Shared services: should we go hybrid?

Shared services: should we go hybrid?

I get lots of questions about the difference between BPO and SSC, so I’ve put together a simplified answer to help you out. Could the hybrid model be the way to go?

When large organisations grow, relocate, merge, acquire, or even consolidate different entities, typically there are two options on how they manage their operational processes.

The most popular option is a Shared Service Centre (SSC), however more and more organisations are now exploring the Business Process Outsourcing (BPO) model.

The difference between Shared Service Centre’s and Business Process Outsourcing is that an SSC is an internal function of an organisation, and a BPO is typically an outsourced provider based offshore, and an external solution.

Business process outsourcing

BPOs tend to offer greater productivity due to technology, process and advanced systems and AI. With labour costs in these locations offering a more cost-effective solution in the long run, however the initial set up of an outsourced model can be costly initially, but over time will see a ROI.

This can be setup quickly and effectively, however, as long as your process isn’t completely unique, as BPOs tend to offer a more ‘one size fits all’ model.

The most popular locations for a BPO is India, Philippines and Central-Eastern Europe and SSCs most popular locations such as Europe and USA. With lower labour costs, and huge talent pools, it is an effective and more cost-effective solution when done right. With a BPO, you wouldn’t need to hire, train and retain your staff, but simply move into this model, and become operational in a short period of time.

BPO offers organisations scalability and opportunity for growth, as most tend to offer a 10-20% cost reduction to an SSC model.

Whilst, outsourcing can be implemented more quickly, not all vendors can offer the same quality service as an SSC. For example, if the vendor is based in Eastern Europe or Asia, Language barriers could also affect the quality of the deliverables.

Shared service centres

The SSC model offers a more bespoke solution and tend to give a company the ability to run systems like an internal service provider, allowing it flexibility. Companies make efficiencies through process standardisation, technology improvements and centralisation of services.

The SSC model offers more control over decisions, enabling a better service to the customers, suppliers and internal users.

A Shared Service Centre can closely monitor the performance and quality of the work done, which gives more control over the service being offered, however, having to install and maintain a new infrastructure can be costly, let alone having to train the employees.

The hybrid model

The big one – the hybrid model – is when organisations may opt in for both solutions and use a combination of both. Combing different models to ensure you are working towards the organisation’s goals, with lower risk activities such as Cash Allocation, Accounts Payable Processing and Reconciliations tend to be offshored. There is less room for error with these tasks and involve more processing than communication.

Typically, their more administrative functions and processing work would be outsourced, and the more strategic responsibilities are kept in house. This has many benefits – you’re getting the best of both worlds and in house and outsourced teams are a partnership and therefore work together for better results.

It’s a new buzz in the industry, but could the hybrid model be the future?

If you would like to discuss further, email me at sam@refind.co.uk.

You can view more about Sam Perry our Shared Services Executive Search expert here.

Why won’t top performing shared service professions join your business? And what to do about it. Download our free eBook here.  

Shared Services vs. Business Process Outsourcing – who will survive?

Shared Services vs. BPO

There has long been an argument between Shared Services and Business Process Outsourcing (BPO) – is one better than the other? I think both have their merits. However, in the evolving world of shared services and outsourcing, will one become extinct?

BPO is the process of engaging a third-party vendor with the right skills and resources, to carry out work on your behalf.

Shared Services relates to the creation of an autonomous business unit, based on-site, which carries out these processes for multiple functions within an organisation (HR, Finance, procurement).

The services that BPO and Shared Services provide is generally to remove manual, operational and often repetitive tasks out of your everyday work.

Business Process Outsourcing

BPO is often thought to be more efficient, due to it having better systems and processes. It is frequently based offshore, so labour costs and overheads can be significantly lower than having this service in-house.

Outsourcing can often be implemented quickly and more effectively, due to the experience of the resource within these companies. The transition to an outsourced model may not offset the savings you make and the increase in the quality of the work you receive.

Feedback is often that BPO can be seen as ‘faceless’ or lacking the human approach that people sometimes want from these services and in a world where employee engagement and experience is paramount, this can cause real issues.

Shared Services

Shared services can be a better solution if your needs are bespoke. BPO can often be one size fits all, and if you have requirements that are specific and processes that aren’t bog standard, then a shared services model may be the best choice.

However, the implementation of a shared services function within a business can be slow and painful. More often than not this is due to lack of experience internally to deliver this and if systems, processes and data are not clean and efficient, the service will fail.

If the service fails, it can be hugely damaging to employee engagement and if people aren’t engaged to use the service, then they will revert to old habits, rendering the service useless.

Is there a place for both?

People seem to believe that in the long term, only one of these will survive. My opinion is that there is a place for both. If you have high volume of standard processes which need carrying out without knowledge of internal factors or processes, then BPO is probably for you.

However, if you have unique processes and you have the time, money and resources to do this properly, then shared services is the best option.

Before you decide whether to implement a BPO or Shared Services model, you need to do a thorough diagnostic on your business and ask yourself the following questions:

  • What the end goal is for your organisation in changing to a new service delivery model? If it is purely to save money, then shared services isn’t for you.
  • Do you have management engagement and support?
  • Are your systems, processes and data fit for purpose?

Once you have the answers to all of these questions, you should be able to make an informed decision.

So, what do you think? Do you think shared services or BPO will become extinct in the long term?

For all things HR Shared Services, change and transformation get in touch with us via the info form below, and if you would like to feature in our ‘Insiders Story’ blog, email me on kate@refind.co.uk.

You can view more about Kate Wass our HR Shared Services specialist here.

Why won’t top performing shared service professionals join your business? And what to do about it. Download our free eBook here.