Shared Services Delivery – Outsourced or Captive?
Outsourcing processes that are delivered by Shared Services is important to consider as external service providers continue to improve the quality of their services. It is also important that Shared Services leaders develop a strategy related to outsourcing so that they have an informed understanding of how outsourcing can be designed to fit with an overall delivery strategy. And, because the decision to pursue an outsourcing strategy is often made by senior management without directly including Shared Services leaders, having a defined strategy that is developed by Shared Services leadership with review by senior management will go a long way towards ensuring the evaluation for how to best source services is completed by those who best understand process design and delivery alternatives.
If you have attended an external conference on the topic of Shared Services or Global Business Services, you could easily get the impression that the performance leaders have all outsourced extensively, with many others who will soon make the decision to do so. With Business Process Outsourcing a multi-billion-dollar industry that largely funds large-scale conferences, it’s not a surprise that the BPO industry sets the agenda and tone of conference discussions. While many companies have achieved success with large-scale outsourcing, the predominant model is to maintain process ownership with captive processes that include selective outsourcing.
iPollingTM Results Review
Peeriosity’s iPollingTM was used to learn more about Peeriosity member companies’ strategy for outsourcing, with insight into where delivery resources are located. The results suggest that pure captive exceeds pure outsourcing by a factor of 5:1, with 6% reporting their primary delivery is via outsourcing or large-scale BPO and 29% indicating their primary delivery is via resources that are captive. The most prevalent model used by Peeriosity member companies at 59% is the use of captive with selective outsourcing. Here are the details:
With regards to the question of the location of resources, all regions of the globe are covered, since the primary model for Global Shared Services delivery is to organize regionally with some using more of a global model where work activities are largely centralized in a single location. Given the prevalence of this design, it’s not surprising that 24% selected “multiple regions” as the best response. For those that are more significantly located in a specific region, 35% have a majority of resources in North America (USA and Canada), 18% have a majority of resources in India, 12% have a majority of resources in Eastern Europe, and 12% have the majority of resources in other Asia-Pacific locations excluding China.
Here are some of the comments from members:
- To meet the strategy of the service line, the approach can vary; however, generally, we are limiting outsourcing activity.
- Our Control organization is a hybrid of captive and outsourced with resources located in the US and India. Other functions are moving to a captive model with resources located across multiple GBS locations (e.g., India, Latin America, etc.).
- Philippines and Ireland.
- Our Shared Service is in New Zealand.
While many companies have achieved success with large-scale outsourcing, the predominant model is to maintain process ownership with captive processes that include selective outsourcing. For some, this means owning the design and quality review of the process, when the actual work activities are managed by a third party. Out of sight doesn’t mean you treat the process like a black box where you hope for the best. Peeriosity members are likely to pursue outsourcing selectively, with almost a third choosing to keep work activities completely in-house and captive. Yes, BPO companies will have greater scale, but when you consider the volumes of transactions a global company with $5B or more in annual revenue has, the incremental benefit of larger size doesn’t necessarily translate into having better overall delivery capabilities.
What is your company’s Shared Services outsourcing strategy? Where are resources (captive or outsourced) located?
Who are your peers and how are you collaborating with them?
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