Can You Globalize Without Outsourcing?

At last week’s European Summit for Leaders in Shared Services, shared services strategy was hot on the agenda. In particular, the integration of outsourcing into the shared services or global business services model, and the various methods for doing so, were keenly debated.

We take it for granted that outsourcing is the future for any large corporation, and is the fastest way to globalize your business.

But Rolls-Royce plc have a different approach. They managed to establish global finance shared services, improve standardization and leverage their international network all whilst maintaining their captive model. So how did they do it? Colin Glynn, the Global Head of Finance Shared Services at Rolls-Royce plc presented on his experience.

The company had been using shared services in one form or another since 2001, with the UK finance service centre becoming a European service centre in 2005. This migration resulted in cost and headcount reductions in excess of 50%. This prompted them to establish further regional centres in North America, Asia, the Nordics and South America.

But as their company grew, their business required greater alignment between these different regional centres.

“Our vision was to deliver a global service to all Rolls-Royce businesses through one shared services organisation operating through regional service centres in a standard and seamless manner”, Colin explained.

Their strategy was to extend the existing template through the exploitation of technological platforms, standardise processes globally with strict governance, embed a culture of continuous improvement through both external and internal benchmarking, maintain and improve customer relationships and thus move up the value chain.

But how could they do this without resorting to outsourcing?

From their point of view, by keeping shared services captive, they could create a truly specialised model that although not necessarily world class, was completely fit for the business. Colin was quick to point out, however, that this was by no means the cheapest way of going about it. But the Rolls-Royce shared services continue to drive cost savings, improve controls, and have been benchmarked in the upper quartile.

The moral of the tale seems to be that if you are willing to dedicate the time and energy, and your desired outcome is quality over cost reduction, bespoked and captive shared service model will work for your business. But for newer organisations that have increased demand but are not necessarily able to invest the time and resource in starting from scratch, outsourcing may be the leveraging platform they need to kick start their globalization.