major acquisition in the industry,  and suggested that there would be a move by a document management or shared services provider such as HP.

He also said that the Phillipines will become the favored call center location, surpassing India and, for the second year, he said that cloud computing would remain relatively unimportant to the shared services industry.

In a discussion of outsourcing and shared services, speakers felt that a company’s culture, cost structures, readiness to change, and capabilities were key factors in determining whether processes should evolve to captive centers or to outsourcers. They agreed that there is no one right way to address these issues, and that company circumstances and expectations are key drivers. Some said that outsourcing was a natural end of a spectrum running from isolated unit functions to centralization and consolidation, and from shared services to outsourcing.

They also agreed that outsourcing and shared services don’t necessarily result in innovation. “Whether its outsourcing or shared services, its not innovation, it is process improvement and there’s very little innovation there,” said Srini Krishnamurthy, Vice President, Mass Mutual. “In shared services and outsourcing, we have to use the term innovation cautiously, and nowhere near as much as promised. It can happen, but you have to drive it to happen.”

Notable transitions

Sam Poston, SVP, ScottMadden, said that shared services were transitioning from a focus on single functions to multiple processes and from a regional, geographic model to a global model.

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He told the opening session of the three day conference that the focus of shared services has been moving from cost savings and quality to providing greater value to the corporation’s strategic mission and direction. He said that shared services were becoming more “essential to a corporation’s transformation than ever before.”

Poston has hosted each of the 15 annual SSOW programs and was recognized for his contribution to the industry.

Overall themes of the first day’s discussions were maturity, growth, and globalization. Leading companies have moved from having shared services centers with a single focus on a geography to a global model, and customers are becoming more sophisticated as their basic educational needs have been met in recent years. Another issue was whether outsourcing or shared services could lead to innovation.

The conference continues Wednesday in Orlando. Follow our live tweets throughout the day.

Eric Hochstein is Managing Director of Highstone Associates, Inc., a Barrington, IL-based business and economic development consulting firm, focused on strategy and business development, site selection, and marketing for public and private sector organizations involved in technology and knowledge-based commerce. Between 2003-2010, Highstone Associates represented the province of Ontario for investment attraction in the US in the business services and financial services sectors, including outsourcing.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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