Summary Report: Vertical Industry Strategies for Shared Services and Outsourcing Survey

Report: March 2012

A joint study by Shared Services & Outsourcing Network (SSON) and Everest Group

Copyright © 2012, Everest Global, Inc. EGR-2012-0-R-0666

Summary Report Vertical Industry Strategies for Shared Services and Outsourcing Survey


2

Introduction and background

Much of the growth in shared services and outsourcing has been oriented along traditional horizontal functions such as finance & accounting, human resources, and IT. However, with increasing maturation and innovation in strategies, differences across industries are emerging, additionally, vertical functions unique to an industry are increasingly playing an important role

In order to better understand these trends, Everest Group and the Shared Services & Outsourcing Network (SSON) conducted the first-ever survey focused on vertical industry strategies in shared services and outsourcing

The survey covered 28 vertical industries, 8 horizontal functions, and 164 vertical functions. It addressed a wide range of topics including scope, improvement initiatives, sourcing models, and technology strategies

This report summarizes the findings from over 650 responses across enterprises, service providers, and industry influencers

How to learn more Visit the websites of SSON and Everest Group for

more information, including fact sheets with results for specific industries

Results from the survey will be featured at Shared Services & Outsourcing Week (SSOW) events around the world in 2012

China Shanghai 23-25 October 2012 Germany Berlin 20-23 November 2012 India Gurgaon 04-06 December 2012

Australasia Melbourne 16-19 April 2012 Europe Amsterdam 14-16 May 2012 Asia Singapore 04-06 September 2012

www.ssonetwork.com research.everestgrp.com/VISSSO-survey

http://www.ssonetwork.com/

http://research.everestgrp.com/VISSSO-survey


3

Table of contents (page 1 of 2)

Section I. Executive summary 5 Executive summary 6 Snapshot of key analyses 7 How to interpret this report 8 Section II. Overview of shared services and outsourcing strategies 9 Summary 10 Success, maturity, and focus on cost 11 Centralization and sourcing model 13 Improvement initiatives, ability to change, and SaaS 17 Section III: State of traditional horizontal functions 20 Summary 21 Scope 22 Delivery model, offshoring, and technology 23 Section IV: Variations by industry 26 Summary 27 Scale and sourcing model adoption 28 Horizontal and vertical function adoption 30 Improvement initiatives for vertical functions 34

Topic Page no.


4

Table of contents (page 2 of 2)

Section V. Different approaches used by mature organizations 35 Summary 36 Profile of mature organizations 37 Improvement initiatives 40 Scope of F&A 41 Section VI. Perspectives of service providers and influencers 42 Summary 43 Service provider industry focus and growth 44 Sourcing model trends 45 Alignment of investments to improvement initiatives 46 SaaS/cloud adoption expectations 47 Influencer views on service provider gaps 48 Appendix About the survey 49 Glossary of key terms 50

Topic Page no.


5

Outline

Executive summary

Overview of shared services and outsourcing strategies

State of traditional horizontal functions

Variations by industry

Different approaches used by mature organizations

Perspectives of service providers and influencers


6

Executive summary

With the increasing maturation of shared services and outsourcing, many organizations report that their programs are successful and able to consistently meet financial objectives

However, far fewer organizations consider themselves to be mature in comparison to their peers and most are still primarily focused on process improvement over other sources of value

Further, most shared services and outsourcing groups are more oriented towards traditional horizontal functions such as F&A and HR rather than vertical functions, which are closer to the core business activities

In order to deliver the required results, organizations primarily favor a shared services model. Many organizations also state a bias for a “best-fit” sourcing model, but this is not demonstrated in reality

Finally, although many respondents indicate technology is a key initiative, they are generally not yet convinced that it is appropriate to adopt SaaS/cloud technology models


7

Snapshot of key analyses

Financial and value management Percent of respondents agreeing with statement

Representation of horizontal and vertical functions Average number of functions included

Shared services and outsourcing adoption by industry Relative focus of respondents by maturity level Percent of respondents

62

76

87

Cost reduction is the most important objective

Consistently meet financial objectives

Business cases include value beyond cost savings

3.4

3.3

2.1

1.2

Services industries

Product industries

Horizontal functions

Vertical functions

48

31

Collaboration with business users

Successfully implement change

57

12 Less mature

Mature

1.5

2

2.5

3

3.5

1.5 2 2.5 3 3.5 4 4.5 5Extent of shared services

Exte

nt o

f thi

rd-p

arty

out

sour

cing

Above average adoption of shared

services and outsourcing

Below average adoption of shared services and outsourcing

Below average adoption of shared services and above average for outsourcing

Above average adoption of

shared services and below

average for outsourcing

Average outsourcing adoption

Average shared services adoption

Capital markets

Oil & gas

Hi-tech

AutomotiveGovernment

Freight & logistics

Industrial products

CPG

Healthcare payers

Travel & transportation

Media & entertainment

Insurance

Chemicals

Retail

Banking

Utilities

TelecomEngineering &

construction

Information services

Life sciences

Healthcare providers


8

How to interpret this report Key definitions and visual conventions

Key definitions Improvement initiatives: Questions about seven

improvement initiatives were asked for each function (horizontal and vertical functions), and also asked about in aggregate. These seven include the following: – Increase consolidation/centralization – Reengineer/standardize processes – Implement new tools and technologies – Leverage analytics and business intelligence – Increase collaboration with business users – Increase level of offshoring/nearshoring – Deepen talent pool/expertise

Functions: Business support activities which encompass multiple processes

Horizontal functions: Activities which tend to be similar across industries such as finance, HR, and IT. Eight horizontal functions were covered in the survey

Vertical functions: Activities which are different by industry. Examples include order management in hi-tech, merchandise analytics in retail, and loan and mortgage servicing in banking. The survey covered 164 vertical functions

Visual conventions Many questions in the survey were asked in terms of the extent to which a respondent agreed or disagreed with a statement. Respondents were given seven options to select from and these are shown on charts in this report using the color scheme provided below

In order to draw attention to the most important data and summarize key insights, the report uses the standards provided below

Strongly disagree Disagree

Somewhat disagree Neutral

Somewhat agree Agree

Strongly agree

Notable data findings Additional insights


9

Outline

Executive summary







10

Summary of key messages Overview of shared services and outsourcing strategies

Respondents from enterprises report a high degree of success with their shared services and outsourcing efforts, although only a quarter consider themselves mature in comparison to their peers. Further, respondents demonstrate a clear focus on meeting financial objectives while also pursuing sources of value beyond cost savings

IT horizontal services are the most centralized, with vertical functions being the least centralized. Shared services is the preferred sourcing model with “best-fit” as a strong second, although much less commonly adopted when looking in detail at functional approaches

Moving forward, respondents indicate: – The greatest focus on process-centric improvement initiatives and lesser priority being placed on

analytics and offshoring – In order to accomplish these improvements, respondents see their leadership as being effective in

supporting initiatives, but less confident in their effectiveness in executing change efforts – SaaS/cloud technologies vary widely in adoption and many are undecided to slightly biased towards

increased adoption


11

Source: Vertical Industry Strategies in Shared Services & Outsourcing survey, January-February 2012

Although over 60% of the enterprise respondents consider their efforts to be successful, only 26% feel confident that they are mature in comparison to their peers

Level of agreement with statement Percent of enterprise respondents

1

6

5

12

18

10

17

13

20

17

11

19

20

26

33

24

15

13

9

11




Strongly agree

Our shared services and/or outsourcing program is generally

considered to be a success

In comparison to other organizations, we are mature users of shared


In comparison to other organizations, our strategy for shared services and

outsourcing is clear and well-conceived

Larger organizations demonstrated a tendency to perceive themselves as successful and mature in comparison to peers


12

Three-quarters of enterprises meet their financial objectives. Surprisingly, almost 90% respondents reported including sources of value other than cost in their business cases



1

2

1

1

3

6

1

3

6

16

3

8

14

14

8

17

20

30

23

29

34

22

45

33

22

10

19

9




Strongly agree

We consistently meet our financial objectives

We regularly refine our objectives to target new sources of value

Cost reduction is the most important objective for our shared services

and/or outsourcing strategy

In addition to cost savings, we consider other sources of value in our

business cases

The comparatively low portion of respondents who indicated cost reduction as the most important objective suggests that increasing maturity has led to broader value propositions


13

15%

9%

4%

10%

5%

39%

30%

19%

31%

32%

23%

28%

32%

27%

40%

23%

33%

45%

32%

23%

Vertical functions

Horizontal F&A, HR, procurement

Aggregate across functions

Not centralized

Somewhat centralized

Mostly centralized

Percentage of enterprise responses


Centralized

Horizontal IT functions

Overall philosophy

Break-out of functional answers

Sentiment independent of function

Aggregate of over 1,000 functional answers

IT functions are the most centralized at 77%, comparatively almost half of the vertical functions are centralized – which is not far from the overall philosophy of organizations

Within the vertical functions, product-oriented industries were twice as likely to have decentralized delivery as services industries


14


Most organizations prefer shared services, with “best-fit” in a strong second position – and both expected to grow

Roughly 80% of the respondents expect to grow their use of shared services and/or outsourcing. Only one percent expect to reduce the efforts, with 19% anticipating no change

Enterprise sourcing model preference Percentage of enterprise responses

Future sourcing model trend Percentage of enterprise responses

7%

47%

7%

39%

Retain in business

Prefer shared services

Prefer third-party outsourcing

Best-fit (either shared services or outsourcing based upon

situation)

45%

12%

23%

19% Increase shared services

Increase third-party outsourcing

Increase both third-party

outsourcing and shared services

No change

Reduce shared services and outsourcing (1%)


15


Although respondents from shared services organizations most heavily favored shared services, all respondents indicated a similar preference for “best-fit” sourcing


7% 6% 8%

47% 56%

33%

7% 18%

39% 38% 41%

All respondents Respondents in shared services/captives

Others

Best fit

Prefer internal shared services/captives


Retain in business

Although a high portion of respondents in the “Others” category have responsibility for vendor management and other outsourcing roles, less than 20% indicate that outsourcing is the preferred sourcing model


16


Only IT functions which are much more centralized come close to matching the overall sourcing model philosophy


“Best-fit” sourcing philosophy is common, but seldom matches reality – and being adopted less than half as often as the overall philosophy suggests

7% 17% 15%

24% 9%

47%

57% 65% 55%

47%

7%

6% 7%

14%

39%

18% 14% 14% 30%

Overall philosphy Aggregate of functional answers

F&A, HR, procurement horizontals

Vertical functions IT infrastructure & applications horizontals

Retain in business


Best fit

Prefer outsourcing


17

Process-centric improvement initiatives are rated as highest priority

78

53

50

38

28

19

13


Reengineer/standardize process

Increase consolidation/ centralization

Implement new tools and technologies

Increase collaboration with business users

Leverage analytics and business intelligence

Increase offshoring/nearshoring

Deepen talent pool/expertise

Process-centric levers for improving

Percentage of enterprise responses rating as a top 3 priority

Consistent with other areas of the survey, offshoring received modest focus as being an important lever for capturing more value


18

Most organizations believe that their leadership is effective in supporting initiatives, but only a quarter of them express confidence in their effectiveness in executing change



2

3

6

6

14

18

12

15

25

31

28

21

13

6




Strongly agree

We are effective in executing our change management plans

Our senior management is effective in supporting shared services and/or

outsourcing initiatives

Confidence in ability to effectively execute change varies significantly by maturity (see later section for more details)


19

Current use of SaaS/cloud technologies is broadly distributed and neutral on future plans, with a slight bias towards increased adoption



16

11

20

8

7

4

23

38

15

19

17

17

2

3




Strongly agree

We plan to significantly increase the use of SaaS/cloud technologies

We are currently using SaaS/cloud technologies for some functions

The hi-tech and travel & transport industries indicate a greater interest in these new technology models, in contrast to more regulated or information-sensitive industries (e.g., banking, healthcare)


20

Outline

Executive summary







21

Summary of key messages State of traditional horizontal functions

The survey included a deep-dive into the traditional horizontal functions of F&A, HR, and procurement

Although judgment-intensive processes are less commonly included, the representation is generally a third-to-half of the respondents

Additionally, respondents indicated a strong bias for pursuing new sources of value through changes in delivery model such as end-to-end approach in F&A, core spend in procurement, and self service and mobility in HR

By contrast, respondents were more mixed in their use of offshoring and nearshoring, with a wide distribution of approaches

Similar to overall adoption of new technologies, respondents are often undecided on the role of SaaS/BPaaS in their F&A, HR, and procurement strategies – with HR demonstrating a greater openness to new technologies


22

Across horizontal functions, adoption of transaction-intensive processes outpaces judgment-intensive processes


Two-thirds of the enterprise survey respondents included F&A, whereas only half the respondents included HR and procurement. IT infrastructure, IT applications, and contact center were included by nearly 33%, while knowledge services was included by only 20% of the respondents

Inclusion of processes in horizontal functions Percentage of enterprise respondents answering for function

93

82

82

74

50

53

47

35

33

30

Accounts payable

Account receivable

General ledger

Fixed assets

Tax

Management reporting

Regulatory

Budgeting

Treasury/risk

Internal audit

F&A

66

63

63

53

56

52

50

38

Procurement

86

81

76

61

49

45

43

38

38

34

Human resources

Employee data

Payroll

Benefits admin

Recruitment

Learning

Compensation

Performance management

Mobility

Regulatory

Employee relations

Day-to-day purchasing

Accounts payable

Vendor management

Catalog management

Spend analytics

Strategic sourcing

Compliance

Category management

Transaction-intensive Judgment-intensive


23

Enterprises are pulling advanced value levers to further optimize horizontal functions



4

5

12

19

4

15

10

2

12

16

4

26

19

31

19

23

35

12

8

24




Strongly agree

F&A Approach to F&A shared services and

outsourcing is end-to-end process driven (Order-to-Cash, Procure-to-Pay, Record-to-

Report) as opposed to function driven

HR A key focus for our HR services is to increase

self-service and mobility

Procurement Beyond indirect or non-core spend, direct spend

(or core spend) is increasingly managed by our procurement shared services and/or outsourcing

The most common improvement initiatives for capturing more value (e.g., centralization/consolidation, standardization/reengineering, offshoring/nearshoring, tools and technologies) are also pursued more frequently in horizontal functions than vertical functions


24

A quarter of enterprises utilize offshoring as a key component of service delivery for horizontal functions. However, a slightly greater portion indicate the opposite



13

13

12

17

16

25

9

10

6

21

23

22

12

14

11

22

21

19

6

3

5




Strongly agree

F&A

HR

Procurement

Among all 28 industries analyzed, respondents from government, utilities, and healthcare providers had the lowest level of offshoring while banking, insurance, and life sciences had the highest level of offshoring

Offshore and nearshore delivery is a key

component of service delivery strategy


25

Similar to overall views on SaaS/cloud, many organizations are undecided on newer technologies even in horizontal functions



18

15

10

23

16

20

7

9

4

35

41

38

10

9

15

7

10

9 4




Strongly agree

F&A

HR

Procurement

HR is the function most open to new technologies, which is also reflected in market offerings

Our technology strategy for involves significant

leverage of Saas/BPaaS based solutions


26

Outline

Executive summary







27

Summary of key messages Variations by industry

Looking at the responses across industries, several key themes emerge regarding scale, the level of adoption, and approaches

Retail & hospitality, financial services, and healthcare segments report the largest shared services and outsourcing programs. In all industries, the relative level of adoption of shared services is higher than outsourcing

Services-oriented industries, such as financial services, transportation & logistics, and retail & hospitality, include more vertical functions in their scope than product-centric industries such as manufacturing and energy. In all industries, judgment-intensive processes in F&A are less likely to be included in the scope

The range of vertical functions represented is very broad, tending to mostly reflect customer-related transactional activities and supply chain-related activities. This is further reflected in the types of improvement initiatives being pursued for various vertical functions


28

Healthcare, BFSI, and retail have the largest scale of shared services and outsourcing

Overall scale of shared services and outsourcing Percent of enterprise respondents

73%

66%

69%

45%

50%

29%

32%

41%

13%

10%

18%

21%

24%

22%

14%

7%

12%

19%

11%

7%

6%

11%

14%

5%

7%

12%

5%

7%

7%

13%

18%

21%

29%

30%

32%

Public sector

Manufacturing

Transportation & logistics

Technology & communications

Energy & resources

Retail & hospitality

BFSI

Healthcare

Government, non-profit / NGO, education

Aerospace and defense, automotive, chemicals, consumer packaged goods, consumer durables, industrial products, and engineering & construction

Travel and transportation, freight & logistics

Telecom, hi-tech, and information services

Oil and gas, metals & mining, agriculture, and utilities

Retail, hospitality & tourism

Banking, capital markets, and insurance

Life sciences, Healthcare payers, Healthcare providers

Less than 500 FTEs

500-1,000 FTEs

1,000-2,500 FTEs

2,500-5,000 FTEs

More than 5,000 FTEs



29

1.5

2

2.5

3

3.5

1.5 2 2.5 3 3.5 4 4.5 5

The extent of shared services and third-party outsourcing varies by industry

Extent of shared services and outsourcing adoption by industry Average score on a five point scale for all responses per industry

More than three-quarters of industries report adoption of shared services greater than the mid-point and only two industries report greater adoption of outsourcing than shared services

Extent of shared services

Exte

nt o

f thi

rd-p

arty

out

sour

cing

Above average adoption of shared


Below average adoption of shared services and outsourcing

Below average adoption of shared services and above average for outsourcing

Above average adoption of

shared services and below

average for outsourcing

Average outsourcing adoption

Average shared services adoption

Capital markets

Oil & gas

Hi-tech

Automotive Government

Freight & logistics

Industrial products

CPG

Healthcare payers

Travel & transportation

Media & entertainment

Insurance

Chemicals

Retail

Banking

Utilities

Telecom Engineering &

construction


Life sciences



30

Services industries have a higher representation of vertical functions


Average number of functions

3.6

3.2

3.7

3.0

3.1

3.6

2.6

4.3

2.3

2.3

1.9

1.4

1.4

1.1

1.1

1.0

Banking, capital markets, & insurance

Retail & hospitality

Healthcare payers & providers


Energy & resources

Manufacturing

Public sector

Transportation & logistics

Services industries have more robust mid-offices – which tie more closely to external customer service activities with linkages to financial processes such as billing and account set-up and management

Average = 1.6 Average = 3.3

Vertical functions Horizontal functions


31

Similar to the overall view, adoption of transaction-intensive processes outpaces judgment-intensive inclusion across all industries

Inclusion of F&A processes Percentage of enterprise respondents

Industries that consider F&A to be vertical-specific are less likely to include F&A in shared services and outsourcing initiatives. For example, nearly 30% of the BFSI respondents consider F&A to be industry-specific – highest across all industries. Consequently, BFSI has a relatively lower degree of F&A inclusion in shared services and outsourcing

Judgment-intensive F&A processes

Transaction-intensive F&A processes

41%

30%

46% 39% 39% 39% 42%

33%

65% 66% 70% 73% 75%

84% 85% 93%

BFSI Transportation and logistics

Public sector Retail and hospitality


Manufacturing Healthcare Energy and resources


32

Industry Average number of vertical functions Key vertical-specific functions

Automotive Master data, customer data, vendor data management; asset and inventory management support

Banking Retail banking account open/closure and servicing; loans & mortgage servicing; cards servicing and statement processing; transaction processing

Capital markets Application processing, account servicing; investment operations, order management

Chemicals Master data, customer data, vendor data management

Consumer packaged goods

Master data, customer data, vendor data management; order processing and fulfillment

Education Eligibility and registration

Engineering and construction

Document and record management

Freight and logistics Document processing; billing

Government Records management; application processing

Healthcare payers Claims processing and management; claims adjudication, disbursements, subrogation; member on-boarding, records management; underwriting and risk assessment support

Healthcare providers Revenue cycle management (eligibility, billing, coding, receivables, payer services); healthcare information management (records management, electronic health record)

Key vertical-specific functions in shared services and outsourcing by industry (page 1 of 2)

0.9

2.0

3.0

1.2

1.9

0.8

1.0

1.8

1.0

2.2

1.0



33

Industry Average number of vertical functions Key vertical-specific functions

Hi-tech Master data, customer data, vendor data management; order management and fulfillment

Industrial products Master data, customer data, vendor data management; engineering support services

Information services Sales and marketing support; billing & royalty support

Insurance Underwriting and actuarial data processing and analysis; L&P policy servicing and records management; L&P claims processing and management; eligibility, verification, fraud detection and management

Life sciences Drug discovery and research support; clinical trials and pharmacovigilance administration; distribution planning and analysis, defect handling, and reverse logistics

Media and entertainment

Publishing and distribution management; advertising sales support; subscription and order management

Oil and gas Supply chain planning & support; asset and inventory management support

Retail Logistics and supply chain administration; store operations & property services

Telecom Order management and provisioning; sales and marketing support

Travel and transportation

Operations and fleet administration; records and document management; sales and reservations support

Utilities Meter-to-cash (billing, payment processing, credit and collections); field services and meter data administration

Key vertical-specific functions in shared services and outsourcing by industry (page 2 of 2)

1.2

1.3

2.4

0.8

1.7

0.8

2.0

1.1

2.9

1.1


1.6


34


Improvement initiatives reflect business context of a vertical function

Banking: – Loan & mortgage

servicing – Check

processing, remittances, lock-box

Hi-tech: Order man. and fulfillment

Telecom: Sales and marketing support

Healthcare providers: Revenue cycle management

Manufacturing: Vendor/customer master data management

Capital markets: Order management, investment ops

Freight & logistics: Billing

Information services: Billing & royalty support

Media: Subscription and order management

Manufacturing: Order processing and fulfillment

Healthcare providers: Revenue cycle management

Banking – Loans and

mortgage servicing

– Transaction processing

– Cards servicing and statement processing

Insurance – L&P and P&C

claims processing and management

– Claims adjudication, disbursements, subrogation

Oil & Gas: Asset and inventory management

Manufacturing: – Engineering

support services – Order processing

and fulfillment Hi-tech:

Vendor/customer master data management

Banking: Risk, FX, regulatory, fraud

Retail: Merchandising analytics support

Centralization Reengineer & standardize Offshoring Technology &

analytics

Link to revenue management Transaction-intensive

Link to supply chain / business decisions

Retail: Advertising and marketing support

Manufacturing: Engineering support services

Banking: Commercial banking operations

Insurance – Underwriting and

actuarial support – Claims

adjudication, disbursements, subrogation

Talent pools & collaboration

Judgment-intensive with unique skills

Five most common vertical functions for each improvement initiative


35

Outline

Executive summary







36

Summary of key messages Different approaches used by mature organizations

Mature organizations were identified based upon their self-reported maturity in comparison to peers. On average, they are slightly more centralized and notably larger than their peers

Further, these organizations have adopted a greater end-to-end mindset, but focus more of their energy on non-process improvement themes such as increasing collaboration with business users and being effective at change

Despite their focus on factors beyond process, mature organizations are more oriented to focus on cost and meet financial objectives. Interestingly, they are not notably more oriented towards adopting SaaS/cloud technologies, but are more likely to implement new tools

These mature organizations also include more scope in their service delivery models, moving beyond transactional processes in F&A and also greater inclusion of vertical-specific functions


37

Mature organizations were identified based upon their response to the survey; they have a greater representation of large organizations and also more centralization

Definition of mature organizations Maturity is defined based upon

self-reported maturity in comparison to peers

Mature organizations are defined as those indicating they “agree” or “strongly agree” that they are mature in comparison to peers

Less mature organizations are those that “strongly disagree,” “disagree,” “somewhat disagree,” or “neutral” that they are mature in comparison to peers

5% 8%

68% 77%

27% 15%

Mature Less mature

Degree of centralization

5% 9%

48% 46%

6% 6%

41% 39%

Mature Less mature

Sourcing model preference

19% 29%

30% 39%

20%

18% 31%

14%

Mature Less mature

Annual revenue of organization US$ billion

41% 57%

12%

16% 18%

15% 29% 12%

Mature Less mature

Scale of shared services/outsourcing FTEs

Not structured to centralize

Somewhat centralized

Fully centralized

Retain in business


Best fit

Prefer outsourcing

<1

1-10

>50

10-50

<500

500-1,000

>5,000

1,000-5,000


38

Having already adopted an end-to-end philosophy, mature organizations increasingly look for value beyond process improvement – instead focusing on users and driving change

F&A approach is end-to-end

48

31


Priority initiatives

Successfully implement change

80

39

48

61

Consolidation

57

12 Less mature

Mature

Percentage of enterprise respondents



39

Mature organizations show greater financial orientation and are somewhat more interested in new technologies

76%

42%

22%

52%

2% 6%

Mature Less mature

Consistently meet financial objectives

Agree

Disagree Somewhat agree/disagree

SaaS/cloud

Financials

39% 28%

56% 60%

5% 12%

Mature Less mature

Cost reduction is most important

Agree

Disagree

Somewhat agree/disagree

27% 16%

54% 64%

19% 20%

Mature Less mature

Plan to increase use of SaaS/cloud

Agree

Disagree


22% 17%

35% 48%

43% 35%

Mature Less mature

Currently use SaaS/cloud

Agree

Disagree



40

Mature organizations have a relatively higher focus on technology, collaboration, and offshoring and less focus on reengineering and consolidation


Important actions for optimizing current service delivery Percentage of enterprise respondents

Mature

Less mature

70%

48%

57%

48%

22%

27%

13%

86%

58%

46%

31%

17%

28%

10%

Re-engineer/standardize processes

Increase consolidation/centralization

Implement new tools and technologies

Increase collaboration with business users

Increase level of offshoring/nearshoring

Leverage analytics / business intelligence

Deepen talent pool / expertise


41

Within F&A, mature organizations include greater scope, particularly in areas beyond traditional accounts payable and receivable

93%

84%

91%

86%

66%

59%

71%

50%

39%

43%

91%

78%

73%

58%

42%

39%

47%

34%

26%

30%

Accounts payable

Accounts receivable

General ledger

Fixed assets

Tax

Regulatory reporting and compliance

Management reporting and analytics

Budgeting/forecasting

Internal audit

Treasury and risk management


Scope of F&A shared services and outsourcing Percentage of enterprise respondents

In addition to including more processes within the F&A function, mature organizations include 10-20% greater scope in HR, procurement, and vertical functions

Mature

Less mature


42

Outline

Executive summary







43

Summary of key messages Perspectives of service providers and influencers

Service providers report the greatest focus and growth in more mature industries such as banking, insurance, telecom, and hi-tech

Both influencers and service providers believe that a “best-fit” sourcing strategy is the prevalent trend, largely similar to the overall reported philosophy of enterprises

Although service providers are often investing in the areas where enterprises are focusing their improvement initiatives, there are notable misalignments such as underestimating the importance of increasing collaboration with business users and over-emphasizing analytics and offshoring

For new technologies such as SaaS/cloud, service providers are notably more optimistic about the future level of adoption by enterprises, although few strongly agree adoption is increasing

The advice of influencers to service providers most strongly emphasizes increasing understanding of business context and developing the required capabilities to truly provide the desired scope of services. Other areas for improvement include performance management, change management, and innovation


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Banking emerges as the most important and fastest growing industry for service providers

78

89

91

105

106

107

110

154

184

347

Capital markets

Consumer packaged goods



Government

Retail

Hi-tech

Telecom

Insurance

Banking #1

#2

#3

#4

#5

#6

#7

#8

#9

#10

Relative growth of third-party outsourcing services in last 12 to 18 months by industry

Industries with fastest growth

1. Banking 2. Telecom 3. Insurance 4. Consumer packaged goods 5. Hi-tech

Industries with slowest growth

24. Metals and mining 25. Automotive 26. Engineering & construction 27. Hospitality & tourism 28. Non-profit / NGO

Ranking of industries in terms of importance for third-party service providers Weighted score1

1 Score is a weighted calculation. Items ranked first are valued higher than the following ranks, the score is the sum of all weighted rank counts Source: Vertical Industry Strategies in Shared Services & Outsourcing survey, January-February 2012


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Enterprises, service providers, and influencers consider “best-fit” to be the preferred sourcing model

7% 6% 5%

47%

24% 10%

7%

15% 41%

39% 54%

44%

Enterprises Influencers (perception of trend of clients)

Service providers (perception of trend of

clients)

Retain in business



Best-fit (either shared services or outsourcing,

based upon situation)


Nearly 40% of the service providers consider third-party outsourcing to be the preferred sourcing model, compared to only 7% of the enterprises. Influencers report a mix most similar to the non-shared services respondents in the enterprises

Sourcing model expectation for enterprises Percentage responses


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Service providers’ perceptions are not completely aligned with clients’ priorities


Enterprise and service provider perceptions on shared services and outsourcing initiatives Percentage responses

Influencer perspectives mirror enterprises more closely than service providers. While the overall ranking of initiatives remains similar, influencers place greater emphasis on centralization/consolidation and analytics

Serv

ice

prov

ider

Enterprise / service recipient

Reengineering/ standardization

Consolidation/ centralization

Tools and technologies


Analytics and business intelligence Offshoring/

nearshoring

Talent pools / expertise

Areas over-emphasized by service providers

Areas under-invested by service providers

Low High

Low

High


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There is a significant “adoption gap” in the use of SaaS/cloud technologies

Enterprises

Service providers Plans to increase the use of SaaS/cloud technologies Percentage of responses

0%

15%

30%

45%

1. Strongly disagree

2 3 4. Neither agree nor disagree

5 6 7. Strongly agree

Adoption lag between supply

and demand

Most enterprises continue to sit on the fence regarding the use of SaaS/cloud technologies – demand (enterprises / service recipients) is trailing supply (service providers)



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Service providers’ inability to understand the client context emerges as the biggest capability gap

Service provider capability gaps identified by influencers for F&A, HR, and procurement Degree of inclusion


Technology

Talent and expertise

Innovation and continuous improvement

Change management support

Performance management

Scope of services

Client context “Tailoring cookie cutter solutions to fit client needs” “Understanding the impact on business” “Knowledge of specific industry processes”

“Moving up the value chain; providing R2R analysis capability” “Consolidate procurement and sourcing platforms” “Being good enough in all transactional HR services”

“Business outcome, definition, and transaction pricing” “Track, manage, and report KPIs... and the savings created” “Review services and service levels annually to adapt to client needs”

“Strategic advice is absent – too much off the shelf solutioning” “Team continuity from sales cycle into operations” “Transitions – people transfers and industry-specific requirements”

“Lack in proactive innovation and proactive process reengineering ” “Not looking for innovations and continuous improvements to add more value to the customer”

“Leadership skills of middle management” “Lack of senior professional people to support the business focus” “Ability to provide adequate subject matter expertise”

“Platform-based offerings with transaction pricing” “Tools to ensure value-added sourcing” “Do not provide enough SaaS services for HR”


49

41%

32%

27%

About the survey

The 10 to15 minute survey was conducted via the Internet and collected responses from enterprises, third-party outsourcing service providers, and industry influencers – each with different, but parallel sets of questions. The length of survey varied significantly, based upon the number of functions for which a respondent chose to provide input

SSON and Everest Group jointly promoted the survey globally with email invitations, newsletters, social media, and websites

The survey collected over 650 responses across enterprises (272), service providers (210), and industry influencers (181). A profile of the roles of respondents is provided below

Respondents were distributed across all sizes of organizations

Mix of respondents

Enterprises

Service providers

Industry influencers

100% = 663

60% 10%

7% 6%

5% 5%

9%

Roles of enterprise respondents

100% = 272

Shared services/ captive Strategic

sourcing/ procurement

Corporate strategy

Vendor mgmt.

Business user of

services

COE Other

32%

28%

16%

9% 7%

8%

Roles of service provider respondents

100% = 210

70%

15%

5% 10%

Roles of influencer respondents

100% = 181

Senior management

Sales and business development

Service delivery

Solution design

Other

Marketing

Consultant/ advisor

Technology provider

Business/equity analyst

Other


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Glossary of key terms

Term Definition

BPaaS Combined technology and service delivery solution which provides business outputs (e.g., paycheck)

Captive Entity in the offshore location that provide services exclusively to the parent company

Cloud Services delivered to match variable volumes through a virtualized model, particularly as it relates to the underlying technology infrastructure

Horizontal function Activity which tends to be similar across industries such as finance, HR, procurement, and IT infrastructure

Nearshore Delivery of services from a location which tends to be physically and culturally “similar” to the region receiving the services, motivated primarily by a desire to utilize easily accessible talent pools

Process The operational flows of activities within a function. For example, within the F&A function, processes include accounts payable, accounts receivable, general ledger, management reporting, and others.

Offshore Delivery of services from a location which tends to be physically and culturally “remote” from the region receiving the services, motivated primarily by a desire to access lower cost talent pools

Outsourcing Contracting with a third-party to provide a defined service

SaaS Software as a service (SaaS) is software that is deployed over the internet and/or is deployed to run behind a firewall in the local area network or personal computer

Shared services Separate internal entity within the company to perform specific services across business units. Shared services can be located in onshore or offshore geographies

Vertical function Activity which is notably unique to an industry. Examples include order management in hi-tech, merchandise analytics in retail, and loan and mortgage servicing in banking

Function Business support activities which encompass multiple processes. Examples include F&A, HR, order management in hi-tech, and loan and mortgage servicing in banking


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About Everest Group and SSON

Everest Group Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research, and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies, and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations, and private equity firms in six continents across all industry categories. For more information, please visit www.everestgrp.com and research.everestgrp.com. The Shared Services & Outsourcing Network The Shared Services & Outsourcing Network (SSON) is the largest and most established community of shared services and outsourcing professionals worldwide, with over 60,000 members. We provide the roof under which key industry experts and organizations share their experience, knowledge and tools, and your practitioner peers connect with others all over the world, face to face, and online. SSON focuses on developing its members through providing training, tools, and networking opportunities. Our staff work from international offices in New York, London, Sao Paulo, Singapore, Sydney, Johannesburg, Berlin, and Dubai to research current trends and developments in shared services

http://www.everestgrp.com/

http://research.everestgrp.com/


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www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com

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Summary Report: Vertical Industry Strategies for Shared Services and Outsourcing Survey

Business

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