Outsource Magazine Issue 26 - (Page 36)

Separate WayS? Traditionally, many shared services have ‘merely’ laid the path for future outsourcing ventures – while others have been deployed by organisations adamantly rejecting the outsourcing model. However, today’s business landscape frequently calls for a more sophisticated , “best of both worlds” approach… Stan Lepeak Stan Lepeak is Director, Global Research, Management Consulting at KPMG. He is a member of the Outsource Editorial Board and a regular columnist for Outsource online. H istorically some (especially outsourcing service providers) have viewed shared services as a precursor to outsourcing, or a more risk-averse means for buyers to get at some, but not all, of the potential benefits outsourcing can deliver. However today, shared services and outsourcing does not have to be an “either/or” decision, and there are good reasons to leverage the different models in different situations. The opinion that shared services was just a way to ease into outsourcing was especially popular a few years back, when mega-outsourcing deals were the rage and many buyers’ early shared services efforts were foundering or at least under-achieving initial business cases. While many shared services efforts achieved some initial quickhit wins, for example by driving out costs via consolidating operations into lowercost markets and reducing headcount, sustaining longer-term performance and price gains proved much more challenging. There has long existed an opinion that outsourcers, because of greater global reach and economies of scale, deep pockets, diversified expertise, and the discipline to run services delivery “as a business” are inherently better positioned than end-user organisations to improve service delivery process performance and reduce operating costs. History and current market conditions have shown, however, that outsourcing efforts, especially global mega-deals, are not the sure ticket to service delivery nirvana that many buyers and providers had hoped for and predicted. Today there are a range of scenarios and situations in which buyers see shared services as complementary or preferable to the use of outsourcing. Over the past one to two years, there has been an uptick in buyers’ interest in the use and expansion of shared services operations, especially nearshore captives, to support various frontand back-office functions and processes. In some cases this is due to the nature of work being performed, for example, dealing with sensitive data, interfacing directly with customers, or handling core strategic processes. In other scenarios, it is more simply because buyers feel they can perform the work better or cheaper than an outsourcer, or have experienced problematic outsourcing efforts that they were unable to remediate. Part of shared services’ resurgence is driven by organisations’ greater abilities to measure and drive value from shared services efforts. The value proposition and success metrics for shared services operations are evolving. Leading organisations today receive measurable business value from shared services – above and beyond driving costs down via consolidation, automation and labour arbitrage. These organisations are assuming a more commercial orientation to the business. This involves driving and improving overall business performance, as well as competing for internal business on level ground with external service providers. It is not, however, an “either/or” scenario. While interest in shared services has rebounded, the outsourcing market has continued to grow. Leading organisations today employ a broad range of integrated global service delivery models and techniques that increasingly, and prominently, include shared services, nearshore and offshore captive operations, ITO and BPO. Organisations must perform thorough assessments to determine the preferred service delivery model mix for a “When you have to make a choice and don’t make it, that is in itself a choice.” – William James 36 ● ● www.outsourcemagazine.co.uk http://www.outsourcemagazine.co.uk

Table of Contents for the Digital Edition of Outsource Magazine Issue 26

News & Comment
2012 in outsourcing
Fine – but what does it all mean?
Steering Steria
Separate Ways?
Getting Smart
Northern Lights
Heads in the Cloud
Connecting Service
Bigger and Better
NOA Round-Up
Breaking Through
You Cannot be Serious!
Back to the Future
Accounts Payable
The Power of Two
Public-Private Partnerships
Kill or Cure
Public Problems
Head-to-Head
Top Ten
The Legal View
HfS Research
Online Round-Up
Inside Source
The Last Word

Outsource Magazine Issue 26