“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.
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.
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.
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:
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:
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.
Global Business Services (GBS) takes shared services to the next level with an integrated, worldwide approach. It delivers enhanced efficiency, flexibility, and customer-centricity across critical business functions. By tapping into global talent, streamlining processes, and focusing on customer needs, GBS becomes a strategic driver of growth when executed successfully.
The GBS model provides greater integration, flexibility, customer focus and global reach compared to a traditional shared services model. It enables organizations to tap talent worldwide, streamline processes across functions, enhance customer satisfaction and quickly scale operations to drive greater efficiency and support strategic growth. By taking a holistic, worldwide approach, GBS eliminates silos and delivers value as a strategic business partner across critical functions.
Global Business Services (GBS) prioritizes customer-centricity and improving service quality by prioritizing best-in-class service delivery for both internal teams and external stakeholders. Initiatives like proactive customer feedback collection, root cause analysis of issues, and timely communication of resolutions are key features of a GBS model. This customer-centric approach facilitated by GBS enhances service quality and loyalty across the organization.
Global Business Services (GBS) drives cost-efficiency and resource allocation for organizations by centralizing and streamlining operations across multiple locations, and by leveraging global talent and technology to deliver high-quality services at a lower cost.
When selecting a GBS center location, key factors include talent availability, infrastructure, government support, language capabilities, proximity to operations because of time zone alignment. It enables 24/7 coverage, as well as reasonable operating costs, cultural fit, and business environment. The optimal GBS center location balances these factors to access qualified talent, efficiently support global operations, and align with the organization’s growth strategy.
To implement GBS, first define the strategy, scope of services, and operating model, along with metrics to track progress, then establish leadership roles and global teams, being sure to foster collaboration across business units and provide change management support. Zinnov is poised to help companies create this plan, and enforce phased implementation to deliver enhanced efficiency, agility and customer satisfaction.
Transitioning from a traditional Shared Services model to the more advanced Global Business Services (GBS) approach begins by thoroughly assessing your current shared service functions. Identify areas for improvement and alignment with your organization’s strategic goals.