Switching to shared services: A balancing act
Many companies are considering pooling business functions into shared service centres to save costs, but it requires a carefully balanced approach, explains Ian Wilson, a speaker at this year’s Finance Transformation Europe event.
As businesses continue to face pressure to streamline costs over the next 12 months, the shared service model is one which many will consider as a way of simplifying business processes, but any large scale shifts require in-depth assessment, says Ian Wilson, director of global financial shared services at Hewlett Packard.
“Companies need to make a decision about whether they’re going to lift and shift what they’ve already got into a shared service centre or whether it’s part of a broader transformation programme to implement enterprise systems if they don’t already have them.
“If you’re planning a transformation progamme at the same time as switching to shared services, it’s a bigger project with much larger financial benefits at the end, but it also increases the risk and the timeline, as well as increasing the skill sets you need in the transitions team to make it a success”.
HP was an early adopter of the shared services model in the early 1990s. “At that point HP, like most large companies in the US, had largely decentralised processing, multiple applications, various enterprise systems and lots of old legacy systems. A lot of our integration was driven by the need to modernise apps,” explains Wilson.
The group started a programme of regional consolidation towards the late 1990s in Europe, the Americas and Asia Pacific, pulling all the decentralised country support into regions. In the early part of the last decade, the group began to focus on a global model, looking at how global processes were run through centres around the world, initially starting with the finance processes, but since then extending into HR, supply chain, services and marketing.
Considering the business currently operates in more than 178 countries, keeping a consistent process across all its units presents a significant challenge.
“For each of our towers (and a tower would be finance, HR, or procurement, for example), we have process owners who are responsible for making sure there is a globally consistent process across all the centres that operate that process. Their job is to make sure that the process is the smartest it can be (i.e. that it meets benchmarks for being the ‘best in class’), and also that we have a consistent service delivery model over a three year roadmap.
“This roadmap is very important to us; we always take a three year view of where our processes are going which includes the IT development we need to meet that plan, the people development requirements (i.e. which people we need and where we need them), and a location strategy to make sure we have the right people in the right place at the right time to execute the plan”.
What advice would he offer for those considering switching to a shared service model? “The first thing people have to decide is whether they are going to look at captive shared services or whether they are looking to outsource. That depends on the business you’re in, the level of control you want to have over a shared service centre, whether you have a corporate culture that wants to control everything, or whether you have a culture that is happy to outsource shared services to a third party organisation. So the first thing is making a conceptual choice about how you want to staff a shared service centre.
“There are also choices to be made around the scope of what services you’ll include in the programme. Do you start with finance/accounts payable as most people tend to do, or will it be a multi-tower operation straight away?
“Most people tend to go for a low risk high volume process that’s easy to do and then move up the value chain to other things. You’ve got to decide the processes in themselves that you want to move into a shared service centre and put together the business case for moving those services”.
Ian Wilson is director of global financial shared services at Hewlett Packard. He will be speaking at SSON Finance Transformation Europe, an event focused on streamlining finance operations through business partnering, end-to-end process and optimised delivery. The event will take place on 15 – 17 February 2011 at The Bloomsbury Hotel, London. See www.fintransformation.co.uk for more information.