It’s now a seller’s market for captive shared services organizations, according to an Alsbridge white paper by Paolo Dias: “2010 should be a great year for the captive acquisition market. Many outsourcers (particularly the Indian-based outsourcers) have the balance sheets to go on a back office services shopping spree”.
Recent deals, as the Alsbridge white paper notes, include Citigroup’s disposal of its global business services captive to TCS, and Aviva’s sale of its GS unit to WNS.
Which reinforces something that I suspect all the best shared services directors always knew: that shared services is very much a journey. It may be a very long journey – lasting a decade or more perhaps – but, outside possibly the public sector, the ultimate destination is almost certainly an offer from an outsourcer that the CFO just can’t refuse.
This sense of a journey helps right from the start. Shared services implemented as a one-off re-organization or, even worse, as the one-off implementation of a software package implementation, were always heading for the rocks.
The journey idea helps in other ways too. Shared services can then be seen as a business strategy with multiple payoffs, not as careering towards some sort of oblivion [there is life after disposal].
It also frames shared services directors as what they really are – entrepreneurs. They are building new businesses within their existing organizations that will likely one day be sold. If they do it well, the payback to the organisation during the build phase and at the eventual sale can be very substantial. ‘Back office?’ – phooey. The best shared services directors are extraordinary value creators.
In that context, it makes sense to keep a close eye on the competition. Firstly, because knowing what will tempt outsourcers to pay premium prices for a captive could shape many aspects of how the shared services organization is built.
Secondly, and equally importantly, at every stage along the shared services journey, the CFO will be receiving proposals from outsourcers claiming that they can do more-for-less, and automate faster, and generally do everything better. If a captive organization continues to fall behind what is available from the outsourcers, then its days are numbered.
The anecdotal evidence is that many shared services organizations are falling behind. Many have unhappy internal customers and poor customer engagement. Launched as ‘one-off’ innovations in the delivery of one service line, they seem often to struggle to manage expansion to a wider scope, while at the same time delivering the continuous service improvement and cost reductions that their internal customers expect.
Thinking like the competition provides clues to how shared services organizations can drive performance improvement. Outsourcers can’t hide costs through loose transfer pricing mechanisms. And if they don’t keep their clients happy at every stage – from onboarding through to ongoing innovation in service delivery – then they will walk.
The only conceptual difference between a shared services organization and an outsourcer is that one has internal customers, while the other must compete in the marketplace for its customers.
So what are the hallmarks of successful outsourcers, and where are they headed next? Well, I would say this, but I see one of the distinguishing features of successful outsourcers is that they have, or are striving to complete, a comprehensive and integrated view of the customer journey and the whole process lifecycle. They think end-to-end.
The recent case study from Computacenter shows how one outsourcing and managed services provider has invested in building a framework for process management as a critical underpinning for operational efficiency and continuous improvement in the customer experience. And this is typical. All outsourcers are striving to build collaborative frameworks for process management and continuous performance improvement. They know that, in the long run, frameworks of this kind are essential to deliver sustainable improvements and happy customers.
But you knew that already 😉