the “value add” shared services landscape - how do different industries and functions stack up...

1 | SEPTEMBER 2013 THE “VALUE ADD” SHARED SERVICES LANDSCAPE: HOW DO DIFFERENT INDUSTRIES AND FUNCTIONS STACK UP?

2013SEPTEMBER

THE “VALUE ADD” SHARED SERVICES LANDSCAPE:HOW DO DIFFERENT INDUSTRIES AND FUNCTIONS STACK UP?AN ANALYSIS OF PROCESSES AND INDUSTRIES CHARACTERIZED BY VALUE ADD SERVICES


The conversation around shared services has evolved over the years from one largely focused on cost savings and the provision of “back office” services that tended to be more “transactional and administrative” in nature, to one involving the provision of “value adding” services to the business, and increasing proximity to the internal customer. This has meant that, as shared services has increasingly delivered on the initial promise of cost savings, improved visibility, control, and process improvements, what is possible – indeed expected, today – is a greater scope and depth of services, including more profession-al and technical services, that move higher up the “value chain”. This has also encompassed revenue-enhancing strategies, through leveraging business intelligence via data analytics, or through enabling organic or acquisition-driven growth through effective integration, standardization and automation.

With shared services’ implementation history stretching back some two or three decades in North America and the UK, and with a shorter history in Continental Europe, Latin America, and Asia, it’s not surprising that the more mature a center, the more services lines it tends to include, and the more likely we are to see value-adding services within scope. Equally, while the public sectors in North America, UK, and Australia have been taking great strides to catch up, the private sector is still notably lead-ing the way, both in terms of maturity and in terms of breadth of service (however, there are some public sector exceptions).

This report highlights the trend in numbers of Value Add service lines according to industry, function, maturity, and private vs. public sector.

Note: This report is part of a series produced by Chazey Partners, which tracks and charts

the evolution of services delivery across different functions and regions, and across both

the private and public sectors. The reports provide an overview of the market expertise

leveraged by Chazey Partners.

Phil SearleCEO & Founder Chazey Partners

Chazey’s Viewpoint

3//Executive Summary

4//Observations

7//Conclusions

Value Add Services Lines

Number of Organisations offering value add services

Is there still room for growth

Your partners in business services

8//Chazey Partners

As shared services has increasingly delivered on the initial promise of cost savings, improved visibility, control, and process improve ments, what is possible – indeed expected, today – is a greater scope and depth of services, including revenueenhancing strategies, through leveraging business intelligence via data analytics, or through enabling organic or acquisitiondriven growth through effective integration, standardiza tion and automation

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Table of Contents

2//Chazey’s ViewpointWhat We Think


This report assesses the trend towards “Value Add” Service Lines (VASL) being provided by shared ser-vices organizations around the world. In analyzing the market, we considered maturity, industry and public vs. private sectors to provide some compara-ble perspectives. The research is based on Chazey’s proprietary knowledge, as well as reviews of rele-vant publications, reports, and direct contact survey responses.

For the purpose of this research, we define “Value Add” Service Lines as services that have an impact beyond mere cost savings or efficiency, are more “professional and technical” in nature, and tend to provide more “commercial” or “strategic” services that sit closer to the internal customer. By comparison, tra-ditional “transactional and administrative” back office services have tended to be “removed” from the core business, and have been more streamlined, automat-ed, standardized and centralized. These new Value Add Service Lines (while still operating in as standard-ized, automated and centralized a way as possible) have grown in importance and significance, and tend to align more closely with the internal customer.

EXECUTIVE SUMMARY

VALUE ADD SERVICES LINES

Chazey’s previous research around the landscape of shared services in the public sector showed that the shared services model was not as prevalent there, compared to the private sector. However, since the economic downturn of 2008, the public sector has been under severe pressure to reduce operating bud-gets and increase efficiency. In fact, the trend started earlier in the UK as a result of Government-driven cost cutting measures that began in the early to mid 2000s. This pressure has created a lot of buzz in the public sector around the potential leveraging of shared services models. As this research indicates, however, public sector activity has, to date, generally been more limited to the core back office functions of IT, HR, Procurement and Finance, with relatively limit-ed transformation of what we are considering here as more value-adding service lines.

This paper also demonstrates that even the more mature private sector organizations have room to increase their VASL offerings to customers.

We define “Value Add” Service Lines as services that have an impact beyond mere cost savings or efficiency, are more “professional and technical” in nature, and tend to provide more “commercial” or “strategic” services that sit closer to the internal customer.

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OBSERVATIONSNUMBER OF ORGANIZATIONS OFFERING VALUE ADD SERVICES

The objective of the research conducted here was to analyze existing shared services organizations’ service lines, and determine how many, if any, Value Add services are currently in scope. Over the course of our research, we collected data from 36 private sector organizations and 15 public sector organizations.

From this data we can note the following:

• 69% (25 of 36) of private sector SSOs offer Business Support Review, Consolidation & Financial Reporting.

• The majority, that is, 55% (21 of 36), of private sector SSOs offer all of the Value Add services we have identi-fied in the Procure-to-Pay Cycle (P2P).

• The P2P and the Record-to-Report (R2R) cycles are the most developed Value Add offerings for the private sector. This is even more noteworthy considering the T&E Administration and Corporate Card Administration are often very tightly linked with the P2P cycle, but are here being represented as Administrative Services.

• Public sector SSOs today offer only limited additional Value Add services, however Purchasing dominates, with 67% of public sector organizations offering this service.

Our data determined a list of 21 possible Value Add services, stretching across Order-To-Cash, Procure-To-Pay, Record-To-Report, Hire-To-Retire, and Admin-istrative Services. The graph below shows the total number of organizations, out of the 51 total sample size, that have incorporated Value Add services in their customer offerings.


NUMBER OF SERVICE LINES BY ORGANIZATION

Looking at the same information another way, we wanted to determine how many Value Add services different organizations provide. The pie charts below display the number of Value Add Service Lines provid-ed by organizations – i.e., whether few or many.

From the pie charts above we can note the following:

• 14% (5) of private SSOs sampled offer 16 or more of the total number of Value Add services we have identified (i.e. 76% percent of the total VASLs).

• Just over a third (36%) of the private SSOs sampled offer 11 or more of the total number of Value Add services (i.e., just over 50% of all VASLs).

• In the public sector sample, there were no SSOs that offered more than 10 VASLs, and the majority (87%) of-fered only 6 or less VASLs.

With the total number of VASLs equal to 21, we grouped the number of VASLs by thresholds, separat-ing private and public sector SSOs.


AVERAGE NUMBER OF SERVICE LINES BY INDUSTRY

Finally, we wanted to evaluate each industry separate-ly, to identify those that stand out in terms of having moved towards customer-centric VASLs. The graph below displays the average number of VASLs offered by SSOs grouped into their industry.

From the line graph we can note two interesting points:

• There are 6 industries (out of the 16 industries represented in this sample) where the average number of VASLs offered is greater than 10. These are:

» Oil & Gas (4 SSOs) » Food & Beverage (5 SSOs) » Healthcare (1 SSO) » Consumer Goods (4 SSOs) » Medical/Pharmaceutical (2 SSOs) » Publishing (1 SSO)

• There is only one public sector industry – healthcare – where the average number of VASLs offered is greater than 5, and there are only two public SSOs in this classification.

While the sample size is too small to provide any truly meaningful cross-industry analysis, there are a few interesting things to note.

0

2

4

6

8

10

12

14

16

Healthcare

Oil & Gas

Consum

er Goo

ds

Publish

ing

Medical/Pharm

aceu@cal

Food

& Beverage

Retail

Conglomerate

Telecom

IT Related

Defence

Document Services

Steel

Support Services

Travel Technology

Automo@

ve

Healthcare

Local G

ov't

Federal G

ov't

Other Gov't

Higher Educa@o

n Private Public

Value Add Service Lines by Industry

# of SSOs

Avg VASL


While this research was based on a relatively small sample size, and to some extent only scratches the surface, it does provide an overall indication of the number of SSOs offering Value Add Services, as well as the number of VASLs offered by SSOs, com-pared across industries and processes. Based on the research we can conclude that while a significant number of SSOs (predominantly in the private sector) offer a number of Value Add services, there is still ample room for expansion. The private sector is more developed in this area, which is to be expected, since the private sector has been implementing shared services for well over 20 years.

t would be interesting to determine whether the maturity of the SSO has a direct correlation to the number of Value Add Services provided, or if this

Conclusions

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number is driven by SSO management and a culture of continuous improvement and expansion. If there was a direct correlation between numbers of VASLs and maturity, that could help explain why the public sector is lagging behind.

However, newer SSOs, whether in the private or public sectors, have the opportunity to learn from the experience of others and to rapidly expand service offerings and move up the value chain, irrespective of number of years implemented.

The more general trend towards “Global Business Services” would also tend to support the assumption that SSOs will add service lines in the future, across both the public and private sectors.

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Chazey PartnersYOUR PARTNERS IN BUSINESS SERVICESChazey Partners is a professional management consultancy business that is committed to adding value to its clients through a partnership approach. Chazey’s experience covers Business Transformation, Shared Services & Outsourcing, and Technology Enablement, and the firm’s partners have built, operated and turned around some of the world’s most respected and ground-breaking Shared Services Organizations.

This report is part of a series produced by Chazey Partners, which tracks and analyzes the evolution of services delivery across different functions and regions, and across private and public sector. The reports provide an overview of the mar-ket expertise gathered by Chazey’s partners.

If you would like to speak to a partner about this research, please contact:

Phil Searle CEO & FounderChazey Partners+1 408 402 [email protected]

David O’Sullivan Co-Founder & PartnerChazey Partners+353 (0)86 384 [email protected]

Grant Farrell Managing Director United States Chazey Partners+1 408 767 [email protected]

Esteban Carril Managing Director, Latin AmericaChazey Partners+54(911) 3085 [email protected]

Chas Moore Managing Director, CanadaChazey Partners+1-855-5-SHARED, Ext. [email protected]

Anirvan Sen Managing Director, Asia, Middle East and AfricaChazey Partners+31 649133170 / +65 85143766 / +971 [email protected]

Janey Jux Head of Public Sector Practice EMEAChazey Partners+ 44 (0)800 [email protected]

Christina Exarchou Head of HR Practice EMEAChazey Partners+30 6944 [email protected]

Emer O’Kelly Regional Director EuropeChazey Partners+44 (0) 7703 647 [email protected]

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