Shared services centers and outsourcing are both hot with today’s businesses looking to cut costs and increase efficiencies as much as possible. What are the differences between the two models? This is Part III of a three-part roundtable discussion on important perspectives on these popular business models. Part III roundtable participants are Krist Davood, Group CIO of Schiavello; Joseph Soalheira, Advisory Board Member of the Shared Services & Outsourcing Network (SSON) global community; Asheesh Mehra, Head of Sales, Infosys BPO Asia Pacific; and Peter Barta, CEO of Everest Group Asia Pacific. All four are among many industry experts presenting at the upcoming 13th Annual Australasian Shared Services & Outsourcing Week.
Shared services and outsourcing models both create value, and both require financial investment. How do they differ in the amount of management effort and type of management skills that they require?
Krist Davood: They have more similarities than they have differences. Both models require a thorough understanding of their business and their organization’s value to the market – in other words, a focus on profits not process.
Joseph Soalheira: Both have similar and yet different drivers. It all depends on the type of organization; but in general terms, both aim to move the organization from an environment of operational necessity to one where you are able to leverage process capital to increase competitive advantage. As to skills, you need highly skilled communicators and leaders that can inspire; other than that, I believe that the management effort and skills are not that different in either service delivery model.
Peter Barta: All other things being equal, such as the starting point, potential outcomes, etc., there is very little difference when one considers the end-to-end operational process environment. But within that environment, there are differences at the margins, given the arms-length nature of an outsourcing agreement versus the ownership control of a shared services operation.
Asheesh Mehra: However, a shared-services center can require significantly greater management effort.
Both models need strong executive sponsorship to ensure the strategy is successful. Why does the shared services strategy require more effort from management?
Mehra: A shared-services center’s higher cost, from a CAPEX perspective, requires additional management resource to track and control expenses. In addition, the same people who were responsible for managing the process in house are generally also responsible for managing the shared-services organization, so the company may need to invest more in internal audit. Also, managerial resources will be required to staff multiple layers of project management and to brand the separate shared-services entity.
Another important management aspect is that there is no third party to hold accountable for achieving specific service level agreements or benchmarks.
Barta: Yes, the accountability and reward systems differ in the two models, as well as the decision rights. These would require variations to the systems of measurement and control. Overall, though, whether it’s shared services or outsourcing, the organization must focus on capturing value from the end-to-end processes entirely, not just from the retained functions. But the management effort and skills to do this are largely indifferent to the chosen operating model.
Davood: The management focus needs to be on providing value with an understanding of how to balance delivery versus the need to maintain a robust governance model. The key at the end of the day is to deliver an outcome rather than the outcome being held up in the delivery.
Peter Barta is CEO at Everest Group Asia Pacific. For over 20 years his extensive commercial expertise has served the strategic interests of world-leading organizations in over a dozen countries in sectors as diverse as financial services, energy, resources, manufacturing and distribution, government, transportation and telecommunications. Before Everest, he was Chief Financial Officer for EDS Australia / New Zealand, where he established and led the new business planning function as a shared service supporting 12 countries.
Krist Davood is Group CIO of Schiavello. He focuses on all parts of information technology including networks, infrastructure and applications. He brings with him over 20 years of IT experience in manufacturing, construction, utilities and telecommunications industries in Asia, Europe and Australia. He possesses strong skills in product management, delivery credentials and strategic planning.
Asheesh Mehra is the Head of Sales, Infosys BPO, Asia Pacific. His responsibilities include consolidating market share by identifying and targeting new verticals and industry segments and leading the sales force. He has 10 years of BPO experience. Prior to Infosys, he was with WNS Global Services and established the BPO delivery center for Tata Consultancy Services.
Joseph Soalheira, Advisory Board Member, SSON, has over 12 years of leadership in shared services management including extensive experience in the design, roll-out and management of shared services initiatives in the local government and telecommunications sectors. In his current role at Brisbane City Council, in the Corporate Strategy Office, CEO’s office, he specializes in organizational and business reviews, process and efficiency improvements, and change management.
Since 1998, freelance writer Kathleen Goolsby has studied outsourcing relationships’ successes, failures, trends, and best practices. She has interviewed more than 860 executives at buyer and service provider companies and is the author of “Critical Requirements for Building and Sustaining a Successful Outsourcing Relationship,” a chapter in Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships (December 2006, Gower Publishing). As a freelancer, she also currently serves as the Senior Writer for Outsourcing Center (whose parent company is sourcing advisory firm, Alsbridge) and has authored dozens of articles as well as white papers. In a past role, she was editor of Outsourcing Venture (a former print publication). You can contact Kathleen at ksgoolsby@gmail.com.
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