Viewpoint paper

Get the
greatest
value
Choosing between internal
shared services and BPO
Making the right choice for your needs
The decision to set up a shared services operation or a more
advanced global business services organization is never easy; there
are many variables to consider and stakeholders to manage. But this
is something that every CFO and CEO must consider as they search
for cost-efectiveness, agility, and value.
With 75 percent of the global Fortune 500 companies implementing
shared services or global business services, the evidence is that this
is a smart approach. So what are these companies looking for? HPs
experience and our client CFOs and CEOs tell us they want to:
Reduce the cost of the shared service organization
Reduce organizational cost by leveraging best practices
Grow the top line through focusing on core competencies
Exploit innovation and analytics through technology
Address market perceptions through enhanced controls and
improved transparency
Increase fexibility and access to skills and free up scarce
capital resources
Increase speed to market to meet the demands of the global
economy
Whether you are on the journey to implement shared services or
moving to a global business services environment, you have a choice
of implementation models ranging from in-house shared services
to outsourced operating models in single or multiple functions. The
decision to set up an internal shared service center or to outsource is
a complex decision. Many organizations are now moving to a hybrid
model where an outsourcing provider works collaboratively with
them to set up an integrated in-house/outsourced model to deliver
the best of both options.
To arrive at the solution that best meets your needs, you have to
match your requirements to your business goals. Your attitude
toward risk and control might mean that implementing an internal
shared service center or global business services model is more
suited to deliver value for you than an outsourcing relationship;
however, if speed to value and access to capital, technology, and
human resources are important, then perhaps an outsourced service
is more appropriate.
Lets take a look at some of the value levers and questions you
should be asking yourself and your potential outsource service
partner.
Value levers
There are fve key levers that, together, create the corporate value
that your CFO and board are looking for. The question for the CFO is:
Who can best do this for me, and what does my risk profle look like?
Value delivered
Reduce cost
Leverage best practices
Focus on core competencies
Gain access to technology
Enhance controls
Increase exibility and
free up capital
Increase transparency
Customer
performance
objectives
Facilities/infrastructure leverage
Operations management,
support, SMEs leverage
Better labor
utilization/eciencies
Technology and investment
amortization
1. Economies of scale
1
2
3
4
5
Co-location and centralization
Wage arbitrage
Multilanguages
BCP/DR
Global talent pool
2. Economies of location
Business process reengineering
Six Sigma plus
Compliance/controls
SLA/KPI/metrics
Continuous improvement and benchmarking
3. Operational excellence
Digitization/workow
Process-specic systems and tools
Process and technology optimization IP
Data/network security
Application management
4. Technology enablement
Shared services
value drivers
KPI/metrics commitments
Reporting/process intelligence
Governance/relationship management
Analytics/decision support
5. Performance management
Figure 1. Value levers
Economies of scale
This is not solely about scale but also about access to capital, speed
to realizing benefts, access to infrastructure and technology, and
more. Can you aford the time and management efort to create
in-house shared services when your competitors are leveraging
existing multiclient shared service centers to speed the transition?
Will your 50-seat center in Asia really add value to your business, or
will it dissipate management focus? All these factors can increase
risk and time to value, and defect attention away from the core
business.
Economies of location
Location choice is not a one-time decision. Changing world trends
will lead to changes in cost-efectiveness in diferent locations.
Process enhancement will remove language requirements. Talent
pools will change over time (for example, bigger shared service
operations may move into your city). Do you have the ability to be
fexible and agile over time?
Operational excellence
After you have set up your shared service center, you need to
quickly establish an operational excellence agenda to drive out cost
and to create value for your organization. This needs to be in your
organizations DNA and implemented using world-class techniques.
If you are setting up an in-house shared services center, can you do it
and at what cost? How do you implement lessons learned from other
organizations, and how long does it take you? Can your BPO partner
share experience working with other clients to help you drive to a
new paradigm more quickly and efectively?
Technology enablement
Technology has quickly become the key to efective shared services
operationsfrom simple automation to complex analytics.
Assuming your core ERP system is in place or being considered, what
efciency and analytic technologies can you employ, and how do you
assess them? How do you efectively implement them, and how do
you ensure that your management processes are optimized?
Performance management
Your outsourcing partner and the internal shared services
organization can both implement performance management
techniques, measuring the services and providing sound analysis.
But the corporation must question how this performance
management information is used. Does the contractual relationship
with an outsourced service provider give your organization greater
leverage? Can performance be delivered equally successfully
through the internal management structure?
A contract will provide incentive for your outsource partner to
perform to your expectations, but managing a contract relationship
is not without its demands. The most important lesson to learn from
companies experienced in outsourcing may be that a collaborative
attitude based on trust and mutual beneft is critical to success. So,
the key question is this: Can you fnd a partner that you trust, and are
you ready to be a partner yourself?
Final considerations
The question of who brings the greatest value cannot be answered in
a document like this. The optimal solution depends on the context of
the problem the board is looking to resolve and the result they want
to achieve. In the end, it comes down to an assessment of the level
of control, the ability to infuence, and probability that the results
will be achieved.
One thing is certain: To achieve the greatest value, moving to a
true global business services environmentone in which multiple
processes operate globally and across business streamsadds
the greatest value to the corporation, regardless of the sourcing
approach.
As you move through your shared services agenda and consider the
sourcing model, the organization should have a well-thought-out
strategy that is sustainable in the long term, with due consideration
of these factors:
Level of leadership sponsorship
Required speed of implementation and value creation
A mature process, transition, and change management capability
within the corporation
Defnition of common standards and the ability to implement
Continuous improvement methods and access to best-in-class
technologies
Requirements for global operations
Governance and ability to recruit and retain
Access to capital
HP is committed to providing solutions that create the most value
for our clients, and we work with our clients to jointly ensure that we
implement the optimal shared services and outsource solution.
For more information
Visit hp.com/enterprise/bpo
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Copyright 2011-2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.
The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and
services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors
4AA3-5765ENW, Created August 2011; Updated July 2012, Rev. 1