Shared Services Comes Of Age

Comprehensive Shared Services

Shared Services Comes of Age Pursuing broader business value on a global scale This is the fourth in a continuing series of research studies conducted by Deloitte related to shared services organizations (SSOs). In these studies, our objective has been to explore attitudes about how the SSO concept is changing and to share emerging trends, all derived from the feedback of a diverse global group of companies that have implemented shared services delivery models. In evaluating highlights of each study’s findings, we see an increasingly broader and more strategic role emerging for SSOs since we conducted our first study in 1999.1 In that first study, early adopters took up the shared services concept to reduce costs, consolidating administrative functions – and reducing duplicative effort – across a number of business divisions or subsidiaries. In 2003, a second and larger study revealed a notable expansion of the concept.2 Ninety-five percent of those respondents identified their SSOs as a success and 75% said the financial return had met or exceeded their expectations: the average ROI was about 20% and the average payback period was about three years. This, of course, was great news for executives seeking financial benefits. The 2003 study also revealed that headcount reduction alone was not the only driving force behind implementing shared services. A high percentage of respondents also cited process standardization and process improvements as bonus outcomes, and many were shifting processes other than finance to their shared services centers. By 2005, the Sarbanes-Oxley Act of 2002 (SOX) and the growth in popularity of outsourcing and offshoring were driving more strategic reasons for implementing SSOs.3 Our 2005 respondents said the value was clear: the consolidation and standardization enabled by shared services had greased the wheels of SOX compliance. Further, decisionmakers saw opportunities for enhancing their SSOs’ value to the business in even more fruitful ways, such as pursuing improvements to corporate performance through outsourcing and offshoring models. Now, in 2007, the trend of shared services adoption continues to move toward the high end of the benefits food chain, from cost saver, to strategic asset, to a value and flexibility enabler on a global scale. We are seeing companies expand their global footprint of shared services operations and increasing the scope of services offered.

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

Survey Participation in 2007 131 shared services leaders participated in our 2007 study, representing our most diverse set of responding organizations ever (Figure 1). Participants were distributed across all major industry groups. Figure 1. Survey participation by industry

Seventy-two percent of participants were well seasoned in experience with shared service operations, having centers in operation for five years or more (Figure 3). The range of experience across all participants varied from less than one year to a total of 19 years. Figure 3. How long has your SSO been in operation? 4%

3% 3% 5%

25%

8%

25%

40%

9%

10% 22%

16%

32%

Manufacturing

Consumer Business

Telecom, Media & Technology

Energy & Resources

Life Sciences & Health Care

Financial Services

Real Estate

Transportation Services

Public Sector

Less than 2 years

Between 2 and 4.9 years

Between 5 and 9.9 years

10 or more years

Note: Percentages do not total 100% due to rounding.

Note: Percentages do not total 100% due to rounding.

The median revenue of participant organizations was $5.2 billion, with the three categories of size by revenue (less than $2 billion, $2 to $9.9 billion, and $10 billion or more) almost evenly divided into thirds (Figure 2). Figure 2. Participant organization annual revenue

Combined, the survey participants had 332 shared services centers located around the globe, with slightly more than one-third of them being responsible for multiple centers within their companies. Most of the centers were in the European/Middle East/Africa region and in the Americas, and 20% were in the Asia/Pacific region (Figure 4). On average, this year’s surveyed organizations had three shared services centers per organization. Figure 4. Where are your organization’s shared services centers located?

35%

32%

20%

38%

33%

Less than $2 billion U.S.

$2 - $9.9 billion U.S.

$10 billion U.S. or more 42% Asia/Pacific

2

Europe/Middle East/Africa

Americas

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

Many are pursuing a hybrid service delivery strategy, combining onshore with offshore service delivery as well as choosing to outsource selected processes. The consolidation and standardization enabled by shared services over the past several years has moved the SSO concept far beyond cost control and enhanced service models into support of big-picture strategic direction and improved business performance. The story for 2007, then, is one of shared services leaders looking for ways to pursue broader business value delivery by thinking strategically about their SSOs’ structure, scope, organization, and processes. Cost reduction is increasingly being perceived as a “dial tone” benefit – a necessary but not sufficient goal for a truly effective SSO. As one respondent from a global retail company observed in a followup interview: “If I take 100% of the cost out of shared services, it wouldn’t even come to a penny per share. I can’t move the needle that way. But what I can do is to provide better information for better decision-making, and that can move the needle.”

Top Seven Shared Services Trends in 2007 1. Organizations are on a quest to improve their geographical SSO footprint. As organizations pursue the shared services journey, they can encounter many factors that may cause them to rethink their original approach: unforeseen obstacles to the initial implementation plan, shifts in business strategy and organizational focus, or simply changes in the global business environment such as the rising cost of labor in many popular SSO locations. Our 2007 survey suggests that one prime candidate for such rethinking is an SSO’s geographical footprint. Given the compromises that may have occurred during initial SSO implementation, as well as the continuing need to adapt to evolving business circumstances, organizations often find that there is considerable room for improvement in this regard. Many of our respondents indicate that they are continuing to evaluate their location strategy and make aggressive changes. Figure 5. How will the number of SSCs your organization operates change over the next five years? 22%

44%

34%

Stable/no change anticipated

Increase

These changes are being made to both the number of shared service centers (SSCs) that comprise an organization’s SSO and to the location or locations of those SSCs. With regard to the number of SSCs, a majority of our 2007 respondents said that they plan to change the number of SSCs they operate within the next five years; about a fifth planned to reduce the number of centers, and about a third planned to increase the number of centers (Figure 5). Follow-up interviews with several respondents revealed a variety of reasons for the change, including enabling changes in scope, geographic reach, or geographic coverage. Additionally, some respondents planned to reduce the number of SSCs as part of an overall effort to consolidate shared services operations. “After the next five years, I’d be very surprised if we [still] had six or seven centers,” said one manufacturing company respondent. “We’d like to consolidate our centers into a stronger hub/ satellite design and consolidate like transactions into a single center.” The second dimension that organizations are changing is the location of their SSCs. Our 2007 results suggest that SSCs are on the move at many organizations; 40% of our respondents indicated an anticipated relocation of some of their centers (Figure 6). Figure 6. Do you believe your organization will be relocating any of its SSCs? 11% 24%

29%

36%

Yes, in over three years

Yes, over the next one to three years

No

Not sure

Where and why are they moving? Not surprisingly, when we asked the question directly, the number one reason for relocation was to reduce costs, cited by 56% of respondents. (Other reasons given included the desire to improve service, accommodate expanding operations, move closer to customers or other operations, and combine or consolidate functions.) However, when we asked our respondents how important various factors were when they selected their current SSC location(s), cost was not number one. Labor quality, labor availability, and language skills were the factors most often cited as critical, with labor cost coming in fifth (Figure 7). This is a welcome finding, as we believe that organizations that carefully consider quality and availability of labor when choosing a location can reduce their risk of having to relocate in the future due to labor issues.

Decrease

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

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Figure 7. What were the key factors in selecting the organization’s SSC location(s)? Labor quality

41%

Labor availability

38%

Language skills

31%

Labor cost

52%

24% 23%

48% 27%

Risk profile (political/social/natural disaster) 9%

58%

Regulatory/legal 7% Tax impact/advantages 6%

Critical issue Important issue

42%

27%

Close proximity to current operations

Close proximity to headquarters

53% 44%

56%

2. Multi-functional SSOs with hybrid service delivery strategies are on the rise. Today’s SSOs are anything but simple in either functional scope or service delivery model. As more companies come to appreciate the benefits a shared services model can bring to processes in a variety of functions, and as businesses continue to explore the possibilities of outsourcing and offshoring, SSOs are evolving into multi-functional organizations that use a hybrid service delivery strategy – leveraging a strategically chosen mix of in-house, outsourced, onshore, and offshore providers – to achieve their service and cost objectives.

28%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of respondents

So is low cost or good labor more important? Organizations must reach a delicate balance between the two. Obviously, it is important to keep costs to a minimum. But as some organizations have learned the hard way, it is extremely critical to have the right labor fit and availability for the SSC to achieve its goals. As a respondent from a global software company put it: “When you have only 10 people in a center in [a high-labor-cost location], the scale of savings if we moved to [a popular low-labor-cost country] is not worth all the extra problems of not having a stable workforce. If we had hundreds of people, that would be a completely different situation.”

Among our 2007 survey respondents, 70% indicated that they are responsible for multi-functional SSOs. The vast majority of these reported that responsibility for the SSO was held by a CXO, while the rest wrote in the title of VP of Shared Services (Figure 8). Most of the CXOs in charge of multi-functional SSOs were CFOs, reflecting the continued dominance of finance processes in most companies’ SSOs. However, a majority of respondents with multi-functional SSOs indicated they also include IT and HR processing in their centers (Figure 9). Figure 9. For executives with multi-functional SSO responsibility, what functions are included? 99%

Finance 66%

HR

We are seeing an ever-increasing number of location strategies emerge as companies try to achieve this balance. In particular, a growing number of companies are starting to locate their SSCs in so-called “under-the-radar” locations to avoid the disadvantages – recruitment challenges, attrition, and cost escalation, among others – of locating in SSC hot spots. Figure 8. Who has overall shared services responsibility?

62%

IT Procurement

53%

Operations

43% 26%

Customer service/call center Facility and support services

14%

Other 9% Marketing 8%

VP of SS, multiple function responsibility 10%

VP of SS, single function responsibility 1%

CPO or top HR executive CAO 4% 4% CIO 5% COO 7%

CXO with single function SS responsibility 29%

4

CXO with multiple function SS responsibility 60%

CFO 80%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of respondents

When it comes to driving governance, consistency, and knowledgesharing across multiple SSCs, most respondents said that, other than the top SSO executive, they do not have a specific person in charge of such initiatives (Figure 10). However, a number of respondents did indicate that they are using alternative methods, such as crossleadership meetings, process and customer councils, quarterly service reviews, and Six Sigma practices, to drive cross-SSC knowledge sharing. Our respondents indicated four key reasons – increased standardization, sharing best practices, reducing overall costs, and improving governance – to coordinate efforts across multiple SSCs (Figure 11). Clearly, respondents recognize that, while cross-SSC collaboration can be difficult, it can significantly improve the overall value an SSO delivers to the enterprise.

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

Figure 10. What is the title or what is the method your organization uses to drive governance, consistency, and knowledge-sharing across SSCs?

Figure 13. What processes are in your SSO? 81%

Finance

16%

17%

59%

Procurement

Onshore Offshore

5%

5%

55%

HR 8%

50%

IT

13%

Other 14%

Position does not exist; however, the SSC leaders meet regularly to drive global consistency

Position does not exist

Corporate executive

44% 3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Position does not exist; however, other methods to achieve the same objective exist

Overall shared services executive

49% 10%

Note: Percentages do not total 100% due to rounding.

Figure 11. What are the key responsibilities of the position or teams responsible for coordination across SSCs? Increase standardization

94%

Share best practices

78%

Reduce overall costs

75%

Improve governance

62% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of respondents

In follow-up interviews, respondents described several factors that played into their decision as to how to source services, including cost, risk, scale, internal control considerations, alignment with the core business, and the degree of administrative and management investment required to manage outsourced service providers or offshore operations. Said one respondent from a global e-business, explaining why his SSO decided to outsource several processes rather than build a captive offshore SSC: “We don’t believe that our core competency is in hiring finance folks, and we’ll never have enough critical mass to be a player in any offshore region. Third-party labor increases transparency and controls and provides cost leverage.” Conversely, another respondent explained his SSO’s reluctance to outsource by noting, “Outsourcing requires heavy management involvement. Other improvement alternatives have seemed more attractive.” Figure 14. What direction is your organization pursuing regarding its use of the shared services model?

% of respondents

With respect to sourcing services, our survey reveals that 18% of our respondents outsource at least one finance process, 18% outsource at least one HR process, and 15% outsource at least one IT process (Figure 12). Many of our respondents also indicate that they combine onshore with offshore service delivery (Figure 13). In general, high value-adding, customer-facing, and interaction-intensive processes tend to stay closer to the home continent, while low-value adding, standardized, and automated processes are increasingly being located offshore (that is, on continents other than that of the primary operations being served). Figure 12. Percentage of respondents outsourcing processes in each function Finance

18%

HR

18%

IT Procurement

15%

4%

Other

9%

0% 2%

4%

6%

8% 10% 12% 14% 16% 18% 20%

% of respondents

Increasing # of transactional processes in SS

83%

Increasing # of internal locations served by SS

69%

Increasing # of consultative processes in SS

47%

Increasing # of processes outsourced

41% 35%

Increasing # of processes offshored Increasing # of external customers

20%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of respondents

Finally, our survey suggests that, as organizations become more comfortable and achieve their desired results with shared services, they are expanding the types of processes delivered by SSOs (Figure 14). The majority of our participants are increasing the number of processes within the service center or the number of locations served by the center. Transactional processes continue to dominate the scope of shared services operations, but many organizations are also beginning to include more strategic processes and ones that have high customer interaction. About half of respondents said they are increasing the level of consultative processes offered by their SSOs. These results indicate that shared services leaders are increasingly looking to deliver, as one respondent from a global consumer products company put it, a more “complete suite of services” as well as “higher-order processes that require greater analytical power to complete.”

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

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3. The benefit of improved controls with SSOs continues to strengthen in importance. To our 2007 survey respondents, the benefit of improved controls due to shared services was nearly as important as reduced costs. When we asked respondents to rank the importance of various benefits of shared services to the organization, the ability to increase controls tied for second behind reduced costs, along with the improved ability to achieve process optimization (Table 1). In fact, more than one respondent cited controls as a leading reason to keep processes in-house in shared services. “Our global leadership team sees the SSO’s role as controlfocused and keeping a lid on the numbers,” said one respondent from a global consumer products company when asked why his SSO did not outsource processes. “They see outsourcing as a high-risk strategy.”

Figure 15. What impact does your SSO have on the cost of achieving Sarbanes-Oxley section 404 compliance? Makes compliance less expensive than it would be without the SSO

53% 45% 34%

Do not know the impact

32%

Has had no impact on the cost of compliance Makes compliance more expensive than it would be without the SSO

10% 15% 2007 2005

2% 8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Table 1. What are the key benefits of shared services to your organization? Please rank in order of importance. Average rank

Benefit

(1 = most important, 8 = least important)

Reduced costs

2.5

Increased controls

3.4

Improved ability to achieve process optimization

3.4

Reduced headcount levels

3.6

Cross-company comparability

5.5

Ability to meet Sarbanes requirements

5.9

Faster integration of acquisitions

6.2

Improved working capital

6.3

Shared services’ ability to improve controls appears to be paying considerable dividends for organizations subject to the Sarbanes-Oxley Act of 2002. Fifty-three percent of our respondents reported that their shared services centers made compliance efforts less expensive, up from 45% in 2005 (Figure 15). Similarly, the number of participants who felt that shared services had no impact on compliance costs or made compliance more expensive decreased from 23% in 2005 to 12% in 2007. These results reflect our experience that many companies with whom we have worked now clearly recognize SSOs for their role in helping drive SOX compliance. In many cases, we have seen SSOs take a leading role in key compliance activities. For example, a respondent from a global life sciences company reported: “We work very closely with the Corporate Accounting and Finance group on compliance. We have point people who have worked with the countries to centralize the controls within the SSO and to support activities like testing.”

% of respondents

4. Effective governance and business-unit linkage continue to be a key challenge for SSOs. Managing effective relationships with corporate leaders and internal customers is a perennial issue for many SSOs, and our respondents are taking it more seriously than ever. One indication of the increasing attention organizations are paying to governance is the rise in the use of formal mechanisms to regulate customer and business-unit relationships. Out of the top five governance mechanisms identified by our 2007 respondents, three – performance metrics, process owners, and customer councils – were more widespread than they were among our 2005 respondents (Figure 16). Especially notable is the substantial increase in the percentage of respondents using process owners as a governance mechanism, underscoring the importance of process ownership in managing relationships between an SSO and its customers. At some companies, the SSO’s focus on process ownership reflects a businesswide shift toward process ownership as an integrating force. As one global manufacturing respondent said: “We have global process owners identified for all of our major processes, not just in finance, but also in all the major functions such as manufacturing and engineering. All of us in leadership feel that this is an opportunity to do things globally. We’ve been multinational for decades but we’ve never really operated on an international basis.” Figure 16. Most frequently used SSO governance mechanisms 82%

Performance metrics

66% 76%

Process owners

2007 2005

45% 68%

Service level agreements

74% 32%

Customer councils

Customer liaisons

29% 31% 32%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of respondents

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As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

A similar story holds for our respondents’ perceptions of the effectiveness of various methods of staying connected with the locations or divisions served by the SSO. The top five most effective methods identified by our 2007 respondents were the same as those identified by survey participants in 2005 and 2003; however, the perceived effectiveness of each method has increased over their perceived effectiveness in previous surveys (Figure 17). Figure 17. Most effective mechanisms for keeping the SSO connected with locations/divisions served 66%

Joint continuous improvement objectives

65% 57% 58%

Service level agreements

56% 2007 2005 2003

53% 53%

Site visits

53%

When asked about what they felt was important to SSO customers and leaders, respondents cited timeliness and overall responsiveness to business unit requests as the most critical service needs (Figure 18). In fact, timeliness of response was the only factor selected by all participants as either “very important” or “somewhat important.” On the other hand, only 66% of our respondents felt that the cost of service was “very important” to its customers. This may be because cost is less visible to many SSOs’ customers than service timeliness and quality. As a shared services leader from a global life sciences company commented: “We are [officially] measured on cost, but businesses see no direct correlation as the SSC is not recharged. The real measure is ‘no complaints.’” Figure 18. Which factors are very important to your internal business-unit customers?

45% 50%

Joint leadership meetings

5. When it comes to customer satisfaction, timeliness is #1.

44% 45%

Timeliness of response

49%

Performance management communication

91%

34% 37%

0%

10%

20%

30%

40%

50%

60%

70%

Reacting to business-unit requests

% of respondents

When we spoke to some of our respondents about governance in more depth, a number of familiar themes emerged: the need for strong executive support, the challenges of securing internal customer buy-in, and the importance of communication. “You need to have the voices of the business as part of what you are doing,” observed one respondent from a global software company. “And it can’t be casual – they have to be fully engaged.” Also crucial is to win internal customers’ confidence in the SSO, as several respondents noted. “It’s relatively easy to set up an SSO,” said one respondent from a non-profit organization. “The difficulty for us was the change management piece. Can people accept that the SSO can do its job and that they don’t have to be doublechecking everything?” And no governance system can work effectively unless the internal customers can be persuaded to view the SSO as an asset rather than as a threat. Said one respondent from an agricultural products company: “The local CFOs have been our biggest challenge. Originally they were against the SSO, as it meant they would lose responsibilities and organizational influence. At the start of the project, they kept on redundant staff to check SSC quality and pinpoint errors.” When governance works well, however, the results can be dramatic. For example, the non-profit respondent mentioned above noted that the idea for one of the SSO’s “biggest wins,” implementing behaviorbased pricing for certain processes, originated with the business units themselves. “The leadership of the business units came to us and said, ‘We want you to start charging [our subunits] more for invoices that [don’t follow the standard procedure],’” said the respondent. “They understood the process and the savings it could drive, and they pushed for behavior-based pricing to get people to do what was needed. And it made a huge difference in changing people’s behavior.”

73%

Providing routine service

66%

Cost of service

66%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of respondents

Our respondents’ clear focus on customer service issues was evident from what they identified as the most important key shared services priorities going forward. Three of the top four priorities as ranked by our 2007 survey participants directly support customer needs: process efficiency, quality improvement, and internal customer satisfaction (Table 2). Table 2. What are your key shared service priorities? Please rank in order of importance.

Priority

Average rank (1 = most important, 8 = least important)

Process efficiency

1.5

Cost reduction

2.0

Quality improvement

2.3

Internal customer satisfaction

2.6

Service innovation

4.2

External customer satisfaction

4.7

Return on investment

4.9

Strategic importance of work

5.3

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

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In interviews, respondents described several approaches that they said helped them better satisfy internal customers. According to the life sciences SSO leader quoted above, “One of the most helpful things is being flexible – understanding customers’ requirements and working with them on solutions, adapting the delivery model rather than applying a rigid set of rules.” Prioritization is also important, said a respondent from a higher education institution: “We focus on one area of the organization, and then the other ones are upset because we’re not focusing on their needs. We’re trying to make sure we have a way of prioritizing.” Yet another respondent described her approach to keeping problems from being blown out of proportion: “Make sure the business leaders’ administrative assistants know exactly who to call when they hear that something’s the matter. They’re the ones who take the calls when something goes wrong in the SSO, and if they know to call me rather than go to their boss and tell them that someone’s complaining, the crisis is averted.” Most important of all, said many respondents, is to set realistic customer expectations and “be honest about challenges in the current process,” as an e-business shared services leader said. Expectations may need to be managed not only among business-unit and executive leadership, but also among end users. Explained an HR shared services leader at a global software company: “The SLAs and key performance indicators are with senior leadership, but the hiring managers don’t necessarily know what SLAs I have contracted for. For example, the hiring managers may think that it’s reasonable to fill a position in 14 days when we know that 40 days is best in class. Dealing with that is a key initiative this year.”

6. The people challenges are not over. Finding, keeping, rewarding, and motivating SSO staffers has always been challenging for shared services leaders, and we believe that the people challenges will only increase over time as competition for low-cost resources increases and companies move to lower-cost regions and geographies with decreasing pools of skilled resources. The increase in pressure for skilled resources is likely to make staff morale and retention increasingly important. Effective training and development will also become more vital than ever as SSOs strive to bring new, inexperienced employees up to speed and further develop existing employees. The biggest people challenges among our 2007 survey respondents were those having to do with customer service. Consistent with the focus on service noted in the previous section, “maintaining high quality” and “maintaining high customer service levels” were viewed as critical people issues by 64% and 60% of our respondents, respectively, easily surpassing the percentage identifying as critical such other key issues as maintaining strong morale, retention, recruitment, and training (Figure 19).

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Figure 19. What are the biggest people-related challenges within your SSO? 30%

60%

Maintaining high customer service levels

40%

44%

Maintaining strong morale Retaining professional staff

36%

Recruiting professional staff

34%

Retaining management staff

47%

44% 49%

24%

Maintaining desired training levels

17%

Retaining clerical staff

15%

11%

Critical issue Areas of concern

43%

26%

Recruiting management staff

Recruiting clerical staff

28%

64%

Maintaining high quality

65% 40%

37%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of respondents

Many companies are focusing on installing HR programs and policies to address these and other people issues. Among the strategies used by the 2007 respondents we interviewed, one of the most frequently mentioned was the expansion of career paths for center workers, whether through cross-training or by allowing shared services employees to transition into the business. “We want to improve internal training and development with a focus on cross-department training within finance,” said one respondent from a manufacturing company. “There will be a clear career path from shared services into the business.” Agreed a shared services leader from a construction company: “Remember that the SSO is an excellent way of recruiting talented people directly out of school. They will then be available to take on more challenging roles within other parts of the business.” Job rotation within the SSO was a much-used people strategy as well: “Try to create a rotating system since routine is the greatest enemy of the shared services concept,” advised a shared services leader from an energy and utilities company. Respondents also placed great value on both selecting the right people and developing them once they are with the SSO. “[Because] the SSC is seen as a training ground with people moving on into business partnering roles, we want to make sure that we get the right caliber of people,” said a consumer products company respondent. “We use a continuous recruitment approach and hold open positions for good candidates.” “It is more important to find the right person rather than to find a person with all the skills we need,” added a respondent from a global manufacturing company. “A sharing and learning culture is important. [We] identify area champions who train the other staff members in a ‘sit close to each other and learn from each other’ approach.”

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

7. The focus on optimization is here to stay.

standardization. As one software company shared services leader explained: “We’ll have managers asking us, ‘Even if I supervise people in five different countries, why do I have to deal with five different tools and timelines? That’s ridiculous; go and fix it.’” As in previous years, respondents found the use of a single ERP system enormously helpful in driving process standardization. “Within the last few years, we’ve migrated the whole company to a single instance of [our ERP platform],” said one software company respondent. “That’s afforded us the opportunity to do a lot more in terms of standardizing, driving consistency, and looking for opportunities to leverage our common system to improve processes and take costs out of the equation.” Consolidation of like processes into the same center was another tactic our respondents employed to drive common practices, as well as to achieve scale and centralize skills. “If we consolidate, for example, all accounts payable activities in one area, there’d be enough scale to support an organizational model that would yield centralized expertise and more automation,” the same respondent said.

Many of our 2007 survey participants lead “mature” SSOs that, after five or more years in operation, are a well-established part of the business. But they’re not resting on their laurels. As several respondents made clear, continuous improvement is a constant focus even for SSOs that have delivered on their initial value proposition. “We have definitely achieved our cost goals, and we’ve achieved our quality goal,” said a manufacturing company leader. “Now we’re looking at the next step and working to continuously improve the operations.” The drive to optimize among our 2007 respondents is reflected in the widespread use of institutionalized mechanisms to support continuous improvement. Forty-seven percent of this year’s respondents said that they had an on-site continuous improvement department or group at their SSOs. A number of respondents we interviewed also said that they had implemented or planned to implement a formal process improvement methodology at their SSOs. In fact, one non-profit organization’s SSO had such positive results with Six Sigma that, according to its shared services leader, “We’ve exported it to the rest of the organization. We’d been doing Six Sigma training in the center; now we’re also training outside it.”

Another important part of continuous improvement is implementation of new technology tools to increase automation levels and enhance efficiency. This is reflected in the rise in our respondents’ use of the top ten automation tools in 2007 as compared to 2005 (Figure 20). The tools with the largest increases in use since 2005 were the use of data warehousing (24% growth), automated three-way match (17% growth), consolidation/ reporting tools (16% growth), and call centers (13% growth).

What does “optimize” mean to our respondents in practice? For more than a few respondents we interviewed, it means global process

Figure 20. What tools have been implemented in your SSO? 71%

EFT/ACH

65% 64%

Document imaging

60% 59%

Financial consolidation/reporting tools

51% 58%

Electronic data interchange (EDI)

57% 54%

Direct deposit

52% 52%

Automated workflow tool

48% 51%

Automated cash application/lockbox

46% 2007 2005

49%

Automated 3-way matching

42% 47%

Data warehousing

38% 44%42% 39%

Call center

39% 42%

Employee self-service

45%

E-procurement

41%

Procurement cards

40%

42%

44% 39%

E-invoicing

30%

Manager self-service

24% 34% 13%

Vendor self-service

13%

0%

10%

20%

30%

40%

50%

60%

70%

% of respondents

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

9

the bottom. Based on these findings, we believe that organizations are entering a more mature phase of technology implementation in which, having achieved automation of more basic processes, they are exploring more sophisticated ways to leverage technology to improve SSO performance.

Self-service tops the list of tools organizations are planning to implement at their SSOs in the future (Figure 21). Procure-to-pay automation was second, with planned implementation of e-invoicing, workflow, EDI, and P-cards also in the works for many respondents. Not surprisingly, tools that have high installations today, such as direct deposit, automated cash application/lockbox, and EFT/ACH, rank at

Figure 21. What tools are you planning to implement in your SSO? 48%

Vendor self-service

28% 45%

E-invoicing

31% 39%

E-procurement

21% 38%

Manager self-service

15% 34%

Automated workflow tool

9% 34%

Employee self-service

12%

Electronic data Interchange (EDI)

12%

31% 2007 2005

28%

Procurement cards

17%

Data warehousing

15%

27%

26%

Financial consolidation/reporting tools

11%

Document imaging

10%

25%

42%

39%

24%

Automated 3-way matching

16% 21%

Call center

18% 17%

EFT/ACH

6% 15%

Automated cash application/lockbox

18% 15%

Direct deposit

6%

0%

10%

20%

30%

40%

50%

% of respondents

10

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

Discussion

Contacts

Shared services has come a long way since the idea first originated. Over the years, our survey has documented the growing maturity of the shared services concept among our respondents – as well as the ubiquity of some of the challenges they have faced. Our 2007 respondents, most of whose SSOs have been in operation for five years or more, appear to be taking stock of their early experiences and working to expand and enhance the benefits. We see organizations taking an increasingly strategic approach to shared services location and service delivery model, thinking carefully about where to locate their centers, how to balance in-house with outsourced service delivery, and what processes to house in the SSO. They are exploring more sophisticated technology tools to enable SSO processes and increasing the extent of automation.

Susan Hogan Principal Deloitte Consulting LLP Atlanta +1 404 631-2166 [email protected]

At the same time, several of the issues our survey uncovered back in 1999 continue to challenge shared services executives. People, governance, and service quality rightly remain top concerns for our respondents. We anticipate that companies will need to develop innovative ways to approach these issues as they expand their SSOs’ geographical and service footprint. A number of our 2007 respondents have already taken steps that we feel are very effective practices in these areas, such as expanding shared services employees’ career paths; establishing performance metrics, process owners, and joint continuous improvement objectives; and focusing on timeliness of response in the service quality and customer satisfaction.

Peter Moller Principal Deloitte MCS Ltd London +44 20 7007-3973 [email protected]

We believe organizations that have met their initial goals with shared services are now expanding their use of the concept to meet broader business objectives. By virtue of its ability to support an important combination of factors – from cost savings to customizing and refining process improvements to promoting cross-company knowledgesharing and synergies – shared services continues to win over adopters and advocates. To sustain and expand upon these benefits in the future, we believe companies will need to continue to execute on a comprehensive shared services strategy geared to meet their global service needs.

Richard Sarkissian Principal Deloitte Consulting LLP New York +1 908 673-5959 [email protected]

Hugo Walkinshaw Principal Deloitte Consulting Singapore Pte Ltd Singapore +65 62327-112 [email protected]

References Tracy Gere and John Farrell, “Shared Services: Maximizing returns on investment. An IDC white paper sponsored by Deloitte Consulting,” International Data Corporation, 1999.

1

“The Future of Shared Services: Realizing and sustaining the benefits,” Deloitte Consulting LLP, 2003.

2

“Shared Services in a Global Economy: Expanding the shared services value proposition,” Deloitte Development LLC, 2005.

3

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP.

11

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