Procurement can be top of mind for chief financial officers (CFOs) in a world where businesses must be vigilant about cost cutting to have sufficient resources to pursue growth opportunities.
According to Deloitte's latest Global Chief Procurement Officer Report, 78 per cent of procurement leaders say cost reduction is among their top priorities this year. At the same time, 58 per cent say identifying new products and markets is their main concern.
Many procurement and finance leaders also recognise there are potentially significant systemic risks in the global economy that could stymie any growth plans.
Deloitte's report names these top three potential threats this year: trade negotiations such as those associated with Brexit; geopolitical risks in emerging markets and the Middle East; and a slowdown in China.
In the report, Deloitte UK's chief economist Ian Stewart noted CFOs are more focused now on controlling costs than they have been at any time in the last eight years.
“Despite this, they are more optimistic today than they have been in the last two years and perceptions of uncertainty are far lower than during the euro crisis and following the EU referendum," he stated.
Changing landscape
David Fincher, Partner - Finance and Performance Management at EY Australia, says there are several emerging trends in shared services that CFOs might consider.
When it comes to new technologies, Fincher says intelligent automation has progressed far beyond what he calls 'unattended desktop robotics.'
He says most procurement teams have already automated transactional and manual processes. For example, automated prompts may already direct staff to perform certain tasks that need to be done by humans and not by robots - such as calling a debtor to chase payment.
Fincher says shared services functions are adopting cognitive automation so that decision making becomes more efficient, by using technology to recommend the best course of action in a situation. This combines robotised processes with analytics and a decision engine, to apply a level of judgement to the process. For example, data generated about how services are delivered could offer valuable insights into how to help make faster and more effective decisions.
“It's not just a set of rules, the technology learns based on the patterns in the data. That's where we're moving and it's very exciting," Fincher says.
Another trend is the rise of global business services. This marks a shift away from simply moving some roles to low-cost overseas centres. Global business services are more about integrating end-to-end processes and involve highly mature process ownership.
“It's all about leveraging a shared infrastructure to deliver a consistent customer experience," says Fincher.
Global business services can offer the ability to easily integrate new firms into the model, whether they are acquisitions or start-ups. “They are focused on creating value in all its forms in the organisation," he explains.
Main models
There are three main shared services models: captive, hybrid and outsourced.
1. Captive, in-house model
The captive model is best suited to organisations with significant global scale with at least 500 people in the business.
It's also sometimes used by businesses in countries where there is the potential for backlash from outsourcing offshore.
“The other reason organisations maintain a captive model is to manage the customer experience or maintain access to intellectual property, or if they feel they need to have complete control. But it's still important to have scale," says Fincher.
2. Hybrid model
Organisations typically use the hybrid model if they have mature relationships with an external shared services provider and can manage those relationships well.
Fincher says that a hybrid model can be a stepping stone from a captive to a fully outsourced model as it often offers flexibility. “If you want to maintain some control over certain differentiating processes or over the customer experience you can do that for key processes. But for other, very routine non-differentiating processes, you can work with a third party," Fincher explains.
3. Outsourced model
Fincher suggests that 'speed to value' can often be the impetus for a fully outsourced model.
“If you embark on an outsourced approach, it's likely you're highly committed to making that work. The business will be pushed very hard by the partner you have chosen to deliver value faster than if you had executed a similar model yourself. The outsourced model drives a benefits case and allows the business to reinvest some of those benefits in improving the firm," he adds.
A lack of scale could also be a reason a business may fully outsource services. “If you don't have the scale, then a third party could help give you that scale," says Fincher.
Access to the right skills to manage an offshore shared services centre is another possible reason for outsourcing, says Fincher.
“Shared services firms have highly mature, offshore infrastructure their clients can leverage immediately, rather than build their own," he explains.
Offshoring could also help businesses transform their services more effectively and faster than they might be able to achieve on their own.
New trends drive resources management
Proper service management can be an ongoing challenge for many businesses. This could be especially true when an organisation is rethinking the way the business and its employees access shared services.
In an environment where proper resource management often has a direct impact on the bottom line, the ongoing focus is to consider how shared services innovations could build capability in the business. The challenge for CFOs is to establish which model is most suitable for their organisation to help find efficiencies, keep costs down and drive profits.
Key Takeaways
- CFOs are pursuing cost cutting and growth strategies in tandem.
- Global business services is a new model that is emerging as best practice.
- Automation is the new frontier for shared services.