WORLD-CLASS IN GLOBAL BUSINESS SERVICES - OVERVIEW & TRENDS. ABSL, Prague

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1 WORLD-CLASS IN GLOBAL BUSINESS SERVICES - OVERVIEW & TRENDS ABSL, Prague Tom Olavi Bangemann SVP Business Transformation, The Hackett Group October, 2014

2 Statement of Confidentiality and Usage Restrictions This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group. Copyright 2012 The Hackett Group, Inc. All rights reserved. World-Class Defined and Enabled.

3 The Presenter Global business services (GBS) Overview & Trends 3

4 The Hackett Group defines and enables World-Class performance Global business services (GBS) Overview & Trends 4

5 The good news: costs are down Cost of G&A as % of Revenue 5,20% 0,51% 2,90% 4,83% 0,42% 2,58% 4,46% 4,42% 4,34% 0,33% 0,30% 0,30% 2,34% 2,38% 2,36% 4,25% 4,35% 4,12% 0,30% 0,30% 0,31% 2,19% 2,30% 2,28% 4,48% 0,28% 2,34% 4,09% 0,28% 2,06% 3,95% 3,79% 0,28% 3,65% 0,26% 0,26% 2,04% 1,90% 1,83% 0,64% 0,63% 0,57% 0,57% 0,58% 0,57% 0,62% 0,59% 0,65% 0,59% 0,64% 0,54% 0,51% 1,15% 1,21% 1,22% 1,17% 1,10% 1,05% 1,04% 1,17% 1,22% 1,15% 1,00% 1,08% 1,05% F 2015F FN HR IT PR Hackett benchmark historical moving median Hackett forecasted results Global business services (GBS) Overview & Trends 5

6 1,40% G&A Performance from 2004 through ,20% 1,11% 1,13% 1,17% 1,00% 1,00% 0,80% 0,60% 0,40% 0,20% 0,00% $9,5 $9,0 $8,5 $8,0 $7,5 $7,0 $6,5 Finance Cost as a % of Revenue - 30% - 47% - 48% 0,78% 0,60% 0,60% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 $9,2-18% IT Cost per End User Equivalent (x 1000) $7,8 $7,6 $7,3-6% 1,20% 0,80% $2,0 $1,5 $7,3-15% 1,01% - 27% 0,74% 0,60% 0,40% 0,20% Procurement Cost as a % of Spend 0,80% 0,75% - 24% - 20% 0,60% 0,60% 0,00% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 $1,4 $1,9 $2,2 $2,2 $1,8 $1,7 $6,0 $5,5 $6,2 $0,5 $5,0 $0,0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 World-Class Peer Group $2,5 $1,0-27% HR Cost per Employee (x 1000) - 17% - 22% Global business services (GBS) Overview & Trends 6

7 Tactic 1; Manage cost Business service functions to need to delivery 6-8% annual productivity improvement Business Services Functions Revenue growth Number of staff (FTEs) Operating Budget 6,7% 4,9% Productivity Gap 7.4% Efficiency Gap 6.2% 0,5% -1,3% -0,7% -0,2% actual projected Global business services (GBS) Overview & Trends 7

8 Reinvesting in innovation enablement is occurring across G&A Finance IT 47% Transactional 36% 62% Transactional (Run IT) 54% 53% Knowledgecentric 64% 38% Knowledge- Centric (Design / Build) 46% Peer World-Class Peer World-Class HR Procurement 44% Transactional 42% 42% Transactional 31% 56% Knowledgecentric 58% 58% Knowledgecentric 69% Peer World-Class Peer World-Class Source: Hackett 2014 Benchmark Data Global business services (GBS) Overview & Trends 8

9 Multi-functional GBS for G&A is the standard the debate is into non-traditional functions and progressive placement % companies with single- function shared services vs. multi-function GBS 28 % % 72 % multi function single function Service Placement Finance, HR, IT, Proc. combined 31% 34% 28 % CCC (inbound) Inclusion of non-traditional functions in GBS scope by Industry Order Management Direct Procurement CCC (outbound) Industryspecific Risk & Security Supply Chain Legal Marketing Corporate Comms. 56% 44% 39% 46% 38% 38% 33% 38% 58% 50% 58% Source: The Hackett Group s annual Global Business Services (GBS) Performance Study, 2014 Median 35% 11% 16% 8% Healthcare Consumer Discretionary Financials Industrials IT Materials Consumer Staples Energy & Utilities Organization structure Geographical structure Corporate Multiple regional delivery centers GBS One global delivery center Business Units BU - Local centers Global business services (GBS) Overview & Trends 9

10 GBS keep pushing the boundaries to include more value-adding finance processes and knowledge centric-activities Service Placement Finance processes Accounts payable Cash application Travel Expense Fixed assets Intercompany accounting Collections Payroll General ledger accounting Credit Customer billing Time and Attendance Cash management Treasury Inventory Accounting Order Entry External reporting Cost Accounting Tax filing & reporting Business performance reporting Cost analysis Business performance analysis Budgeting Outlook/Interim forecast 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% GBS - Transactional GBS - Knowledge-centric GBS - Outsourced Outside the GBS organization 5 years ago today In 5 years Global business services (GBS) Overview & Trends 10

11 GBS continue to move up the value curve with a modest increase of companies developing stage-2 type models Focus, Value Stage 3 Enterprise Strategic Enablement Stage 2 Business Service Excellence Stage 1 Function Transactional Excellence Strategic Enterprise GBS Integrated Services Operations Multi-function Integration Multi-function Aggregation Single Function Optimization Single Function Consolidation Single Function Shared Services Time 8% 35% 57% Source: The Hackett Group Global business services (GBS) Overview & Trends 11

12 Process split example: Best practice based budgeting process All activities can be categorized by where in the organization they should ideally be performed Time Spent Thinking about the future 35% Data collection and validation 37% Report preparation & variance analysis 28% Top-down target setting Bottom-up planning Data submission Data validation Data aggregation Budget discussion Report preparation & variance analysis Board approval High-level process split Retained organization 50% CoE 40% SSC 10% Tasks that require close cooperation of central management and Finance as Business Partner understanding business needs Tasks that require local knowledge and local presence Tasks that are repetitive and standardizable and do not require local presence Global business services (GBS) Overview & Trends 12

13 GBS think strategic alignment is key to creating value, and most think they deliver on this promise GBS Objectives according to GBS (Importance vs. Perceived Effectiveness) Alignment with corporate and business unit strategic goals 59% 68% Contributing to effective enterprise compliance (compliance focus) 50% 76% Delivering operating cost reduction (cost leadership focus) 46% 60% Delivering a high-quality services portfolio (service excellence focus) 31% 50% Importance Highly important to have a GBS that meets this objective Effectiveness Highly or mostly effective in achieving this objective Global business services (GBS) Overview & Trends 13

14 C-suite executives value strategic alignment and quality of service equally, cost reduction is not the only goal GBS Objectives according to C-suite Executives* (Importance vs. Perceived Effectiveness) Alignment with corporate and business unit strategic goals 42% 65% Contributing to effective enterprise compliance (compliance focus) 56% 56% Delivering operating cost reduction (cost leadership focus) Delivering a high-quality services portfolio (service excellence focus) 49% 53% 52% 67% Importance Highly important to have a GBS that meets this objective Effectiveness Highly or mostly effective in achieving this objective *Each year, The Hackett Group conducts a study of mid-sized and large companies surveying executive management and leaders of business services functions including finance, HR, IT and procurement about enterprise and business services priorities and initiatives for 2014 to identify their strategic priorities for the coming year. Global business services (GBS) Overview & Trends 14

15 The war for talent is here, and will be waged on a few key battlefields Difficulty to attract/retain Extreme Difficult Minor Transactional Process Relationship Management Strategic Thinking & Analysis R E D Z O N E Global Business Acumen Demand: Low Significant Very strong Finance HR IT Procurement Source: 2011 Hackett Business Services Skills and Talent Performance Study Global business services (GBS) Overview & Trends 15

16 The mix of talent management practices used changes in each stage of GBS HR practices (Used to a high extent) Stage 1 Stage 2 Stage 3 Job rotation within GBS 31% 54% 23% 46% 50% Bonus tied to company performance 45% 46% 40% 51% 50% Flexible working practices 22% 42% 21% 23% 50% Opportunity for advancement in positions outside GBS through career planning 12% 38% 9% 26% 13% Bonus tied to GBS performance (e.g. productivity, quality, or productivity) 25% 38% 16% 38% 50% Job rotation outside GBS 8% 23% 7% 11% 25% Virtual work practices (work from home) 11% 17% 13% 5% 38% Peer World Class Global business services (GBS) Overview & Trends 16

17 Offshoring levels across functions are still lower than most would expect Onshore vs. Offshore delivery of transactional services by Function across GBS maturity stage 44% 80% 74% 86% 83% 91% 89% 76% 70% 70% 80% 56% 20% 26% 14% 17% 9% 11% Small sample 25% 30% 20% 30% Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Finance HR Procurement IT % of activities delivered offshore by GBS maturity stage % of activities delivered onshore Transactional Finance Cash Disbursements, Revenue Cycle, General Ledger Accounting & Reporting) Transactional HR Employee Data Management, Payroll Administration Transactional Procurement Supply master data mgt, Requisition & PO processing, Receipt Processing Transactional IT Infrastructure mgt., Infra. Development, Application Maintenance, End-user Support Source: The Hackett Group s annual Global Business Services (GBS) Performance Study, 2014 Global business services (GBS) Overview & Trends 17

18 SSC/BPO distribution in CEE Poland Czech Republic Hungary Slovakia Romania Latvia Lithuania Bulgaria Estonia SSC BPO Global business services (GBS) Overview & Trends 18

19 Companies have been producing productivity improvements, and utilizing off-shoring but wage arbitrage is an ending game! Global business services (GBS) Overview & Trends 19

20 Automation remains the single largest optimization potential AP Transaction $1,63 Offshore 27% $2,23 Automate, Reengineer $5,17 Offshore 57% 32% $3,50 Automate, Reengineer 53% $1,63 70% Offshore, High automation World-class, (30% Offshore, High Automation) Peer, (20% Offshore, Low Automation) 70% Offshore, Low automation 70% Offshore, High automation % Transformation opportunity % Labor arbitrage gap Global business services (GBS) Overview & Trends 20

21 Both top performers and peer have a hybrid sourcing model in place for business services Sourcing Mix Top performer Sourcing Mix Peer 35% 38% 37% 38% 27% 24% Captive onshore Captive offshore Outsourced Captive onshore Captive offshore Outsourced Source: GBS effective sourcing performance study, 2013 Global business services (GBS) Overview & Trends 21

22 Main take-aways as summary.. 1. Globalization keeps us busy in improving efficiency and effectiveness the pendulum swings back and mature organizations require both 2. Multi-functional GBS is the model of today and the model of the future 3. Hybrid sourcing and progressive placement are becoming the norm 4. Multi-dimensional is the holistic view of tomorrow: ops cost, cash, risk and spend 5. The journey is about using technology to eliminate work higher productivity requires higher standardization as prerequisite Global business services (GBS) Overview & Trends 22

23 Finance - Insights from the Leaders and Performance Assessment Appendix

24 Profile: Tom Bangemann A must have tool and reference source Axel Hesslenberg, Head of Shared Services, Novartis Consumer Health ISBN: Shared Services in Finance and Accounting offers a route-map to implementing your shared service program. Comprehensive theory is fully supported by handson practice and case studies involving some of the world s leading organizations and enriched with real metrics and KPIs. Shared services work, and this book shows you just how to achieve the same results. Thought Leader of the Year First of all, I don t know what to say. I was very surprised and feel humble about winning this prize. I would like to thank our partners. I think shared services is a team sport. I was making a joke about our customers, what should we have done without our customers? Of course, they are our partners and we do have some advisors in the audience as well. I d like to thank The Hackett Group and in particular Tom Bangemann and Martin Wolleswinkel who have been supporting us throughout the years with best practice advice, consulting support, benchmarking.. Hans Jakob Hegge, SVP Global Business Services, StatoilHydro at IQPC SSWeek Awards Ceremony receiving prize for BEST OVERALL SSC, Budapest April 2009 Winner: Tom Olavi Bangemann Vice President Business Transformation, The Hackett Group Judges comment: 'Tom needs no introduction. He has served as an exemplary member of our industry, and stands out by his passion to do whatever it takes. It s all about heart, connectivity and passion and Tom has it all.' Global business services (GBS) Overview & Trends 24

25 The Hackett Group enabling world-class performance through a factbased approach to consulting Profile & Mission The Hackett Group is an IP-based consultancy focusing on enabling G&A performance improvement through leveraging our intellectual capital, based on over 7,500 benchmarks and performance studies Approach More than 20,000 performance metrics More than 1,900 best practices Best practice process flows and configuration guides We help clients to measure current performance compared to peers and World Class performers We identify project opportunities and develop a business case leading to an actionable roadmap, supported by a Transformation Management Office We implement recommended change and empower our clients to improve the organization, processes and the culture that enable agility, leading to sustainable growth BENCHMARKS BEST PRACTICES INTELLIGENCE CENTER PERFORMANCE METRICS BEST PRACTICE PROCESS FLOWS BEST PRACTICES SOFTWARE CONFIGURATION PROVEN STRATEGIES WHICH REDUCE RISK & ALEO PharmaLERATE BENEFIT REALIZATION Results Sustainable performance improvement leading to an agile enterprise with lower costs, higher quality and better margins HIGH LEVEL ROADMAP DETAILED PROCESS DESIGN PROCESS IMPLEMENTATION Global business services (GBS) Overview & Trends 25

26 Hackett s Intellectual Capital is derived from engagements with the world s leading companies 97% of the Dow Jones Industrials 80% of the Fortune % of the Dow Jones Global Titans 80% of the DAX 30 49% of the FTSE % of the CAC 40 Global business services (GBS) Overview & Trends 26

27 Hackett has a full SG&A taxonomy Sales, General & Administrative Scope (SG&A) Finance Cash Disbursements Revenue Cycle General Accounting and External Reporting Tax Management Treasury Management Compliance Management Planning & Performance Management Business Analysis Function Management Information Technology Infrastructure Management End User Support Infrastructure Development Application Maintenance Application Development & Implement. Quality Assurance Risk Management IT Business Planning Enterprise Architecture Planning Emerging Technologies Function Management Human Resources Total Rewards Administration Payroll Services Data Mgmt., Reporting & Compliance Staffing Services Labor Relations Workforce Development Services Organisational Effectiveness Total Rewards Planning Strategic Workforce Planning Function Management Procurement Supply Data Management Requisition and PO Processing Supplier Scheduling Receipt Processing Compliance Management Customer Management Sourcing Execution Supplier Management and Development Sourcing & Supply Base Strategy Function Strategy & Performance Management Function Management Sales Sales Execution Sales Operations Planning and Strategy Function Management Service Order and Contract Management (OTC) Service Execution Service Operations Planning and Strategy Function Management Global Business Services Service Strategy Service Design Service Transition Service Operations Continual Service Improvement GBS Contact Centre Plus any other process executed inside the centre Marketing Marketing Communication Brand and Product Management Planning and Strategy Market Research and Analytics Function Management Executive and Corporate Services Administrative Services Travel and Transportation Services Real Estate & Facilities Management Government Affairs Legal Quality Management Risk and Security Management Corporate Communications Planning and Strategy Executive Office Capture FTEs and Costs as defined regardless of where they are organizationally located Global business services (GBS) Overview & Trends 27

28 End-to-end process management is foundational Purchase-to-Pay End-to-End Process Management Purchase-to-Pay End-to-End Process Scope Purchase Pay (Settle) Process groups Supply data management Req. & PO processing Supplier scheduling Receipt processing Invoice processing Settlement Compliance management Process participants AP Procurement Business Unit Business Unit AP Procurement Business unit Legal/Contracts Supply chain planning Treasury Treasury Logistics/Operations Controller IT Quality Risk mgmt. Source: The Hackett Group Global business services (GBS) Overview & Trends 28

29 Contact Information Tom Bangemann Senior Vice President Business Transformation Telephone I Amsterdam Atlanta Frankfurt Hyderabad London Miami New York Paris Philadelphia San Francisco Sydney Global business services (GBS) Overview & Trends 29

30 Corporate Headquarters 1001 Brickell Bay Drive 30th Floor Miami, Florida TEL: Amsterdam Camerastraat BB Almere Amsterdam TEL: Atlanta 1000 Abernathy Road NW Suite 1400 Atlanta, GA TEL: Chicago 525 W. Monroe Street Suite 1550 Chicago, IL TEL: Frankfurt Torhaus Westhafen Speicherstrasse Frankfurt am Main TEL: Hyderabad /112/88&89 1st Floor, Aparna Crest Road #2, Banjara Hills Hyderabad TEL: London Martin House 5 Martin Lane London EC4R 0DP TEL: New York 110 Wall Street 17th Floor New York, NY TEL: Paris 8, rue de Port Mahon Paris TEL: Philadelphia 225 Washington Street Conshohocken, PA TEL: San Francisco 100 Montgomery Street Suite 2225 San Francisco, CA TEL: Sydney Suite Lime Street Sydney, NSW2000 Australia TEL: (within Australia) TEL:

31 Statement of Confidentiality and Usage Restrictions This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group. Global business services (GBS) Overview & Trends 31