Blogs - Transformation Solutions
| Adjusting the Operating Model for SSCs |
| By Daniel Wollenberg on 2/8/2010 1:10:55 AM |
Shared Service Centers (SSCs) were originally established to deliver low risk transactional processes. But as companies move up the SSC maturity curve, their ability to embrace globalization, appetite for performing a broader range of processes, and their interest in implementing models which are more ‘risk proof’ and sophisticated will advance. As a result, adjustments in the traditional SSC model will also be necessary.
Here are some “adjustment” scenarios that will matter.
1.Changing the organizational construct from shared management to shared utility
Most SSCs were designed to benefit from a ‘shared management’ structure, typically aligning common functions under a single span of management control in order to alleviate some cost. Few actually implemented more evolved ‘shared utility’ models, in which a single functional group delivers a macro work stream across business lines or customers, using a common, consistent process.
The shared utility model not only takes advantage of volume, but typically delivers significant quality improvements and cost savings by reducing redundancies. It is most effective when implemented in situations with high transaction volumes that are relatively consistent in form, and have a low degree of variability. It is most successfully deployed only after the SSC is established.
As an example, in 2006, WNS established a SSC program for a risk advisory company, initially consolidating finance and accounting processes into global locations under a shared management structure. This resulted in operating cost reductions by as much as 40 percent, a 31 percent increase in productivity, and process improvements in areas such as reconciliation by as much as 60 percent. The program's second wave is now focused on obtaining additional operating savings of 20 percent by realigning the functions in existing centers into a shared utility.
2. Moving to a blended sourcing model
Once a SSC has captured the initial benefits of consolidation, standardization, and labor arbitrage, implementing some degree of business process outsourcing (BPO) gives an organization the opportunity to leverage the scale offered by a third party’s ability to innovate, imbed new technology and invest in improvements.
An outsourcing strategy can be deployed in several ways. If there is pressure to further reduce the cost of existing processes within the SSC's scope, moving transactional processes offshore, and leveraging the provider's lower cost location represents a solution. If capacity or volume peaks and valleys are issues, the provider's ‘extended enterprise’ instantly delivers without a corresponding increase in capital investment. A BPO provider may also deliver a broader range of services than the SSC, allowing management to shortcut the development of these functions.
As an example, WNS implemented a transformation program for a global multi-line insurer that yielded significant incremental benefits: a 43 percent reduction in transaction processing time, and a 23 percent increase in customer satisfaction. Through a formal continuous improvement program that could not be developed under the SSC model, the implementation of Six Sigma projects yielded added benefits including USD 1.4 million in increased collections each month and a reduction in the claim lifecycle by 65 days.
As companies strive to move up the SSC maturity curve, adjustments in resourcing and processes must take place in the models upon which the SSCs were originally structured. |
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