November 13, 2014
It would not be an exaggeration to say that there are as many definitions of the terms “global business services“ (GBS) or “global business management” (GBM) as the number of organizations. As unanimity on what is meant by GBS or GBM is still not near the sight, companies have come out with their own versions. However, while its definition may be debated, there is unanimity on its going well beyond the tentative task of simply having shared services models around the world.
Global business services or Global business management is a highly integrated and commercialized service that set it apart from a functional shared service which is more conventional. Global business services or global business management is, in general terms, a back office entity which leveraged management, locations, and sourcing methodologies to create a, cross-functional business support function.
Against the backdrop of not-so-good-state of the economy, organizations of all sizes are faced with the challenge of minimizing the costs. At the same time they have to improve operational efficiency and offer enhanced service levels. This can be improved and managed by embracing the newly created concept of global business services which is being increasingly used to address the complexity which is the hallmark of the present world. It has been found that a successful implementation of Global business management model can result in dramatic service level improvement as well as increases in satisfaction level of both employee and customer.
Since the mid-1980s, firms around the world have been familiar with the concept of shared services which were first implemented in the US by noted companies including General Electric and Baxter healthcare. According to one estimate, more than 80% of Fortunes 500 companies have applied some variant of shared services in their operations in the US. The concept of shared services found favour in Europe in the mid-1990s. Since then the global business management have migrated to the Asia and other parts of the world.
Experience shows that BP Shell, Procter and Gamble, Pfizer and Oracle have proved that a global shared service structure is a viable proposition.
These days many organizations operate in an increasingly competitive global market. Many also have growth strategies targeting emerging markets. In the changing global landscape, critical question arise when evaluating how an organization can best deliver its services, what we call the service delivery model.
Since the mid-1990s a number of multinational organizations with Shared services in the US and Europe have expended the concept into south America and Asia. Companies such as BP Shell, Pfizer, Procter and gamble and Oracle have proved that a global shared service structure is possible.
Instead of operating numerous shared service centers and managing outsourcing vendors independently, they are implementing Global Business Services, providing integration of governance, locations and business practices to all shared services and outsourcing activities across the enterprise.
According to studies conducted by U.S. audit, tax, and advisory firm KPMG LLP and HfS Research, a leading analyst authority on global business operations strategies, by 2017 six out of 10 companies will adopt global business services model over standalone outsourcing and shared services. More than 62 percent of organizations will be extensively investing in global business services that include hybrid, integrated outsourcing and shared services delivery over the next two years. Annual external Global Business Service expenditure will be to the tune of $73 billion by 2017.
According the research, strategic operational analytics, cost reduction and automation are the key drivers for determining today’s sourcing strategies. Organizations are considering these drivers as critical to the success of their shared services and outsourcing strategies. the consumer goods, pharmaceuticals, and manufacturing are the verticals where Global business service usage and focus is highest .
The corporations and organizations that have embraced the global business services model are realizing its benefits. Apart from reducing costs global business management helps the customers leverage limited management resources to achieve greater results within the organization. Enterprises are well on the way to bid adieu to narrow business functions such as IT or finance. On the other hand they are focusing on delivering and improved processes by end-to-end process ownership..
Global business services helps companies reduce costs, integrate acquisitions to drive growth in emerging markets made possible by seamless support of operations in new territories.
The benefits of Global business services are compelling for the businesses. The model enables the organizations to further leverage operational synergies and cost reductions. By reducing functional shared service, Global business management provides companies with service scalability benefits. This helps the organizations improve control and visibility within the organization.
Many organizations have established Shared Services Centers (SSCs) which have played important role in reducing the costs. Many of the Fortune 500 firms operate SSCs in one or multiple functions. In order to make the most of the value that is provided by the SSCs, it is incumbent on the companies to assess the maturity of their operations.
Over the years, companies across the world have been adopting global business services model. Though the global business services models are more mature than the conventional, functional shared services ones, not everyone has been able to use them successfully. True there are scores of instances where organizations have been utilizing the GBS model to their benefit. There are glimpses of organizations that have returned to the single-functional shared service models.
Inability to effectively leverage and exploit data analytics are some of the challenges that act as barriers in deriving benefits of the GBS.
A next generation operating model for driving performance and reducing costs in business services, Global Business Services has been implemented by the companies in the form of shared services for 20 years.
Global Business Services offers huge potential for unlocking greater business value. However, due to its enterprise-wide, cross-functional nature, it also requires new ways of operating between Global Business Services, business units, corporate functions, and their key external delivery partners.