Shared Services and Global Business Services (GBS) make up a quarter of the global services sector. This sector is expected to grow to US $300 billion in revenue by 2023. (Up from $211 billion in 2020.)
As this growth continues, finance shared services and GBS professionals are seeing increased workloads, increased complexity, and new challenges in refining their operational models and technology requirements.
As shared services aim to evolve, the ‘next generation’ is more focused on service innovation, client-facing initiatives, internal and external partnerships, and contributions to top-line growth and customer journeys.
Yet this growth is often hampered with foundational challenges.
Basware and Everest Group defined and discussed these challenges in a Webinar.
Challenge Number 1:
Shared Services and GBS are Stuck in Transactional Processes
While many shared services aspire to deliver more analytical capabilities and value-adding processes, they are often too caught up in transactional processing.
Beyond the sheer volume of the workload, shared services often develop an output-driven culture as they constantly strive to hit service level agreements (SLAs). Emphasis and KPI-focus are often on aspects like processing time and on-time payment rates, with little room provided to explore and invest in other aspects of shared services business.
How to address this?
Beyond automation, to break free from transactional constraints, organizations must transition from an output-focused mindset to an outcome-driven one.
Output focused: “How can our team process this invoice faster?”
Outcome focused: “How can we use technology to automate invoice processing, without having to touch invoices.
Leadership and vision are required to define what you want your organization to look like and what it will take to get you there. Technologies such as automation are only part of the solution. Look further to examine:
- Metrics to foster an outcome-driven focus, including more customer service-focused KPIs.
- What impact does your current data quality have on your current ability to automate?
- How can you empower your employees to contribute to wider process improvements?
World-class finance departments are able to achieve high rates of touchless invoice processing rates when they are able to step back and look at the bigger picture: solving wider data issues, examining end-to-end processes and shifting to an outcome-driven mindset.
“We have customers with 89% touchless invoice processing. The processing time is now hours instead of days. The metrics improve significantly because of automation, and at the same time empowering people to go to the next level and focus on how they can influence in the process, rather than processing [an invoice] fast.” – Olav Maas, VP - Product Management, Basware
Challenge 2:
Complexity of Financial Compliance
E-Invoicing mandates and real-time reporting mandates are emerging at a rapid rate and are becoming increasingly complex. As more regulations come into force every year, some companies find themselves unprepared. They are struggling to keep up with compliance demands.
How to address this:
Embrace Financial Compliance as an Opportunity for Growth
While e-invoicing and real-time reporting requirements appear burdensome, it presents an opportunity. The mandates give your business case a sense of urgency. And, if done well, the changes you make to ensure compliance will also give you valuable insights and metrics for informed decision-making.
Leverage the experts
The complex and everchanging nature of the compliance rules makes tackling this in-house extremely difficult, unless you operate in just one or two countries. For global companies, the right networked third-party partners can help you manage e-invoicing and financial compliance in all the countries in which you operate, while also being responsible for updates whenever the rules change.
Now is the time to get proactive. e-Invoicing is increasingly mandated and more and more countries are requiring near-time or real-time reporting. Use the mandates as a catalyst for change and find the right e-invoicing partners to help you ensure compliance globally.
Challenge 3:
Inflation is Driving Up Costs
Inflation rates are at their highest levels in decades. Cost and pricing pressures are a major concern as companies and the shared services that support them strive to stay competitive.
Operating costs in finance accounting, especially in locations like India, saw an average rise of 12%. While this has been mitigated to some extent by currency depreciation in certain markets, every company is experiencing an increase in production and operating costs.
How to address this?
- Forward-looking companies are taking inflation as a catalyst to optimize costs.
- Examine opportunities to downsize real estate requirements as organizations adopt more distributed and hybrid workforces.
- Re-assess salary structures. Some companies found they over-hired or have offered inflated salaries in the talent scramble of desperate hiring in the last 2-3 years.
- However, avoid cuts which impact the long-term future of your workforce. Programs including employee engagement and Learning & Development (L&D) are important investments in the long-term health of your workforce. As compliance needs and process complexity increase, investing in talent remains an absolute priority.
While the highest inflation in decades presents challenges for shared services, it also offers opportunities for cost optimization. However, cutting too deep, or in the wrong areas, will impact the long-term health of your workforce. Organizations should strike a balance between optimizing costs and nurturing their workforce.
Challenge 4:
More Complex Work Dropped onto Shared Services Teams
Shared services are taking on more work, and more complex work. On top of that, external factors such as economic instability, inflation, mergers and acquisitions, divestments, more ESG requirements, expansions into new countries, and evolving mandates contribute to the “business-as-usual” complexity faced by most organizations.
How to address this:
To effectively respond and step up to this more complex environment, shared services need to cultivate agility and resilience. But what practical steps can you take to improve agility and resilience?
Invest time to understand the strategic direction of the business
Being aware of the organization's strategic direction, such as an inclination towards mergers and acquisitions, allows for better preparation and can help you invest your energy in the right places.
Work on a culture of continuous improvement from all levels of employees
Taking a proactive approach by leveraging automation and data to drive continuous improvement that empowers employees to handle complexity and drive resilience. Rather than imposing top-down directives, organizations should foster an environment where individuals are encouraged to contribute and grow with the evolving demands of the work.
Prioritize visibility
Many large organizations with a history of mergers and acquisitions have multiple ERPs, which makes it difficult to have standardized and harmonized processes. SaaS platforms can help by integrating with your ERP, giving you one interface with enhanced visibility.
By staying responsive to the ever-changing business landscape and embracing a culture of adaptability, shared services teams and GBS organizations can thrive amidst complexity and build a solid foundation for continued success.
Challenge 5:
Navigating Complexities of Digital Transformation
When organizations embark on the journey of digital transformation, one common struggle they face is determining where to start.
Everest Group research shows that only about 31% of GBS organizations have achieved end-to-end standardization. This means most organizations still have disparate processes, business rules may vary across regions, and there might be a lack of process harmonization or standardization.
Addressing the challenge:
“Digital transformation is a journey that starts with change management and leads to business value.” - Amy Fong, Partner, Everest Group.
Here are 5 top areas to focus on in your digital transformation journey:
1 Establish End-to-End Process Ownership:
Having a cross-functional process owner, such as across purchase to pay, is vital. Encouraging collaboration and breaking down silos is crucial for driving change, whether it involves processes, policies, or technology.
2. Engage change management resources:
Dedicated change management resource can provide invaluable support, helping employees understand the current state, desired outcomes, and the steps required to achieve them.
3. Emphasize business value:
When building a business case for digital transformation, it is essential to focus on the value it can bring. This goes beyond process cost-cutting and includes aspects like improving visibility, streamlining processes, and improving the customer experience. Aligning transformation goals with strategic objectives that enhance customer experience and revenue generation is key.
5. Leverage automation for standardization:
When facing an enormous volume of work, teams need to either work harder or smarter. Through automation, organizations can enforce standardized processes even when faced with seemingly insurmountable workloads.
Challenge 6:
Dealing with Poor Quality Data
One significant hurdle organization face during their digital transformation is dealing with deteriorated and incomplete data. Many shared services organizations often grapple with data scattered across multiple systems, operating in a construct that lacks data governance and is blighted by poor data quality. These issues prevent teams from achieving successful transformation and gaining valuable insights.
To tackle these challenges, organizations can implement the following strategies.
1. Establishing a single source of truth.
To achieve data consistency and improve data quality, it is essential to establish one source of truth, consolidating data from various parts of the business, such as procure-to-pay (P2P), customer data, and spend data, into a unified data lake or database. Instead of relying on multiple databases with different sources, organizations should strive for a single, comprehensive data source that supplies all tools and applications.
2. Avoid system fragmentation and embrace connected platforms.
When selecting technology platforms, organizations should prioritize those that can seamlessly connect with other tools using APIs. Smooth connections among systems will give you more standardized data so you can deliver better insights faster.
3. Leverage advanced technologies:
“The technology that we have today has moved data management to a completely different level, and you have to think about this differently than you have in the past.” Amy Fong, Partner, Everest Group
Modern technologies like artificial intelligence (AI) and machine learning (ML) have revolutionized data management and analysis. Data cleansing and analysis that used to take weeks or months can now be accomplished in hours or even minutes.
4. Focus on data-driven decision making:
The goal of improving data quality is to enable better decision-making. When you can’t tackle every data issue, prioritize the data that, when clean and organized, can help you make informed decisions that positively impact the entire business.
Achieving world-class levels of automation is only possible with high levels of visibility and good quality data.
You need visibility of your data and processes to identify areas of your process to improve. Olav Maas, VP of Product Management at Basware says “Having the data of what is going wrong, to get the answers to the ‘why’ is the starting point… E-invoicing, machine learning and AI are solutions that will help you with data enrichment and automation.”
Challenge 7:
Hiring and Retaining Talent in Shared Services Organizations and Global Business Services
Shared services organizations face significant challenges in hiring and retaining talent. Many popular markets are saturated with high attrition, growth, and unmet demand.
How to address this?
To effectively address talent challenges, shared services leaders must take proactive steps. These include:
- Conducting gap assessments and planning based on required skills and competencies
- Clearly defining roles and aligning them internally and with external markets.
- Skill development should fulfil current needs and the needs presented by the company’s future roadmap.
Here are some tips from leading companies:
- Carefully plan and calculate the skills you have in-house, and the skills and resources you will need in 5-10 years’ time, to inform your hiring and training strategy.
- Hire from within. Leading shared services and GBS are increasingly looking to redeploy internal resources, setting goals of 10-50% for internal hires for new roles. By focusing on internal mobility, you can tap into existing talent pools, improve employee engagement, and minimize reliance on external markets.
- Invest in upskilling. Everest Group research shows 90% of peers have maintained or increased spending on L&D in the last 12 months, with best-in-class peers spending more than $1,000 per FTE on onboarding and training programs. This may sound resource-intensive, but there are many third-party training providers available to deliver relevant and informative training.
By investing in the right areas and reducing reliance on external markets, organizations can navigate talent shortages and build a robust internal talent pipeline. To ensure long-term success, shared services leaders must prioritize addressing talent gaps, fostering a culture of continuous learning and development, and adapting to the evolving demands.
Conclusion
The maturity, growth, and success of shared services and GBS organizations can be measured by the impact they deliver.
Shared services increase their effectiveness when they can deliver better value and help the wider business agility. The aim for leading shared services is customer-centricity, gaining a competitive advantage in terms of revenue.
However, this is only possible when shared services overcome the many foundational challenges they face. If you feel any of these pain points, you aren’t alone. With the right drive, leadership, technology, and teamwork, all these challenges are surmountable.
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