The Rise of Global Business Services (GBS): The Future of Shared Services

“Efficiency is doing things right; effectiveness is doing the right things.” – Peter Drucker

In the 1980s, Shared Service Centers (SSCs) and third-party Independent Software Vendors (ISVs) significantly changed how American organizations managed essential functions by providing access to global talent. Pioneering companies like General Electric, Ford, and Baxter Healthcare were at the forefront of this shift, setting the stage for the wider adoption of these shared service models. In contemporary times, this approach has gained significant traction, with over 80% of Fortune 500 companies incorporating various shared services into their US operations. These models have shown their efficiency and effectiveness, making them widely accepted strategies.

As the global business landscape continued to evolve, the mid-1990s witnessed early European adopters, including Intel, Whirlpool, and Allergen, demonstrating the feasibility of the shared services model on a pan-European scale. Multinational companies with Shared Service Centers (SSCs) in the USA and Europe further extended this model to regions such as South America and Asia. Industry giants like BP, Shell, Pfizer, Proctor & Gamble, and Oracle showcased the potential of a global shared service structure, delivering tangible financial and operational benefits.

While Shared Services and third-party ISVs were transforming the global services landscape, they also set the stage for a new player: offshore centers established directly by the organizations. These centers, known as captives, Global In-house Centers (GICs), or Global Capability Centers (GCCs), are vital components of the evolving framework for how companies source services globally.

The dynamic global market and growth strategies targeting emerging markets have introduced new considerations for organizations. This evolving landscape prompts a re-evaluation of how services can be optimally delivered. This is where the choice between Shared Services and Global Business Services (GBS) becomes critical.

Global Business Services (GBS) vs. Shared Services: Which Business Model is Right for You?

Shared Service Centers is a well-established model that revolves around the centralization of specific business functions, such as HR, Finance, IT, or Customer Service, within an organization. These centralized units, commonly referred to as Shared Service Centers (SSCs), operate locally and play a pivotal role in consolidating and streamlining these functions.

Consider a multinational corporation with dispersed regional offices. Each office independently manages HR, finance, and IT functions, resulting in duplicated efforts and inefficiencies. To streamline their operations, they establish a Shared Service Center (SSC) to centralize these functions. Now, the SSC manages HR processes like payroll, benefits, financial operations, and IT support for all regional offices. This centralization enhances efficiency, reduces operational costs, and standardizes services.

Conversely, the Global Business Service Center (GBS) is an advanced and seamlessly integrated evolution of the shared services model. GBS orchestrates the delivery of critical business support functions across a global landscape, utilizing various service delivery models. It stands at the forefront of modern corporate development, driving optimal performance across an array of business support services like HR, Finance & Accounting, IT, Legal, etc. Unlike traditional shared services, which primarily served as support functions, GBS operates as a strategic business partner that actively contributes to an organization’s strategic objectives.

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The transformation from traditional Shared Services to the Global Business Services (GBS) model has been nothing short of revolutionary. Shared Services have undergone development over the years, initially adopting a business-oriented approach through commercial management, which involves overseeing financial transactions and vendor relationships, service management to ensure the delivery of various services including quality and customer satisfaction, and operations management for the day-to-day functioning of functions like HR, Finance, and IT.

Later, Shared Services expanded its scope to manage functions like HR. However, GBS has taken this evolution further, where it has evolved to an enterprise-wide model, characterized by its adaptability in efficiently serving multiple business functions.

In stark contrast to Shared Services, where various shared service centers and outsourcing vendors may operate independently, Global Business Services (GBS) excels in providing an integrated framework for governance, location management, and business practices across all shared services and outsourcing activities within a business. This comprehensive integration proves invaluable in establishing Key Performance Indicators (KPIs) tailored to each function, establishing sustainable workflows, and fostering communication that eliminates the silos commonly found within business operations. GBS’s primary mission is to offer comprehensive support to the entire business entity.

Why is Global Business Services (GBS) becoming more popular?

While Shared Services has proven its worth in simplifying back-office support functions and maintaining them in-house, Global Business Services takes the concept further and enhances it in several critical ways:

• Global Reach: GBS operates on a global scale, ensuring that services are delivered seamlessly across various regions and time zones. For instance, a multinational e-commerce company with customer service inquiries coming in 24/7 from around the world. GBS enables the company to maintain customer support teams in different regions. When a customer in Asia reaches out during their business hours, a local GBS team is ready to assist, ensuring timely and efficient service. This global reach allows your organization to tap into a broader talent pool and provide round-the-clock support to customers or internal teams.

• Integrated Capabilities: GBS doesn’t just centralize functions; it integrates them comprehensively. This holistic approach streamlines processes, reduces duplication, and enhances overall efficiency. Take, for example, a manufacturing company. In the past, separate departments handled procurement, production, and inventory management. With GBS, these functions are integrated into a single streamlined process. When a demand forecast indicates the need for more raw materials, GBS can immediately align procurement and production schedules, reducing inventory holding costs, and improving production efficiency.

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• Focus on Customer-Centricity: Global Business Services (GBS) providers prioritize customer satisfaction, emphasizing the delivery of best-in-class service to both internal teams and external stakeholders. For a telecommunications company, GBS goes beyond addressing customer inquiries promptly. It actively collects and analyzes customer feedback. For instance, when multiple customers report difficulties with a particular service, GBS identifies the issue and communicates it to the technical team for swift resolution. This customer-centric approach, facilitated by GBS, drives excellence in service quality and enhances customer loyalty.

• Flexibility and Scalability: Global Business Services (GBS) can adapt swiftly to changes in business requirements and scale up or down as needed. Consider a startup in the technology sector. As the company experiences rapid growth, GBS can quickly scale its back-office support functions, such as IT and HR, to accommodate the increasing demands. As the market evolves, GBS ensures your organization remains agile and responsive, whether expanding or streamlining operations.

• Cost Efficiency: While cost savings are a shared objective with Shared Services, Global Business Services (GBS) achieves this while offering a broader scope of services. Imagine a Financial institution seeking cost-efficiency. GBS provides integrated solutions for a wide range of functions, from transaction processing to customer support. The integrated approach streamlines operations, eliminating redundancy and reducing operational costs without compromising service quality. This cost-effective solution enables your organization to allocate resources more strategically and invest in growth initiatives.

Challenges and the Way Forward

As organizations explore the potential of setting up a Global Business Services (GBS) center in India, it’s crucial to recognize that along with the benefits, there are also unique challenges that need to be addressed. One of the primary challenges for GBS organizations lies in defining the role and value of the global center when compared to local autonomous business units.

This challenge often stems from uncertainty among executives about whether the global corporate center truly adds value and whether it maintains an appropriate size and staffing level. Unfortunately, in many cases, the organizations lack this baseline, resulting in failed business cases within the newly established GBS organization. This highlights the critical need for accurate metrics and assessments in the GBS landscape. In addition to addressing this challenge, a shared vision is vital at both the company-wide and GBS levels.

Here are a few actions organizations can take to mitigate these challenges and ensure the success of Global Business Services (GBS) initiatives:

• Establish a Defined GBS Leadership Role: To overcome the lack of a defined GBS leadership role, organizations need to create dedicated positions and roles specifically focused on GBS. These leaders will be responsible for driving the GBS strategy, aligning it with the overall business objectives, and ensuring effective implementation and scaling of GBS operations. They will serve as advocates for GBS within the organization, championing its benefits and demonstrating its value to top management.

• Enhance Top Management Visibility: Limited top management visibility can hinder the progress and growth of GBS centers. It is crucial to increase the visibility of GBS teams and their achievements to top management and key stakeholders. This can be done through regular reporting, presenting success stories and case studies, and actively engaging with top management to showcase the strategic impact of GBS. By demonstrating the value and impact of GBS, top management will have a clearer understanding of its importance and be more inclined to support its initiatives.

• Define Clear Mandates and Roles: Clear mandates for GBS leaders and their roles within the organization are essential to ensure effective scaling and purpose-driven operations. These mandates should outline the responsibilities, decision-making authority, and accountability of GBS leaders. By defining clear mandates, organizations can avoid ambiguity and streamline the operations of GBS centers, enabling them to align their efforts with the overall business strategy and deliver value consistently.

• Foster Collaboration and Cross-functional Engagement: GBS centers can benefit from increased collaboration and cross-functional engagement within the organization. This can be achieved by actively involving GBS teams in strategic discussions and decision-making processes, encouraging them to contribute their expertise and insights. Collaboration with other departments, such as IT, Finance, and HR, can lead to better integration and alignment of GBS initiatives with the overall business goals, driving synergy and maximizing the value derived from GBS operations.

Global Business Services (GBS) is the bold action that organizations must take if they aspire to achieve growth and excellence. GBS represents a transformative evolution, offering an integrated, global approach that empowers organizations to scale efficiently, serve customers effectively, and drive sustainable growth. The journey to GBS success is not without its challenges, but these challenges are opportunities for proactive steps.