Organizations operating globally have long been opting for the centralization and standardization of processes as a strategy to reduce costs and improve the efficiency of their operations. Some of the most mature companies have been operating support functions in a centralized manner for over two decades, typically in the areas of finance, human resources, and technology, leading to the creation of Shared Services Centers (SSC) first and Global Business Services (GBS) later.
Today, SSC/GBS organizations are a pivotal entity of world-leading corporations, offering value-added services beyond transactional operations, with a strong culture of customer orientation (internal/external), service monitoring and continuous improvement mindset.
Business impact and value generation through service centralization and standardization
The most evident benefits of service centralization are related with increased operational efficiency, cost reduction, service quality improvement, and greater organizational flexibility and agility.
Operational efficiency refers to the amount of resources used to run the business operations. Its optimization allows freeing-up these resources for higher-value tasks and is achieved through standardization, simplification, and elimination of bottlenecks in business processes by applying reengineering principles and techniques (e.g., lean) and technologies that enable digitization and automation, as well as resource specialization. Additionally, it yields improvements in working capital through a more effective management of order-to-cash, procure-to-pay and inventory management processes.
Secondly, centralizing functions enables the utilization of economies of scale, eliminating redundancies and facilitating resource optimization.
At the same time, standardization and centralization of operations enhance the capacity to adapt to changing market circumstances and facilitate scalability to embrace new growth expectations. Organizations can more easily shift resources and deploy processes in new markets or acquired companies faster and effortlessly.
On the other hand, labor and infrastructure arbitrage through a proper location strategy, as well as outsourcing operations to specialized providers, can also contribute to operational cost reduction.
Last but not least, a significant impact on service quality improvement can be achieved through process standardization based on both internal and market best practices, workforce specialization, and the sophistication of service control and management mechanisms.
Expansion of scope and Centers of Excellence
In recent years, Shared Services Centers (SSC) have continued to evolve, broadening their functional scope to more knowledge-intensive activities and incorporating new capabilities that enhance efficiency and improve service quality. Thus, Shared Services Centers have become large organizations acting as multifunctional service hubs, managing a significant portion of non-productive activities for the company and serving multiple geographies, giving rise to the concept of Global Business Services (GBS).
Today, it is estimated that more than 70%1 of SSC/GBS have a global or regional scope—serving multiple countries—and are multifunctional, expecting to further expand their scope (up to 86% in the next year). In addition to the services traditionally offered by SSC/GBS (procure-to-pay, order-to-cash, record-to-report, payroll, etc.), leading organizations are increasingly incorporating front-office functions and more sophisticated and added value services (analytics as a service, talent management as a service, master data management, or digitization and automation), which are set up in Centers of Excellence.
Establishing the scope of the SSC/GBS
Determining the scope of the CSC/GBS requires careful consideration of corporate development and operational strategy, as well as the current maturity level. It is convenient to review growth and volatility perspectives, optimization needs in terms of efficiency, cost, or quality, and reflect on the desired role of Corporate and Business Units. The starting point regarding the heterogeneity and maturity of processes, resistance to change, and the availability of resources in the organization will also be crucial. In any case, defining the scope of the CSC/GBS should respond to a thorough analysis of the different strategic factors influencing the decision and the constraints given by the nature of the processes themselves.
Determining the geographical footprint
The definition of the number of service centers and their geographical scope, as well as selecting the location, will depend on the markets in which the company operates, the current distribution of resources, and opportunities and risks considering different factors. Today, over 50% of corporations with CSC/GBS organizations provide their services from three or fewer centers of operations, and almost 90% do so from up to six locations1, without a noticeable preference for onshore, nearshore, or offshore locations. Key decision factors in the location strategy should include:
- Labor and infrastructure costs.
- Access to talent/resource availability, considering skills and education, languages, attraction capacity, and time zone.
- Office, transportation, and telecommunication infrastructures.
- Political, socioeconomic, regulatory, and fiscal environment, as well as government support.
- Business continuity risks, considering sociopolitical and environmental factors.
1SSON’s State of the Shared Services & Outsourcing Industry – global market report 2023
