KPMG and HfS Research reveal findings of new report on outsourcing of finance and accounting operations

Spending on finance and accounting business process outsourcing (F&A BPO) services will surpass $25 billion globally in 2013, and will rise at an annual compound growth rate of eight per cent through 2017, according to new research from U.S. audit, tax and advisory firm KPMG LLP and HfS Research, a leading analyst authority on global business operations strategies.

More than 100 enterprise-level F&A BPO engagements are expected to be signed this year alone, according to the research, which covers 399 major global enterprises and analyzed 745 current enterprise F&A engagements. The research also profiled 17 leading suppliers of F&A BPO services.

The report, “Finance and Accounting BPO Market Landscape, 2013: Market Evaluation, Forecast and Competitive Analysis,” found that key market dynamics fueling global growth include:

• Proven performance: 90 percent of F&A BPO engagements have been consistently meeting their cost-reduction targets and initial delivery performance, making it difficult for finance leaders to avoid evaluating its potential.
• Desire to reduce costs and standardize processes: Enterprises overwhelmingly want to look at new ways to take advantage of lower-cost operations and standardized financial processes, where there is little competitive differentiation to be achieved by operating in house.
• The lethargy of the 2008-10 recession has slowly lifted: More enterprise leaders are now looking at more radical strategies to increase productivity and global business effectiveness.  Recent activity shows an increasing number of enterprises getting more aggressive with globalizing their finance operating models to include outsourcing services.

Ron Walker, a partner with KPMG and the F&A service line leader for KPMG’s Shared Services and Outsourcing Advisory practice, said “F&A BPO needs to be viewed as an extension to an enterprise’s capabilities, not a substitute.  KPMG is helping clients evolve toward a global business services framework that optimizes the mix of human capital, service delivery models, process innovation and technology to deliver services on an enterprise-wide, cross-functional basis to support the business strategy.”

Phil Fersht, CEO of HfS Research and a co-author of the research report, said, “Too many enterprise leaders are approaching F&A BPO with a myopic vision to reduce costs and mitigate risks.  They are kicking the can down the road by failing to invest in better technology platforms, analytics capability and an innovation roadmap.  They should be approaching the F&A BPO as an opportunity to invest in their firms’ futures.”

Click here to request a copy of the report.

Contributor: Stephen Moore Contributor to SSON

10 tips to get off to a good start

For anyone thinking about implementing shared services to get the magic leverage out of the “people-process-technology” triumvirate, here’s an introduction to what you should be considering in the design phase.

Before you set out on any journey, you need to be clear about where you are going. Here are my 10 tips for designing a successful shared services.

Tip 1: Commit to change

When I was an apprentice, my mentor and good friend would regularly quote: “If you always do what you have always done. You will always get what you have always got!” So when introducing something new, the important thing is to commit to a new direction. Be confident and purposeful.

Tip 2: Know your starting point

You need to be clear on where you are starting from, so start by getting an as-is audit (you can do this in-house or contract a third party). This is vital for anything that follows, as it will be your benchmark for any progress. This evaluation should analyze volumes and current process times, as well as the variance in the service. I have lost count of the number of senior managers who say, “I never knew we did that!” Processes evolve and workarounds become embedded. Understanding where we are now leads to better planning.

Tip 3: Know your end goal

If you don’t know for sure where you are going, then, for sure, you won’t get there. Many companies tend to think of the end-goal in terms of financial saving.  My engineering background focuses me on a more structured approach. Ask yourself: “What will success look like and how will we measure it?”

Tip 4: Innovation is important, but …

However, let the service or the process drive the technology, and not the other way around. If you lead with all the groovy gadgets and technology, your team may have a hard time following through and the business will be disappointed. Bite off just what you can chew; it’s a long journey ahead.

Tip 5: How will you measure success?

A “one sizes fits all” approach just does not hold water. The design of the operating model must deliver a service that is valued by the customer. If the customer does not use the service, he’ll find ways around it, or complain; either way, it’s a lost opportunity and will cost you more. For example, if you design a process that guides the customer to using an online facility but half your customer-base has minimal access to a PC, that does not count as a success.

Tip 6: Think global, act local

Well, if not global, at least think broadly. But your implementation needs to take account of local needs. Never underestimate the need to engage with the local teams, as local knowledge of practices and policies is invaluable.

Tip 7: Manage your stakeholders’ expectations

Managing both business and customer expectations is key. If you promise your customer base that there will be no change from day one, and that you’ll be offering an “AS IS Service” – you are misleading your customers. Services will change. But it is part of a greater good. Prepare them for that.

Tip 8: Prepare customers for phones, not colleagues

One of the greatest transitions for your customers is that they no longer have “Mary” or “Bill” down the hall. Now they need to dial new numbers, and press “2” for information. They won’t like that. You are replacing local relationships and communications with a remote contact centre and an ACD system. Help them through this by preparing them for the change.

Tip 9: Feedback on progress

Working with the teams and providing regular feedback in a structured manner is a good way to progress. Get the teams on-board, and involve them in delivering the vision. That will go a long way to building a successful shared services.

Tip 10: If you are not sure – communicate some more

The investment in extra communication is far less than the investment required to fix problems. Communicate through the popular channels. And make yourself available.

In summary: here are the main take-aways to consider during a design phase:

• Understand the needs of the business / customer
• Manage those needs / expectations
• Be clear on the services to be provided
• Be aware of current service requirements / scalability
• Establish a robust platform to deliver those services
• Be consistent on how to measure success
• Stick to your budget
• Decide on a phased or a big bang approach, and be clear about what this means
• Communicate throughout

Steve has a long track record of successful business and operational executive appointments. He is an experienced change agent in designing, implementing and operating Shared Services on multiple sites in remote locations. He has delivered HR, Finance, Procure to Pay and IT Support services, for both the private, not for profit, and public sectors.

Steve has successfully led culture change whilst delivering improved commercial performances though business performance management initiatives and employee development programs. These strategies focus on ensuring future business growth. A core area of expertise is Six Sigma and Lean business strategies and deployments. Some examples of projects include: designing and delivering a target operating model to deliver an enhanced service delivery for HR and Payroll Services, reducing operating costs by 40%; and designing and implementing a Financial Shared Services model from 4 disparate Finance departments, delivering 15 % savings in Year 1 and 25% savings in year 2.

Organisations are continuing to expand the services they outsource, according to KPMG’s latest global survey. Based on the views of respondents across North America, the UK, Asia and Europe, the quarterly study indicates that the growth in businesses using ‘shared service centres’ continues to outpace the number of organisations who favour traditional outsourcing.

Shared services, which refers to centralising admin functions once performed in separate divisions of a business, was cited as the strongest area of growth by over half (52 percent) of the respondents polled in the first quarter 2012 survey. In comparison, just 37 percent said they have seen growth in demand for traditional information technology outsourcing and just 27 percent for traditional business process outsourcing.

More than two-third (68 percent) of the service providers polled were also cautiously optimistic about pipeline growth for the next quarter – a figure that has risen by 7 percent since January. Asked to identify the key areas of interest, 50 percent suggested that they expect customer demand for IT services to increase between now and the end of Q2. Some also suggested growth would come from bundled business and IT outsourcing (21 percent), finance & accounting (11 percent) and HR (11 percent).

The survey goes on to suggest that while traditional outsourcing remains a valuable component of business’ efforts to reduce overheads, relative growth of its use has slowed. This is especially the case with business process outsourcing (BPO), which only 27 percent of the advisers polled cited as the strongest growth area.

“It appears that the trend towards focusing on more specialised outsourcing is a consequence of the expanding number of quality global sourcing locations with highly skilled resources, the ability of Indian services providers to diversify delivery capabilities beyond their home markets, and the growing sophistication of skill sets becoming available,” said Shamus Rae, partner in KPMG’s Shared Services and Outsourcing Advisory team.

“Clearly, the relatively weak BPO growth expectations are a reflection of diminished demand for more traditional, generic, transaction-oriented outsourcing arrangements, such as in finance and accounting, in contrast to the greater demand for more specialised BPO,” he added.

The findings also highlight that while many businesses are re-examining their use of domestic outsourcing, the use of near and offshore shared services and outsourcing continues to grow – especially buyer interest in offshore services delivered from locations other than India. For example, asked whether they agreed that buyers are looking beyond India for outsourced services, respondents scored 3.53 on a 5-point scale.

The survey found that respondents are seeing an increase in usage of Cloud services to complement, extend and in some cases replace traditional approaches to outsourcing, with 50 percent of service providers indicating that clients have one or more “live” cloud services deployments at the business unit level. They anticipate that this percentage will rise to 92 percent in 12 months.

“These findings highlight the fact that businesses need to continue to improve their cloud skills and acumen, especially relative to addressing data security, risk and regulatory compliance requirements,” said Rae.

http://inaudit.com/economy/growth-in-use-of-shared-service-centres-outpaces-traditional-outsourcing-as-economy-falters-19837/

International Data Corporation (IDC) has released its 2012 MarketScape report profiling and ranking the leading providers in the worldwide business analytics business process outsourcing (BPO) services market. This research shows that the more experience and expertise BPO providers have delivering business processes within specific industries, the more success they will see in delivering business analytics services. IDC MarketScape vendor analysis reports utilise a rigorous scoring methodology that produces a definitive assessment of each vendor’s current market capabilities and strategies for competing in the future.

IDC MarketScape: Worldwide Business Analytics BPO Services 2012 Vendor Analysis (IDC #234937) evaluates the offerings and prospects of 10 vendors relative capabilities. These providers were evaluated using detailed criteria that IDC identified as key factors contributing to vendor success in the worldwide business analytics BPO services market. The vendors included in the analysis are Accenture, Capgemini, Cognizant, EXL Services, Genpact, HP, IBM, Infosys, TATA Consultancy Services (TCS), and WNS.

The IDC MarketScape methodology placed Accenture, Capgemini, Genpact and TCS in the “Market Leaders” category for this year.

“BPO vendors find themselves in a favorable position to assist their clients’ transformation efforts as enterprises face new sources of competition in this global environment and try to stay competitive by keeping a close check on various business performance metrics,” said Mukesh Dialani, research manager, Worldwide BPO Services. “BPO providers that build competency around industry-specific BPO and analytics outsourcing as well as exhibit the capability to assist clients with business consulting services will gain a bigger portion of this business.”

Source: IDC

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By Phil Fersht

Boston-based Horses for Sources’ Phil Fersht with some interesting insights. In a two-part report he looks at the results of some BPO research that he undertook.

At the end of the day, it’s not all about outsourcing and it’s not all about shared services; it’s about focusing on how to globalize processes, how to transform finance (and other) functions, and how to govern it all in a global business services context. There is no dominant model; it’s more about achieving the right balance across all delivery models to achieve the best business goals.

In conjunction with global accounting body ACCA, We spoke to 682 large organizations currently running finance in either an outsourced or shared service framework (or both) – and the results are emphatic: those organizations relying predominantly on outsourced delivery, or predominantly shared services, are viewing their finance delivery performance much more skeptically:

Why do these results signal the decline of the “predominantly outsourced” model?
1) Expectations are clearly higher with outsourcing… and they’re not being met. Only the ability to meet compliance and regulatory goals (42%) is brushing up notably well with the outsourced finance functions. Everything else is mediocre-to-average, in terms of meeting finance performance objectives. This is because many buyers’ outsourcing environments are relatively nascent, and their expectations were likely set to a high level when they embarked upon their engagements. In addition, most governance staff can clearly recall what it was like before outsourcing, and find their new environment a struggle to get things ticking over like they were in the old days. Buyers are clearly finding it hard to make productivity improvements to their finance processes when they outsource heavily, with the main reasons being the cost and complexity of dealing with providers’ change-order processes and also the fact they the operational people running the engagements on both the buyer and provider side are too junior to make decisions. Instead, they get absorbed into the table-stakes of meeting SLAs and running things on budget. Other reasons we will discuss further in our upcoming Sourcing Blueprint document. Our concern at HfS is that if buyers and providers allow these relationships to stagnate, we could get left facing a dangerous commoditization of operational process outsourcing.

2) Shared Services delivery models aren’t faring much better. Those buyers sticking predominantly to a shared service model for finance are also suffering similarly mediocre performance levels to their outsourcing peers. Only their ability to standardize processes is really coming though as a major plus, with 52% experience really effective results to-date. Clearly, they find it easier to make tweaks to process flows and delivery quality issues. However, when you consider that most of these buyers have been doing shared services for an average time-span of 10-20 years, compared with 1-7 years for outsourcing, you have to conclude that a pure shared services model is not the best answer for those buyers seeking to continually improve their finance performance.

3) Hybrid shared services and outsourcing frameworks are reaping the best results. Those buyers operating hybrid SS&O frameworks are experiencing better finance performance in every single performance category. Clearly a strong, centralized retained organization that augments its shared services processes with outsourced options is enjoying the best of both worlds. Most notably, 54% of the hybrid buyers are finding genuine effectiveness with their ability to transform their finance functions, and similar proportions are encouraged by their ability to transform onto standard processes, meet compliance goals and even globalize their finance operations. Essentially, those buyers that are retaining more of their talent and working with their providers to help with achieving broader finance goals (at least initially), are developing their finance operating structure much more effectively. This indicates that buyers who leverage outsourcing to fulfill specific needs and blend it more effectively with their overall finance operations, are more comfortable with where they are going. At the end of the day, it’s not all about outsourcing and it’s not all about shared services; it’s about focusing on how to globalize processes, how to transform finance (and other) functions, and how to govern it all in a global business services context. There is no dominant model; it’s more about achieving the right balance across all delivery models to achieve the best goals.

The Bottom-line: Many buyers have little choice but to find GBS partners, or face a purgatory of inferior BPO and shared services.

Buyers need staff that is ready to embrace these new global services environments. We’ve been hearing many buyers talk about populating their retained teams with staff who’ve only really ever worked in a globally sourced environment. And on the service provider side, buyers need delivery teams, which can work with these retained teams to meet their business objectives, in addition to cranking out the administrative work. Should a provider fail to do much more than facilitate standard process delivery (yes, we all know they exist) the buyer needs to evaluate how to bring in external help to plug the gaps to globalize processes and work consultatively and strategically with the retained team.

We are now seeing the rise of Global Business Services partners to work with buyers in “process integration” roles, where they can help their clients’ retained teams manage their whole business services mix across outsourced, shared services and in-house models. This is not too dissimilar from the service integrator roles we have seen in the IT world, with some of the higher-value integrators stepping up to help their clients manage the whole morass of service delivery. However, unlike IT where it’s easier to disaggregate services and run multi-vendor environments, it’s a lot more challenging when you deal with business processes, hence we expect those buyers with provider partners which have invested in domain capabilities to have a major advantage over those providers which really can’t do much more than provide butts on seats.

We see a true divide developing between the providers only focused on standard delivery, and those that have high-caliber process experts on their bench. The problem is many buyers today do not discover how poor their provider is until after then signed the deal, and it’s not easy to put in requests for consultative help after they’ve outsourced. However, for many buyers, they don’t have a lot of choice but to start campaigning internally for funds to improve their current sourcing delivery frameworks because they are far too beholden to the capabilities of the provider they signed up with.

Essentially, if your provider is starting to sound and acts like a glorified staffing company, you might just want to open up conversations with GBS partners that can work with you to optimize what you have already invested in. However, we recommend you’re MUCH better off finding this out before you give them the kitchen sink.

By Campbell Fisher

To gain a greater understanding of how organisations can effectively build an integrated shared services solution and a centre of excellence for HR, WR and WHS FCB Groups.

In Australia, workplace relations remain firmly on the HRM agenda this year as the area continues to be a challenge, as we move to a harmonised national system of regulations.

While many organisations have already transformed their transactional HR processes to increase productivity and scale, knowledge-based HR advisory services remain the next step to consider.

One of the key benefits of a central model for HR advisory services case management is the ability to generate on going reporting and metrics on systemic employment issues. This enables businesses to make smarter decisions by accurately reporting on issues raised, for example, service standards, quality and cost on a per-transaction-per-head or per-business unit basis.

Undoubtedly, there’s a role for the shared services model in the HR and WHS advisory space. Indeed, in the last decade there have been a number of significant legislative changes that now make it more logical to apply a shared services solution. These include the Fair Work Act 2009; 122 Modern Awards, 10 National Employment Standards; Independent Contractors Act 2006; Work Health and Safety harmonisation of legislation through 2012 to 2013 and the Paid Parental Leave Act 2010. This progressive move to national or state harmonised regulatory frameworks provides an organisation with the ability to centralise workplace relations’ advisory functions to gain greater value and efficiencies.

Furthermore, the deep cuts inflicted by the GFC have an on going impact on an organisation’s HR function. While transactional HR services may have been partially or fully automated eliminating the need for HR teams to handle this workload, HR resources are being stretched to manage operational and compliance issues. This is diluting the HR department’s ability to deliver strategic initiatives, which support competitive advantage and assist the organisation to achieve their commercial objectives.

HR Directors are validly questioning their HR structure, design and delivery priorities in light of stretched resources. Core competencies sought for HR teams focus on employment branding, talent attraction, talent mapping, culture, leadership development and coaching, as well as talent retention.
With this primary focus, many organisations are seeking answers to how they can deliver HR, ER and WHS advisory in new effective and efficient delivery mechanisms.

Yet just think about the breadth of service offering that the HR function delivers. This includes providing expert advice and consultancy on workplace relations matters; developing and managing policies and programs for labour relations, employment, induction and training. There’s also the need for experienced negotiation skills, and the ability to arrange representation as appropriate at industrial tribunals and hearings. On a day-to-day basis, there’s a need to monitor employment relations developments, conditions of employment, welfare, security, safety and training of employees. And at all times, there’s a need to ensure workplace relations compliance through regular auditing and procedural training of employees.

While there is undoubtedly more red tape and compliance paperwork, many businesses may not be able to support a business case for additional resources to manage all these issues. At the same time, attracting, retaining and providing meaningful career paths for specialist workplace relations experts to resource in-house teams often proves difficult for large organisations.

However, with the development of new technologies that ease the delivery of a shared service or an alliance model as well as the national/harmonised regulatory frameworks, an on going partnering relationship with an external workplace relations specialist really starts to make sense. Through this partnership organisations are better able to maximise the value their HR function provides the business, proactively manage workplace issues thereby reducing their cost to the business and improve service quality through better customer alignment.

For HR Directors though, it’s not just about delivering cost reduction – additional drivers include access to specialist services and expertise, leveraging IP, implementing knowledge management systems, managing risk and empowering managers through new effective accessible delivery models.

Given the maturity and high success rates achieved from transactional HR shared services, it’s no surprise to see forward-thinking HR Directors are considering incorporating expert and advisory services within the shared services model. The next step will be considering if they should also incorporate strategic advisory services within this model or form alliance relationships with external workplace relations specialists to provide consistent, quality advice cost effectively.

Contact: Campbell Fisher cjf@fcbgroup.com.au

Business leaders will gather to discuss how their organisations can leverage shared services and outsourcing to improve international competitiveness at the 15th Australasian Shared Services and Outsourcing Week. The event will be held in the Melbourne Conference & Exhibition Centre from the 16 -19th April 2012.

Donal Graham, Partner at Deloitte and the Chairperson for the event, said he believes that whilst the overall Australian economy remains relatively strong, it is clear that factors such as the high Australian dollar and falling Australian productivity means companies need to be examining ways to improve their competitiveness. Australian organisations are in a good position to take advantage of shared services and outsourcing.


“In a fragile global economy, Australian companies need to continuously look at ways to become more competitive on an international level. One aspect to this is a strong operational structure achieved through business transformation initiatives such as shared services and outsourcing. These initiatives can help contribute to improved cost competiveness and can also bring other benefits such as broader access to supply constrained skills,” said Mr. Graham.

Mr. Graham also acknowledges that the reputation of shared services and outsourcing has suffered in recent months but believes the event is a chance for the industry to learn from each other through knowledge sharing.

“Recent high profile events have put a dent in the industry’s reputation, although I consider much of the media coverage to be misrepresentative of the real drivers for and benefits from outsourcing. The Shared Services and Outsourcing Week is a chance for local organisations to strategise, network and change the public’s perception,” added Mr. Graham.


Aside from external pressures for shared services and outsourcing to perform, companies also face multiple internal challenges.

“Many companies still struggle to use technology effectively in their shared services. They are also trying to figure out a way to make their operations a strategic business partner, but this comes down to figuring out how to bring more value to the core business,” said Natalie Williams, Program Director for the event. 


“Until recently, the industry lacked visibility, so as a whole we’re looking at new ways to attract talent, improve our reputation and branding, and the event has specific sessions catered to this,” said Ms. Williams.


The event will be split into different streams with sessions that cater to various business functions, including procurement, finance, HR, ICT and shared services for the public sector. 


Presenters at the event include:
Mathias von Bescherer, Director, Business Operations – APAC Operations Centre, Microsoft
Kathleen Bailey-Lord, Group General Manager Global Shared Services, ANZ
Alistair Lloyd, Shared Services Director, Lion
Dr. Martin Fahy, Practice Leader APAC, The Hackett Group
Ann Yeager, Corporate HR Director, ALS Group (USA)
Martin Conboy Editor The Sauce (Australia)

The 15th Australasian Shared Services and Outsourcing Week will be held in the Melbourne Conference & Exhibition Centre from the 16-19th April 2012. If you want more event information, the conference agenda or a complete speaker list, please visit www.SharedServicesWeek.com.au, call 02 9229 1000 or email enquire@iqpc.com.au

By Martin Conboy, President – Australian BPO Association

As we are coming to the end of yet another eventful year, I thought that it might be a good idea to ponder upon what next year will bring.

I believe that we will still see even more concentration on lower operating costs as companies try to survive in an ultra competitive environment, and we will see more ‘Green’ initiatives in the way that good companies go about their business.

Will we or won’t we have a US double dip recession?

We hope not. However, economists in the US doubt consumers can keep spending like they did in the northern summer without actually earning more. Consumers are already struggling with higher prices for basics like food and petrol. For spending gains to be longer lasting, employers will need to hire more people and that’s not looking very promising. In recent months, US job growth has stagnated and employers have only added about 75% of the number of jobs needed just to keep up with population growth. I believe that it will be hard for the US to justify sending jobs offshore with nearly 20 million people on the unemployment list. We have heard of a number of BPO projects being repatriated and companies using that as a marketing edge. That will cause a slow down in BPO activity in this part of the world as most large projects come from America
This will in part be offset by the acceleration of Shared Services. Next year will be the year when Shared Services comes of age, especially in Australia. It has reached the tipping point and is just about there or there about. I believe that Shared Services will become a very important part of the BPO value chain and move offshore in an accelerated manner. The cost efficiencies will be too compelling for companies to ignore and will dictate the offshoring of non-core services.

We are going to hear a lot more about China next year. We believe that China will have little or no impact on BPO in the broader region, but it will all be about internal growth. There will be fantastic opportunities to sell consulting services into China as they gear up to service their own market. Just remember that over 60,000,000 people took an international holiday out of China last year and their middle class is growing very quickly.

The cloud finally seems to be getting traction and organisations are starting to get their heads around the cost savings, such as no infrastructure costs and the efficiencies of centralized and standardized databases. Converging technology and the further blurring of the lines between devices like smartphones, tablets and laptops and an emphasis by the cloud players to develop mobile computing applications so that people can access data anywhere, anytime anyhow will have a dramatic impact of its uptake.

Online shopping will offer cost savings to consumers of up to 50% and will drive competitive savvy companies to offer BPO customer support behind their shopping websites as a way of establishing competitive advantage.

We believe that with inflation set to stay around the target set by the Reserve Bank, Australian economic growth in line with the long-term trend and unemployment broadly steady, there will be no need to move interest rates upwards to put a break on the economy.

The Australian dollar will still stay at its record highs, which will only amplify the cost difference between Australia and less expensive BPO Asian destinations. The Australian call center outsourcing sector will really start to shake itself out next year, and we expect to see a lot more mergers and acquisition activity and maybe some players withdrawing from the market altogether.

By Natalie Williams

It is no secret that, historically, Australian businesses have been more apprehensive towards outsourcing and offshoring than their European and American cousins.

Having begun its life as an outpost of the now defunct British Empire and remaining, for the most part, contently insular and isolationist until the final decades of the 20th century, an attitude of ‘Australian-Made’ has been interwoven into almost every industry vertical.

Nevertheless, our proximity to the opportunities of Asia, burgeoning post-GFC economy, and a growing desire from Australian businesses to capitalise on their ability to now compete on the global stage has caused a shift in opinion when it comes to the BPO community. At SSO Week in Melbourne this year, we witnessed these changing attitudes first hand, with discussions becoming far more open about what Asia has to offer and far less taboo than the previous year.

Interestingly, just as the private sector is delving deeper into BPO back office provision and the benefits of relocating to APAC and beyond, so too is outsourcing creeping up the public sector agenda.

During my extensive research with all tiers of government agencies, it became apparent that in order to fully realise the benefits and cost savings of shared services, the public sector might need to look outside of their existing workforce and capabilities to really deliver a citizen-centric service.

There are, of course, still mighty mountains to climb in the form of political pressure and media frenzies around redundancies, redeployment and retaining jobs onshore, but make no mistake, outsourcing discussions are happening at a federal, state and local government level.

I am looking forward to delving deeper into this evolution of attitudes at SSON’s Public Sector Shared Services Transformation Forum in early October.

In the meantime, there is an interesting white paper available here about how the BPO community is responding to the growth of the Australian outsourcing industry and what tailored offerings we can expect to see in the future…. Watch this space.

Natalie Williams
SSON Australia

Source: Shared Services Network

Insourcing vs. Outsourcing vs. Hybrid Models – What’s best for you?

By Mark Atterby Senior Staff Writer

As the outsourcing and shared services industries continue to grow and evolve, more hybrid arrangements for outsourcing are emerging, where organisations and their providers can adopt and adapt a variety of models to best address their business needs. The Sauce speaks to Ray Slayford, National Lead Partner of Procurement and Shared Services KPMG – at the 14th Australasian Annual Shared Services & Outsourcing Week in Melbourne, about the evolution of the shared services and outsourcing industries.

In the past, outsourcing and shared services were viewed as two very distinct business practices, where numerous debates existed concerning the merits of one versus the other. KPMG’s Ray Slayford comments, “I think the existence and understanding of shared services (in-sourcing) and the various forms of outsourcing (on-shoring, near-shoring and off-shoring) are becoming far more common. We will see greater emergence of hybrid models which will connect insourcing, outsourcing, offshoring and on-shoring with different providers including the cloud and overseas providers.”

The emergence of various hybrid forms of outsourcing and managed services has been identified in various studies. Recent research by the SSON, published in March 2011, identified three types of hybrid models that exist in the market today:

   1. Geographic Hybrid: Involves models where a particular geography may have been outsourced and another intentionally keeps its services within a captive shared service centre (i.e. the Melbourne office of a corporation may have fully outsourced a process while Sydney retains control through the managed service centre. This enables a clear comparison for many processes between what is provided by the captive shared service centre and the outsourcing provider. 
   2. Scope Hybrid: Hybrid models that are separated by scope with non-core, repeatable, measurable, and predictable activities migrating to an outsourcing provider, and activities that are core to the business or cannot be migrated due to data restrictions or culture remaining in a captive shared service centre.
   3. Intermediary Hybrid: Fluid hybrid models where the shared service centre is the intermediary step for processes prior to full outsourcing to the external provider. This allows the internal change management required in pulling activities away from the divisions, departments and subsidiaries to be completed; the activities and procedures stabilised; and the processes understood prior to transferring to the outsourcing provider.

Traditionally, Shared services (In-sourcing as opposed to outsourcing) refered to the provision of a service by one part of an organisation or group where that service had previously been found, to more than one part of the organisation or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key is the idea of ‘sharing’ within an organisation or group i.e. two government departments may share the same HR, Payroll and finance services and infrastructure.

In the past outsourcing and shared services were seen as being diametrically opposed. But the two have become blurred, particularly as commercial enterprises engaged in shared services. The internal department could evolve into being its own commercial entity (profit centre), where the services it provided could be offered to other businesses and organisations, hence becoming an outsourcing provider.

Though the provision of shared services and outsourcing are very different models, where there are constant debates about the merits of both, there is an increasing view that they can harmoniously co-exist. The development of hybrid models, that combines the benefits of insourcing and outsourcing, allows organisations to maintain control and migrate from one service to the next.

The Australian shared services market is quite mature, where, over the last twenty years, a lot of private organisations as well as the public sector have explored or developed shared services with different degrees of success. Slayford believes that where Australia is lacking maturity to some extent is in the outsourcing phase and the transitioning from shared services to outsourcing within a hybrid model, he states, “What’s less mature compared to Europe and North America is the outsourcing phase, which is growing at a rapid rate with the emergence of China and Asia as outsourcing destinations.”

“Asia has a lot to offer in terms of talent and resources. They have highly skilled workforces. They have highly educated workforces as well as high English speaking populations. They can provide services that are in high demand where we are experiencing shortages in Australia.” Asia is close and offers Australian organisations, with providers in places like China, Vietnam, the Philippines, as well as India; a number of opportunities in developing cost effective solutions based on hybrid managed services and outsourcing models.

The mainstream view is that outsourcing and shared services should not be viewed as being diametrically opposed to each other. Hybrid models are being developed to leverage the benefits inherent in each, offering organisations greater flexibility and options when it comes to more efficiently managing their business processes.