SAP: Shared Services – The Next Generation

With shared services becoming a proven optimisation strategy for cost, quality and risk, companies are now looking at enterprise software vendors to continue the shared services success story, says Bernhard Fischer of SAP.

Shared shared services (SSCs) have traditionally leveraged labour arbitrage advantages and economies of scale. Despite striking correlation between top performing companies and those operating shared services in a specific domain, SSCs need to look at ways to continue the quest for savings and improvement. There are four major trends that are high on executive agendas with a view to further improvement:

  • SSCs need to own the service delivery platform
  • Leverage a higher degree of business process automation
  • SSCs become multi-functional and service more than one business area
  • SSCs become service aggregators leveraging the right mix of captive and outsourced services

Own your delivery platform

Many SSCs operate on a system landscape introduced before shared services were even conceived. They may include efficiency enablers such as portal solutions, document scanning or automated workflows, but still leave the SSC working on numerous different back-end systems. These back-end systems are often not under the control of the SSC on a day to day basis or in terms of long-term investments or optimisation. The control of the physical system is of secondary concern in this matter. Key to the success of the shared services concept is the ability to directly influence underlying business processes.

The concept of the shared services delivery platform is where the SSC defines processes and technology. It is, therefore, key for ensuring delivery against service level agreements (SLAs) and for investment decisions. The more the SSC can attract processes that were previously decentralised, the bigger its scale effects will be. When absorbing such processes, shared services owners need to balance cost and resistance to change against the incremental benefits of centralisation, as a combination of process harmonisation and system consolidation offers maximum savings.

If the SSC wants to withstand competition from BPO providers, it has to employ the same operating principles as external players. Platform ownership and the authority to take business-driven decisions is one of these principles.

Leverage business process automation

Business parameters for labour arbitrage-focused shared services delivery have become increasingly difficult due to the development of labour markets in offshore locations.

Companies are now looking at long-term strategies for captive delivery, with the automation of previously manual process execution providing a convenient escape route for SSCs.

One principle is to identify the incremental services that can be bolted on to the business processes used by clients. These ‘bolt-on services’ will be similar or identical for all internal clients. Examples of these services include automation of invoice reception and automation of follow-ups on due items, among many others. In designing automation, exception handling needs to be considered. Problems, such as customers disputing invoices, require defined mechanisms in order to be detected early and processed efficiently.

When designing process automation, the separation of service provision and service consumption requires extra communication. This additional communication, if left unmanaged, could easily destroy any savings achieved by process automation. The periodic exchange of items-to-be processed, process results, master data changes, service reports and approval workflows must also be considered. Most administrative processes involve huge amounts of paper. Despite efforts to substitute paper with electronic communication, the total volume of processed paper is increasing. The SSC is ideally placed to reverse this trend as automation investments need to be made only once. Investments in paper automation, however, will still pay off for the foreseeable future.

These investments include scanning, paper-to-digital-conversion (OCR/ICR), archiving and document searches. Effective methods of communication not only offer a great potential for cost reduction; they also define the face of the SSC to its internal/external clients and suppliers. For example, the introduction of a problem tracking solution at a large global electronics manufacturer reaped HR cost improvements of 30% - the platform cost being a single digit fraction.

Multi-functional shared services

The lines of separation between the streams of SSC activities have never been as strong as is commonly believed. We find payroll and travel expense management frequently attributed to HR as well as to finance SSCs. Procurement and associated invoices are at times attributed to finance SSCs, other times to procurement SSCs. The list of examples could be expanded with asset management or real-estate management.

Seen from the perspective of end-to-end business processes, there is no particular need to draw strict boundaries so long as the service provision addresses the right constituent with the expected level of professionalism.

Multi-functional shared services are consequently becoming more prevalent. The service delivery platform needs to cater for the expansion of the shared services model into additional lines of service – into multi-functional shared services. Multi-functional shared services offer several opportunities to leverage synergies between the service delivery streams – notably in the areas of document handling, communication/ self-service portals, workflow control, governance infrastructure and master data management/identity management.

Typical investments into multifunctional shared services concerning communication will go towards call centre infrastructure and self-service portals. Consider the connection between those two. Communication occurs when information has to be retrieved, changed or when questions arise. A large portion of these communication needs can be anticipated and offered as an electronic self-service. But not everybody has access to these means, so a service centre must operate so that it can respond with the same tools available to self-service users.

The mix of self-service and service centre strategy promises the most flexible result, independent of the business area. Owning the service delivery platform will enable the SSCs to continuously monitor the patterns of constituent behaviour across several lines of service and respond with new self-services, additional information, or with investments into process automation. This flexibility is only possible if the SSC has control over its own share of the platform.

SSCs become service aggregators

The portfolio of business services considered by the SSC will always be a mix of highly standardised transactional services and those services that resemble a company’s specifics. For the highly standard portion of the service portfolio, well-run BPO services can be even more efficient than captive shared services due to the even bigger economies of scale.

Instead of perceiving BPO as a threat, SSCs should selectively consider BPO services as one source of service provision and build their portfolio leveraging a mix of captive and BPO sources. The SSC in such a scenario provides the governance infrastructure, governance expertise, service level agreements, reporting tools and presents the services rendered as one portfolio of shared services to its mother company. The mix of captive and BPO services will change over time with new services demanded by the business moving to the SSC, and services previously considered company specific becoming viable for outsourcing. The right mix will always remain the most efficient means of serving the business.

Software enterprise SAP maintains a quality-approved ecosystem of business process outsourcing providers ensuring that it has the solutions, know-how and support required to create sustainable business value for its clients.

SAP solutions for shared services

SAP’s HR solution has been designed for a scenario in which the HR department sees itself as a service provider to employees and managers. The communication mechanisms are designed to ensure that the employee is serviced when needed, with minimum effort from both employee and service provider. SAP’s HR payroll module is designed to provide payroll services to multiple customers, and the HR benefits module complements the aggregator role a SSC can play for a company’s healthcare and pension plans. When the HR SSC is ready to take on talent management, starting with recruiting support, extending into facilitation of training services, SAP’s HR solution can provide essential support for the SSC.

For finance shared services, SAP supports all frequently rendered shared services with its SAP ERP modules Invoice Management, Receivables Management, Intercompany Consolidation and Financial Reporting modules. Recognising the trend to manage finance as a supply chain, SAP offers a set of financial supply chain solutions, namely SAP Collections Management, SAP Credit Management, SAP Cash Management, SAP Dispute Management, SAP Biller Direct and SAP Bank Communication.

SAP provides a platform for the SSC to bill clients in various industry contexts, act as a collection agency and manage disputes related to the outstanding payments. Receivables Management also automates necessary follow-ups. SAP provides a framework of enablers for shared services that spans functional domains, supporting true multi functional Shared Services. The SAP CRM interaction centre uses unique integration points with application processes to ensure efficient communication between the process constituents. A service level management solution enables definition and tracking of business service levels to ensure delivery meets expectations.

SAP runs SAP

In the early 2000s, SAP began its own move to a shared services delivery model. Today, SAP operates six SSCs globally, with regional HR and finance centres located in Singapore, the Czech Republic, Argentina, and the US – with additional locations supporting IT and customer call centres. Additionally, with the Business Objects acquisition, SAP has recently acquired two more SSCs in Dublin and Vancouver, which currently support the Business Objects business.

SAP’s transformation to shared services has not been without challenges but the results have been remarkable. The management of a naturally SAP-based SSC service delivery platform has been one of the keys to its success.

Starting with the SAP system framework and functionality, the project teams defined best practice business process roadmaps for all processes under consideration. This was done by looking at end-to-end business processes, not at traditional functional areas. This process helped define logical splits of responsibility between the SSC and the local country, and also identified which technology enablement would be most suitable.

What emerged was the underlying framework of SAP’s SSC delivery platform, which governed the implementation process and subsequent service level agreements between the SSC and its internal customers. These process roadmaps also helped define the approach for the country by country roll-in to shared services, which was managed in clusters of countries and processes over time.

In the most mature SSCs (Singapore and Europe), scope has been increased significantly, strengthening the position of the SSC in the global organisation and establishing those centres as significant business partners in the SAP community. This approach has helped position the centres as key resources for many business needs. Today, SAP's SSCs have a strong input into the service delivery platforms and have a say in investments in associated technologies.

Bernhard Fischer of SAP.
How can an organisation transform its shared services into a next generation model?