Key issues you wanted to know about shared services

July 25, 2009

It is about standardization, managing complexity, controlling cost, profitable growth, and performance – it’s all about the way a modern corporation is doing

Shared services – old wine in new skins or something really new? Well, it doesn’t actually matter. They enable organization to standardize the processes, manage complexity, reduce costs, ensure profitable growth and performance… – do you want to achieve something more?

Here some findings characterizing the shared services approach:

Issue 1: Location. While choosing a location for their shared service center, corporations take the following criteria in consideration:

• Availability of qualified personnel,
• Local cost structures,
• Experience already gained regarding the location,
• Integration with the company infrastructure,
• Political stability,
• Life quality,
• Transport and technology connection.

Issue 2: Benchmarking and measurement. Benchmarking and measurement are the MUST while establishing and running one or more shared service center(s). Benchmarking allows to compare the service provision with the best in class. The measurement mostly occurs using agreed key performance indicators (KPIs). The amount of KPIs chosen differs from corporation to corporation, the experience shows than 10 carefully chosen KPIs will deliver the best results.

Benchmarking can be used to achieve different objectives including:
1. Improvements in performance,
2. To align the processes with these used by the best ones enabling organization to become world class with processes.

Issue 3: Shared service center – challenges and opportunities. The following issues are to be carefully considered while establishing and running a shared service center:

1. Precise definition of objectives (is our shared service center to be a profit or a cost center?)
2. New organizational structure and considering of formal and informal groups of influence – how will the new organization look like and who is going to play the leading role after the shared service center has been established?
3. Product and service dimension – what products and services will be delivered at what prices? Considering quality and time of delivery issues is a very important matter, too.
4. Measurement and benchmarking to ensure that the shared service approach delivers more value comparing with alternative options (like outsourcing or traditional solution) and learning from the best in class.

Magdalena Szarafin
http://www.szarafin.info
_______________________________________________________
Magdalena Szarafin has immense knowledge of the outsourcing sector and is one of the authorities in shared services and outsourcing industry analysis. Her research interests include insourcing and outsourcing in connection with the value chain. She is an author of many publications dealing with outsourcing, knowledge management and total quality management (TQM).
Magdalena lives in Frankfurt, Germany and she works as an International Management Accountant in a big multinational group, dealing with preparation of financial statements under IAS/IFRS and local GAAP. In her leisure time she prepares a PhD dissertation focused on shared service centers.
Contact her to leverage her knowledge and in-depth BPO and shared service industry penetration experience.

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Zero-defect quality: Management tools to meet the challenges of tomorrow

July 21, 2009

Can a shared service center be better, i.e. more efficient (quantitative aspects) and more effective (qualitative aspects)? How can performance be measured? What is the gap between our shared service center and the best ones?

Did you know that the most enterprises manage their shared service centers in form of cost centers, while a profit center model would be better for them in terms of delivering of the value added for the whole enterprise, customer orientation, operative cost cuts and shorter period of amortization? And although such instruments of continuous improvement as six sigma and total quality management (TQM) contribute to increased productivity and process standardization, only a few companies can successfully use them. The most shared service centers have relative big potential of improvement regarding the process and service standardization. Companies also experience problems with implementation of a complex internal control system, which could support them to transparently measure the performance and to deliver relevant information for strategic and operative management.

But: over 50 per cent of shared service centers use benchmarking as the instrument to measure performance. There are some performance measure tools available online, which deliver the gap analysis between our shared service center and the best in the class.

As the findings of a current study of The Hackett Group show, 65 per cent of companies could cut the costs of the finance function by minimum 21 per cent implementing the shared service organisation model. In some cases the cost reduction was up to 60 per cent. The Hackett Group expects the use of shared services to grow in the coming three years by 50 per cent.

For a shared service center to be successfully implemented, good leadership is needed. The reason why shared service center projects can fail is among others not sufficient support offered by the top management.

Six sigma, leadership for shared services, centralisation within decentralisation, the question of efficiency and effectiveness, profit center vs. cost center, process and systems harmonization, shared services vs. outsourcing and many other interesting topics will be presented in form of presentations, round-table discussions and case studies during the event “Financial Shared Services 2009” organized by Axiom Groupe and held on 17-18 September 2009 in Barcelona, Spain.

Why not learn the way to zero-defect quality and prolong the summer, spending a few days in Barcelona?

Magdalena Szarafin
http://www.szarafin.info
_______________________________________________________
Magdalena Szarafin has immense knowledge of the outsourcing sector and is one of the authorities in shared services and outsourcing industry analysis. Her research interests include insourcing and outsourcing in connection with the value chain. She is an author of many publications dealing with outsourcing, knowledge management and total quality management (TQM).
Magdalena lives in Frankfurt, Germany and she works as an International Management Accountant in a big multinational group, dealing with preparation of financial statements under IAS/IFRS and local GAAP. In her leisure time she prepares a PhD dissertation focused on shared service centers.
Contact her to leverage her knowledge and in-depth BPO and shared services industry penetration experience.

_______________________________________________________

Axiom Groupe is a leader in production and communication, delivering business intelligence and strategic information. Offering e-marketing solutions, best practice conferences, business training, sales incentives, in-house training, first class corporate hospitality and privileged membership services to European executives, Axiom Groupe provides a significant competitive advantage for enterprises. more >>

Think to outsource operations? Why not to Poland?

June 28, 2009

In the past few years a new outsourcing wave has come: after successfully outsourcing of production function to the countries of Central and Eastern Europe, big multinational groups have come to the conclusion that also other functions, for instance the administrative ones can be relocated to CEE.

The preparation for the EU entrance and then the entrance to EU has made the CEE countries more stable and thus more attractive for foreign investors.

There are some important reasons why companies from Western Europe choose the CEE region as their nearshoring destination:

  • membership in the EU: this requires the same legal and institutional framework,
  • performance/cost factor: employees in CEE region are well-qualified and do qualified work at lower hourly rate than the Western European employees,
  • destination: key CEE locations can be reached within a few hours time,
  • cultural background and language skills: Poland, Czech Republic, Hungary and other CEE countries have similar cultural background to that of Western Europe. Many people (mainly the younger generation) speak fluently 2 or 3 foreign languages.

According to NIB (National Irish Bank) Poland ranks second worldwide (after India) in terms of attractiveness to foreign investors. Comparing with Hungary, Czech Republic, Slovakia, Slovenia, Croatia, Poland in on the top of the most attractive BPO destinations. That for good reasons.

The population of Poland amounts to 38.2m. Poland is the biggest market in CEE region in terms of population. The capital town, Warsaw has 1.7m residents.

The GDP growth of Poland was 6.2% in 2006, 6.7% in 2007 and 4.8% in 2008. The unemployment rate decreased from 15.1% in 2000 to 9.5% in 2008.

Warsaw belongs to the most attractive towns in Central and Eastern Europe regarding wages and salaries, comparing with other capitals, as Budapest, Prague or Bratislava.

Poland is located in Central Europe, that is a good location in terms of offering goods and services to both: Eastern and Western parties. Berlin, Moscow, Vienna, Bratislava, Kiev, Vilnius and Minsk can be reached within a few hours from Poland – by rail, car or by air.

Poland also possesses a very good system of education. There are almost 500 universities and other types of higher education schools in Poland and about 2 million people study there. Almost 50% of population between 19 and 24 are students. The fact that big corporations locate their R&D centers in Poland and Polish specialists are very welcome in multinational groups in the country and abroad shows their recognition to high quality level of their educational background.

According to PAIZ (Polish Information and Foreign Investment Agency), foreign companies invested EUR 15.7 bn in 2006, EUR 16.7 bn in 2007 and EUR 11.0 bn in 2008 in Poland. The leading investors are the German (17% of the whole investment volume), the French (11%) and the Dutch companies (10%). There are many attractive incentives for investors, motivating them to invest in Poland. Also the tax rates are relatively low in Poland, CIT rate is 19% for instance.

According to PAIZ, Poland does not intend to compete with India with labour costs but with the possibility to provide more technology advanced projects. As the demand for high-qualified specialists in India in very high, there is the lack of them experienced in the market, which can now be fulfilled by Polish specialists.

Magdalena Szarafin
http://www.szarafin.info

____________________________________________________________

Magdalena Szarafin is a Polish economist, residing in Frankfurt, Germany. She works as an international management accountant in a big multinational group. In her leisure time she prepares a PhD dissertation focused on shared service centers. Her research interests include insourcing and outsourcing in connection with the value chain. She is the author of many publications dealing with outsourcing, knowledge management and total quality management.

BPO vs. Protection of Intellectual Property

June 27, 2009

In contemporary information society data management and intellectual property protection have been an important competitive edge. Knowledge about markets and trends, products and services, competition and own R&D, customer and employees data is much more important than the fixed assets possessed.

Many companies avoid to outsource operations as they are of the opinion that outsourcing brings much risk. For instance, sensitive data, processed by an external service provider, would not be safe any more. That can be subject for discussion as data is not equal information and information is not equal knowledge.

It makes now sense to understand what is the difference between these three concepts.

Data is defined as pieces of information that represent the qualitative or quantitative attributes of a variable or set of variables. Information is a collection of data from which conclusions may be drawn. And knowledge means the confident understanding of information with the ability to use it for a specific purpose if appropriate. (Oxford English Dictionary)

In different legals systems different regulations regarding protection of intellectual property apply. However, if a vendor processes data, it does not automatically mean that they possess knowledge or even information — does not matter what legal circumstances there are in their country. It is definitely easier to create information or knowledge in-house, having better connection to the business made. Therefore, it could now be asked if the data are really safer while processing them in-house then outsourcing them?

However, BPO companies recognize the problem of the lack of trust dealt by their customers and react respectively. Nowadays it is for instance almost impossible to meet an employee at a BPO organization who deals with data of competiting companies. Many BPO companies try to divide people working for different competitors into different offices. Also signing of confidentality agreements is a standard procedure in BPO industry.

Magdalena Szarafin
http://www.szarafin.info

_______________________________________________________

Magdalena Szarafin is a Polish economist, residing in Frankfurt, Germany. She works as an international management accountant in a big multinational group. In her leisure time she prepares a PhD dissertation focused on shared service centers. Her research interests include insourcing and outsourcing in connection with the value chain. She is the author of many publications dealing with outsourcing, knowledge management and total quality management.

Public sector to outsource

June 26, 2009

Public sector has been subject of transformation in many countries for a few years. Under the pressure of tax payers, decision-makers have come to the conclusion that public institutions would deliver high-quality service at the same or even reduced tax burden if they try to act similar to private companies.

If private companies use outsourcing and are successful, also government institutions can do the same.  It is a possibility for them to reduce costs, increase quality and improve performance. Outsourcing also offers them the possibility to create new jobs or get the existing jobs remain in the private sector.

However, offshore outsourcing by public sector is a subject of discussion of many citizens who are of the opinion that one of the task of the government agencies is to contribute to job creation or job retention at least. Therefore, offshoring by public institutions can be seen as politically incorrect.

That is why it is important for the public institutions to choose the suitable vendor in their own country. Such a solution can be a supplement to traditional government measures as subsidies for companies creating jobs in regions with higher unemployment rates.

An example of Washington National Library is very interesting in this context. The Library as a public institution wanted to outsource digitalizing and archiving of documents to a national service provider. Therefore Lakota Technologies, South Dakota has been chosen. The region of South Dakota has not as good cost structure as India or China, however, it offers better cost structure than other US regions.

Magdalena Szarafin
http://www.szarafin.info

_______________________________________________________

Magdalena Szarafin is a Polish economist, residing in Frankfurt, Germany. She works as an international management accountant in a big multinational group. In her leisure time she prepares a PhD dissertation focused on shared service centers. Her research interests include insourcing and outsourcing in connection with the value chain. She is the author of many publications dealing with outsourcing, knowledge management and total quality management.