Service-delivery organizations that embrace the Global Business Services (GBS) model and then climb the ladder toward greater performance maturity can achieve benefits that range from low-hanging-fruit efficiencies to transactional and analytical capabilities that add long-term, strategic value to the business.
The GBS model integrates resources, capabilities, and systems to deliver enterprise-level services such as IT, finance and accounting, human resources, and procurement. GBS relies on various service-delivery approaches, including internal captive shared services, outsourcing, and centers of expertise. It enables groups to significantly reduce sales, general, and administrative (SG&A) expenses for the businesses they support.
Research that KPMG LLP conducted of more than 150 business services organizations shows that the more mature GBS groups reduce their year-on-year SG&A as a percentage of revenue at close to 2 percent per year better than the population as a whole. And cost savings is just the tip of the benefits iceberg. These organizations also are more adaptable to changes such as acquisitions, generate better decision insights, and manage working capital more effectively.
The five rungs on the GBS ladder to operational excellence and maturity are:
- Level 1: Fragmentation. This decentralized service-delivery model includes duplicate functions, processes, and technologies; little central control and governance; and supply-driven delivery.
- Level 2: Subscaled. This consolidated model leverages economies of scale for highly transactional services and provides shared services or outsourcing on a single-function or regional basis.
- Level 3: Scaled. This multifunctional service-delivery model is the first step into true GBS. Previously disparate shared services and outsourcing functional operations are put under a common organizational and governance model. However, different functional processes largely operate in silos during the early stages of GBS.
- Level 4: Integrated. Organizations operating at this level are in the top quartile of performance. They embrace an enterprise-wide multifunctional, transactional, and specialist business-services model. There is coordination of processes, technology, governance, and multichannel delivery.
- Level 5: Strategic. At the highest end of the maturity ladder, organizations provide multifunctional, multichannel business services that are synced end to end; deliver transactional and analytic services; and are managed through integrated, outcome-oriented governance.
Each organization has different needs and goals, but in general, those that climb the maturity ladder from Level 1 to Level 3 can reduce operational costs by up to 35 percent. And as organizations move beyond efficiency and continue to Level 4 and, ultimately, Level 5, they can save more money and realize higher returns on equity through end-to-end optimization, agility, analytics, insights, innovation, governance, and compliance. GBS groups performing at Level 4 and Level 5 typically realize 3 percent to 5 percent higher return on equity than those at Levels 1–3.
Moving toward GBS maturity requires vision, passion, a comprehensive strategy, and a plan of action that is intentional and flexible enough to adapt to the needs of the business. The most successful GBS organizations understand that they are competing for the business of their internal customers, and they adopt a commercial mind-set marked by characteristics such as a commitment to providing data and analytics services to the business and an intense focus on talent management to deliver a wider scope of high-value services. This mind-set also includes embracing new, disruptive technologies that promise to drive major changes in the service-delivery model:
- Robotics and cognitive automation are disrupting the offshore outsourcing and captive models by replacing cheap labor with even cheaper software that improves service quality.
- Cloud and companion integration technologies are breaking apart the traditional on-premises ERP software stack and augmenting existing systems of record with systems of engagement. Cloud deployments can dramatically reduce the time to install, upgrade, and customize processes and software; reduce operating expenses; and enable savings to be reinvested in the business.
- Data and analytics provide improved services, insights, outcomes, and solutions. This capability can be used with business-intelligence technology to create virtual data warehouses, advanced visualizations, and other services to meet increased competition and growing customer demands.
- Social and mobile technologies enhance a GBS organization’s engagement with its customers and partners. Opportunities include digital storefronts developed through design thinking to mimic the way users increasingly use smartphones and tablets to conduct work.
GBS organizations that provide the greatest value are moving up the maturity ladder and evaluating and embracing opportunities provided by capabilities such as these disruptive technologies. Those that do not keep pace with the continually evolving service-delivery landscape and continue clinging to low-value models and legacy technologies will likely be left behind.
To learn more about global business services, visit the KPMG Shared Services and Outsourcing Institute GBS topic page at www.kpmg.com/us/goGBS. To join the institute and receive the monthly newsletter, click here.
Bob Cecil is Principal, KPMG Shared Services and Outsourcing Advisory.