global Business Services - Ey · provement and integration towards a true global business services setup. EY ... Strategy? What will be next in scope? How ... in. Especially controlling

Global Business ServicesEnabling global market operationsSurvey Results 2015

EY GBS Survey 2015 - Results | 1

Global marketplaces enforce multinational corporations to rethink its op-

erational strategy towards the lean and efficient management of busi-

ness-related service functions such as finance, HR, IT and procurement. A

typical chosen set-up for these functions is the shared services or out-

sourcing operating model. Although the standalone setup of these mod-

els has shown proof, today’s decision making bodies ask for further im-

provement and integration towards a true global business services setup.


Why it is vital tolink GBS to cor-porate Strategy?

What will benext in scope?

How does a strongmandate influencethe journey?

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Is GBS driving to-wards “End-to-End”process model?

Why is there no“one-size-fits-all”location?

5 Pillars – from Strategy to Location –exploring what drives GBS towards 2020

EY’s global GBS Survey 2015 identi-fies multiple trends and challengesbased on the response and feedbackfrom Finance Executives


Why it is vitalto link GBS tocorporateStrategy?

Long-term efficiency as key

driver for GBS

GBS adds benefits in various areas

Link of GBS to corporate strategy is vital


1 | Strategy & Drivers

Long-term efficiency as key driver for GBS

Having developed from classical mono-functional sharedservices, GBS offers an end-to-end process perspectivewith several functions under one roof. Key driver focusshifted from pure cost saving in the short-term to increas-ing efficiency in the long-term. This will be achieved byhigher impact changes that target each company’s area ofweakness apart from traditional process optimization. Tothe company they represent more sensitive topics such asintroducing a leaner governance, more structured controlsand improved compliance. These topics are often highly po-litical and thus need more time for implementation, withbenefits becoming visible only in the medium- and long-term. Having these areas as target for multiple functions atthe same time, both financial and performance data be-comes increasingly visible and comparable; Not only perfunction but across regions and business divisions, compar-ing end-to-end processes within the whole company.

Focus shifted from short-term efficiency gains tomaking changes that willincrease efficiency sus-tainably in the medium-and long-term

„GBS is the opportunity to put all the coreoperational processes under a singlestructure and apply an enterprise widefocus on achieving operational excel-lence.”

Christian Mertin, EY



GBS adds benefits in various areas

Apart from the obvious leveraged infrastructure invest-ment, various additional benefits are realized through im-plementing a GBS model on three levels:

The strategic level enforces central governance and pro-cess ownership making the implementation of requiredchanges to support strategic objectives easier in a GBS set-up.

The business level reflects the benefits gained on the stra-tegic level in the way that employees’ time is freed up to fo-cus on their core business. There is no need to spend timewith following complex ways of communication and dataprovision multiple departments that deliver support func-tions, as they are integrated.

The operational level has its own goal that serves thewhole company: providing better services in a more effi-cient way. This ranges from typical improvements such asstandardization to automation and technology improve-ments which are more likely to happen and easier to imple-ment.

GBS provides multipleadditional benefits on topof efficiency gains – rang-ing from operational andbusiness benefits to stra-tegic benefits

Moving the core operations under a GBSstructure enables the functional heads tofocus on what they're really there for -the CFO to improve the company's finan-cial performance, CPO to do more andbetter sourcing deals etc.



Link of GBS to corporate strategy is vital

Functional optimization is in most cases only linked to func-tional strategies and not very well tied to the overall corpo-rate strategy. Nevertheless GBS typically allows the sup-porting functions to contribute to the corporate saving tar-gets. The intent is still to leverage GBS (free up time andbudget) to re-focus the local/regional supporting functionsto step up into their business partnering role and supportthe business in realizing the corporate strategy.

Beyond enterprise cost reduction targets the implementa-tion of a GBS should always be seen as a possibility for thecompany to continue to improve their administrative func-tions in terms of service quality and compliance. How ex-plicitly this is integrated into the strategy must be alignedwith the company's situation. GBS should be part of the or-ganizational strategy but at the moment it tends to be "lag-ging" rather than "leading". GBS Centers need to showproof that they can add value and act as an enabler for e.g.accompanying a corporate integration target within a situa-tion where historically grown divisions shall work moreclosely together. Show cases are there (PMI, Carve out ex-amples), the GBS leaders only need to spread the word!

Link to corporate strate-gy is missing - A strategiclink is intended by theGBS organizations butawareness buildingamong today’s CEOsneeds to be improved byGBS leaders and advisors

CorporateStrategy

GBS


What will benext inscope?

Shift towards

value-added activities


Value-addedActivities

Shared Ser-vice Frame-

work

2 | Scope

Shift towards value-added activities

Over the last years and the growth of Shared Services or-ganizations, there has been a clear focus for companies tocentralize and harmonize highly transactional activitieswithin Shared Services. Reasoning behind is that transac-tional activities allow centralization throughout the wholeorganization due to the fact that those activities follow aclear set of guidelines and routines, have often a repetitivenature and are low on corporate value-add. Therefore,many companies started with centralizing IT (development,testing, maintenance, admin., etc.), followed by accounting(AP, AR, GL, etc.) and HR Services (payroll, master data,etc.).

As centralization across these transactional activities hasbeen realized, companies watch out for the next step tofurther drive organizational efficiency and process effec-tiveness. Therefore, the next step is the movement towardsthe centralization of value-added activities, such as supportin the planning/ budgeting and forecasting process, dataanalytics or customer interaction. The idea is to move alongthe value chain and integrate other related functions intothe shared services organization step-by-step. This willstreamline existing processes on an end-to-end basis, elim-inate redundancies and centralize special know-how in theSSC or Center of Excellence (CoE). In order to ease the roll-in of new functions, closely related functions are favorableas knowledge of interfaces etc. partly already exists in theexisting structures. Therefore, most companies see control-ling, procurement as well as sales as the next organization-al functions to roll in. Especially controlling and data analyt-ics offers huge potential for centralization and bundling ofactivities in SSCs and CoEs, supported by latest softwaredevelopments such as real-time data processing (e.g.through SAP HANA).

But besides organizational support functions such as con-trolling, business related functions such as marketing andsales move slowly in the focus of centralization, as theseareas carry suitable tasks for standardize and bundling(e.g. commission scheme or customer analytics). Conse-quently, the journey towards multifunctional shared ser-vices is on its way across the value chain.

After focusing on thecentralization of highlytransactional tasks, com-panies nowadays shifttheir focus towards tocentralization of value-added activities such asControlling


How does astrong man-date influencethe journey?

Clear activity allocation to handle in-creasing complexityCentral Governance steering

various global operations

“People factor” most underrated in GBS setup

Clear C-Level mandate supports the journey

Central global hubs in a hybrid model with outsourc-ing drive cost & quality advantages

Business Partnering is an undisputable must

Impact of GBS on corporate organization willbe substantial


3 | Target Operating Model

Clear activity allocation to handle increasingcomplexity

The movement towards a multifunctional shared serviceorganization and the resulting increase in different func-tions within in a service entity drives complexity and re-quires a clear split of activities across group, local and SSCas well as strong guidelines. Nowadays, the following chal-lenges drive the re-organization of existing service deliverymodels which have been designed and set-up for the earlyshared services activities that were mainly focused on sin-gle functional services:

Global Expansion of organizations towards Asia andemerging markets to enter new sales markets but also tostrive for labor cost advantages.

Process Extension to encompass value-added functionsand move towards End-2-End service delivery.

Multifunctional Tower building by expanding existing SSCsin order to consolidate multiple locations and processes.

Through the roll-in of value-added activities, a shift and fur-ther centralization of all transactional tasks in a globalback-office focusing on the overall harmonization andstandardization of central tasks group wide is favorable.

Centralization of activities which are highly transactional innature requires a large number of staff, high degree on au-tomation and low proportion of interfaces to business. Ascounterpart, regional front-office centers with focus onvalue-added and more business related activities wouldbuild the second building block. Regional centers should fo-cus on activities with higher strategic nature, requiringbusiness knowledge, as well as a medium level of businessinterface. Local or retained services is completing the set-up and focuses on specialized business knowledge, legaland tax specifics and acting as a single point of contact forthe business. Further, local services should focus on activi-ties which require a high degree on language and cultureskills, require real-time and ad-hoc support for group man-agement, and involve a low number of staff and limitedeconomies of scale.

Establish common servicemanagement layer over-arching all service enti-ties to steer, guide andsplit activities across lo-cal, regional and grouplevel


Global Service Management

LocalServices

RegionalServices

GlobalServices

Steering Steering


Central Governance steering various globaloperations

With more and more functions rolling into the SSC organi-zation it is vital to establish a central management function.Backed by strong C-Level support, it steers the global net-work of front- and back-office center through clear definedand executed activity split, guidelines & policies as well aslived reporting lines. In line with the changing service deliv-ery model which splits functional activities based on theirrequired business knowledge, standardization & automationpotential, and the amount of required staff across local, re-gional and global services, the governance model needs tobe adapted to this increasing complexity as well.

GBS management would provide and set guidelines forglobal service catalogues, service level agreements be-tween centers and retained finance, KPIs, charging models,etc. and is a key for a successful multifunctional tower /GBS organization even though not functionally integrated.

On functional level there should be Steering Committees in-tegrated which report into the Global Service Management,and connecting on a global level all performed activitieswithin the function to overlook the processes, the activitysplit, as well as performance improvement initiatives. TheSteering Committee should also break down and articulateguidelines, policies and KPIs towards the different serviceblocks (local, regional, global).

Overall End-2-End process ownership should be centrallywithin the Global Service Management to allow consistentand continuous process improvements across differentfunctions. Improvement or change requests to the globalprocess model must be steered through the Steering Com-mittee towards the Global Service Management.

Strong collaboration and guidance throughout the networkis vital and allows further growth of the service deliverymodel, e.g. through the roll-in of additional functions, geo-graphical extension in new markets or business extensionthrough serving other divisional units.

The more functions roll-ing into the SSC organi-zation, the more businessunits are served and themore important becomesa strong central steeringmodel



“People factor” most underrated in GBSsetup

Change management is a topic that many people talk about- yet it is still the most neglected and underestimated as-pect in projects. Especially in GBS projects where peoplethroughout the whole company will be massively impacted,emphasis needs to be put on this topic across all levels.

The missing change of people’s mindset and lack of keystakeholder support are easily able to make a GBS projectfail - whether it is resistance in the organization to makethe change or a lack of common vision. The design of thenew organization is crucial to set this common mindset, asit shows how the vision materializes. E.g., going cheap interms of location, facilities and branding creates a certainimpression and how the GBS organization will be perceived.The “perceived” reality may differ from the actual situationbut is crucial for accepting the change and building trustbetween business and GBS. To achieve the desired “per-ceived” reality, it needs carefully selected key people thatcan drive the change with an appropriate level of authority.They can ensure changes in the organization are made andthat people actually commit to the new structure.

Furthermore, getting the governance wrong and allowingfunctions to still have control over activities and people willlead to a GBS organization that remains limited to transac-tional work. In the worst case a bad “perceived” reality beproven, manifesting in an unrealistic business case. GBSneeds to be seen as ONE core function providing valuableservices within the company and not as a business or profitcenter for money creation with several functional areas.

Lack of senior manage-ment support and changemanagement hinder GBSprojects the most

If the implementation is to be a success the com-pany must be able to allocate the needed re-sources and make the necessary managementdecisions to drive the implementation project.Otherwise the project will lose momentum whichwill gradually diminish the identified benefits.



Clear C-Level mandate supports the journey

The starting point of each GBS journey is different withineach case discussed in our Community. But we were able toidentify some principles for each journey:

Provide a clear mandate from top leadership to ensurethat every party understands how they contribute to the in-tegrated model has to be there at the beginning.

Envision the GBS target operating model to provide aneasier to grasp idea of the end state that can be helpful butneeds a bit of flexibility and agility for evolution and unex-pected changes and consequences.

Recruit the best available people, both internally and ex-ternally, for the implementation which is seen as strong ad-vantage and delivers some quick wins to enhance credibil-ity, reputation and buy-in of the concept.

Ensure strong governance and that teething problems(and there will be many) are not allowed to be exaggeratedand amplified is seen as winning strategy.

Transition into GBS mode not only by aligning processesand technology, but by building the service delivery model,re-engineering existing business processes and redesigningthe support organization.

Keep a sufficient level of momentum through focusingglobal business strategies on enterprise strategies, creatinga culture of problem solving, analyzing root causes andsharing leading practices.

Show success and earnyou seat at the table -Although there is no typi-cal standard GBS journeyall successful organiza-tions implementing GBSearned its seat at thetable by showing proof ofthe value add within theconcept



Central global hubs in a hybrid model withoutsourcing drive cost & quality advantages

When it comes to organizational decision along the road ofrolling-in further functions into the SSC organization, thequestion of the future operating model arises. Operate asmaller number of global centralized hubs or spread multi-ple hubs – smaller in size and scope – across the global op-erations?

Current development in the GBS sector shows that themovement is clearly towards centralized hubs (focusing onEnglish services) and some regional / local spokes (locallanguage services). Moving towards centralization of all ac-tivities within one to three global hubs, is further drivingprocess standardization, increases quality monitoring andachieves economies of scale. Technological developmentthrough simple finance, cloud based software solutions andreal-time data processing is supporting the global centrali-zation of activities.

However, the driving for highest level of standardizationand centralization of transactional activities across theglobe brings an additional aspect into consideration, the fu-ture role of BPOs. Although most companies today are run-ning captive, global centers, the future is favoring morehybrid models. Given that more and more processes arerolled in, activity splits are getting more aggressive andprocess improvements and standardization potential arereaching its limits, the outsourcing of highly transactionalactivities towards a BPO would provide the opportunity tofurther reduce costs while keeping the level of quality.

This shift would allow the organizations to develop its SSCmore towards a Center of Excellence, building up and spe-cializing in new skills (processes, business, etc.). The BPOwould act as vendor to the captive hubs, with the hubsproviding vendor management and the interface to thebusiness. However, also the BPO industry faces profoundchallenges, e.g. through robotics or simple finance whichwill change the role of BPO providers as they need to trans-form their business models and moving away from FTE ser-vices towards cost per output.

Captive hubs will developnew skills and transitionto a Center of Excellenceover time whereas BPOdrives transactional activ-ities

Central,hybrid hubs



Business Partnering is an undisputablemust

Business Partnering is a key concept within the buildup of aGBS organization and is seen as vital to success: without ef-fective business partnering success is very limited and willleave work in the sending location / organization. Neverthe-less, the reality is that partnering with the commercial or-ganizations when GBS organizations only drive back officefunctions is fairly limited. Thus, organizations tend to callbusiness partners the functional groups within the corpo-rate functions.

However, once you drive end-2-end processes that inher-ently impact the business e.g., logistics or customer ser-vice, then you are able to really partner with them to helpthem achieve their vision and business results in a moretangible way.

GBS as such is a serviceentity and as such it hasto act in the interest andto the benefit of the con-nected business partnersto understand their needsis essential and thereforebusiness partnering is anundisputable must

Business partnering is absolutelykey and that’s why GBS should bechanged to GBO - replace'services' with 'operations'. I'dargue you can't have both - youare either a service provider or abusiness partner.



Impact of GBS on corporate organizationwill be substantial

Multi-functional shared services have been the logical resultof gaining experience with classical mono-functional sharedservices. With the first movers in the SSC world havinggained experience with classical shard services starting toexperiment with multi-functional shared services the GBSconcept has been born but is still in its infancy. It is not asbig as it could be yet, as full understanding at the C-levelneeds to be achieved first.

Nevertheless, it will continue to be part of all global compa-nies’ service delivery strategy. Focus shifts from providingtransactional services to more business partnering in thefuture as excellence in transactional services is achievedand new, less transactional areas for achieving new opera-tional efficiency milestones will be integrated. This is not arevolution, but a next step in the SSC journey and will bepart of the standard operating model. Thus the impact onthe corporate organization will be substantial as the func-tions' delivery model is completely redesigned.

Being seriously committed, a single GBS entity at the heartof all the core operations and empowered by C-level istransformative.

GBS will be the substan-tial next step in the SSCjourney, being part of allglobal operating modelsin the future

The size of the GBS organizationis based on its capacity to servethe business in a competitive andsustainable way; as long as it isable to add value to a company itwill evolve offering new services.


Is GBS drivingto-wards “End-to-End” pro-cess model?

GBS drives and enables“End-2-End” process ownership

IT is a strategic enabler for GBS


4 | Processes & Enabling Tools

GBS drives and enables “end-2-end” pro-cess ownership

Today the term of “end-2-end processes” is often used andbecame a buzzword especially in the context of processstandardization and centralization through shared services.But trying to set-up and re-organize process handling on areal end-to-end basis is increasingly difficult and rarelycompanies achieved this so far.

However, GBS is a real driver for “end-2-end” process own-ership and organization due to its multifunctional scope.Process ownership naturally moves from the functions toan end-to-end perspective as more and more functions arerolled in under the umbrella of global business services. Or-ganizing global processes end-to-end allows one processowner to focus on standardizing and automating the re-spective process to the greatest extent possible across allcountries, centers and business units.

Prerequisite for this change in organization and ownershipshould be strong C-Level support as well as the fact thatthe global end-to-end process owner would need to be func-tional expert in all required functional areas, e.g. finance,procurement and sales. An option to encounter this re-quirement would be the implementation of process owner-ship teams instead of a single owner. However, ownershipteams would increase complexity in terms of steering andgovernance in order to correctly reflect each function. Re-gardless of where the process owner is located from an orgchart perspective, whether inside the GBS organization oroutside, the governance as to whom the process owner re-ports to and with whom the process owner has a service re-lationship must be clear stated and communicated acrossthe organization. The right structure differs from companyto company and is well affected by the corporate culture.

However, multifunctional shared services and GBS providethe change to focus and implement successfully an “end-2-end” process ownership to steer improvements along thewhole process and across the entire value chain.

Functional expertise isvital for global end-2-endprocess owners, but askill set which is hard tofind


4 | Processes & Enabling Tools

IT is a strategic enabler for GBS

The technology nowadays has an enormous potential forbusiness transformation, especially when speaking aboutdigitalization. Nevertheless, certain steps are advised tokeep:

Standardization is the first step, which usually means thereduction of existing ERP systems. Most companies have ahistorically grown IT landscape and it takes a certain effortto harmonized and bring all data into a small number oreven only one ERP system, but this is still referred to as themost important game changer.

Simplification using appropriate technology can reducetime when executing transactional task, improve accuracyand traceability, and keep people connected in a structuredway through predefined platforms.

Automation is the logical next step. Robotics is movingforward quickly and there are big gains to be heard, but theusage is currently marginal and more a buzzword than asound and bullet-proofed concept. Mature SSCs and BPOsare looking towards robotics as a way of reducing cost andcreating more efficient processes.

[ ]

It is not robotics or ana-lytics which change thegame, it is a global singleERP system, which cre-ates the strongest value-add for GBS

Technology acceleratesprocess harmonizationand glues a company toan enterprise wide so-lution offer.


Why is thereno “one-size-fits-all”location?

No “one-size-fits-all”location model


5 | Location

No “one-size-fits-all” location model

Multiple smaller hubs, regional center, central back-officewith multiple smaller front-offices, one hub per continent –there is no one-size-fits-all solution with regards to amountof centers per company. This is highly dependent on thestrategy and operating model and needs to be customizedto fit demands.

What the above mentioned models have in common is thatall of them include not only one central but multiple loca-tions. Although one central location may seem an appealingsolution, the more pragmatically solutions take into ac-count time zones, cultural differences and travel distance.This necessarily leads to a multiple location solution, typi-cally including at least two major sites in the Americas, Eu-rope or Asia-Pacific at low-cost countries and smaller sitesstrategically placed in regions important for the company.

For mature services, even BPO can be considered as an ad-ditional location.

GBS location model willalways involve multiplelocations, but to differentextent – fitting to thecompany’s need


Summarizing

During the last years the many large, global companies with establishedshared service operations moved to global business services with addi-tional functions and value added activities, providing supporting activitiesalong the whole value chain. Summarizing the opinions of thought leadersand companies either just starting the SSC journey or being already onthe way towards GBS, it can be found that GBS is still in its infantry. Hav-ing gained experience with SSC projects or being a first mover towardsGBS, current developments range from a shifting top management per-ception of GBS to becoming more aware about actual implementationprerequisites and considerations for building a successful GBS organiza-tion. This survey gives answers to the questions how to establish a trueGBS out of a mature shared services / outsourcing setup.


EY management con-sulting services at aglanceEY Advisory has competencies to protect yourbusiness, improve your performance and ena-ble change – across the entire value chain andin all major business support functions.

But we know that in today’s environment, itcan be difficult to select an advisor who under-stands and meets your needs. We would there-fore like to share with you the reasons why wecan make a difference. Our responsibilities andgoals are based on the following elements:

► Understanding your needs

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To get companies into top shape, wetake an integrated approach using a con-sistent global method aimed at leverag-ing potential, controlling risks systemati-cally and achieving a lasting improve-ment in the overall performance of yourcompany. The fields which we addressare strategy, business model transfor-mation, organization, processes, IT andchange management. The key to successis our practical approach which we use tohelp implement your business strategy.

We support you from the strategic plan-ning phase to final implementation.

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Survey ParticipantsThe yearly EY Global Business Service Survey reviews latest market developments andidentified current challenges and future trend across a large group of C-Level, Finance Ex-ecutives and Global Shared Service Operation Leaders. As shared services is and GBS is amatter of fact nowadays in almost all industries around the globe, the survey contains re-sults and insights from multiple, highly different industries and sectors.

72FinanceExecutives

>20Industries

GlobalCoverage


Christian MertinEMEIA Finance LeaderErnst & Young GmbHArnulfstrasse 5980636 MunichGermany

Tel +49 89 14331 13590Mobile +49 160 939 13590Fax +49 181 3943 13590Email [email protected]

Martin WeisSwiss Finance LeaderErnst & YoungMaagplatz 18005 ZurichSwitzerland


Sven WesteppeSSC Leaders Club CoordinatorErnst & Young GmbHArnulfstrasse 5980636 MunichGermany


Ann-Kathrin HofGBS community contact EMEIAErnst & Young GmbHMergenthalerallee 3 – 565760 EschbornGermany


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global Business Services - Ey · provement and integration towards a true global business services setup. EY ... Strategy? What will be next in scope? How ... in. Especially controlling