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Integrated Business Services: Added value or unnecessary organizational complexity?

Shared Service Centers (SSC) were created to improve service delivery and reduce costs within distinct parts of their businesses for over 20 years. Mostly these parts of the business are back office related, administrational work that can easily be managed by a third party, however, now a days many business leaders are recognizing that wider benefits can be achieved. How do they do so? By leveraging Shared Services and Outsourcing consistently across multiple functions and regions, and in some cases moving all elements of this into one organization.

 

It seems like an added value, outsourcing certain activities to free up resources and focus on the core business, however according to a research done by McKinsey not everyone is as excited about IBS. They mention arguments from executives that are based on fair grounds, one them being that the system has introduced greater organizational complexity and not necessarily improved performance.

 

Two of the issues that stood out:

  • Digital technologies such as process automation, robotics, and machine learning allow companies to address their business units’ service requirements quickly and efficiently without having to go through the arduous work of implementing a IBS structure.
  • Companies are under increasing pressure to be more agile, and senior leaders are questioning whether IBS groups can be responsive enough.

Two valid points, digitalization and being agile. Can the digitalization of business processes cover the output of an IBS? And what happens when you implement these innovations and automations within an IBS? According to McKinsey the IBS model still maters and the rise of digitalization enables IBS centers to provide benefits that go beyond costs.

 

Also, being agile is a rather serious concern, for in this day and age one has to be able to act immediately or one falls behind. So can IBS centers be agile enough? The trademark of agile development is increased collaboration among employees across functions. IBS teams have the possibility to enable the business units’ agile projects by providing a standardized environment under which a project may prosper.

 

A report from Deloitte in 2016 specifies the benefits of an IBS structure:

A market research from Deloitte in 2016 and their client experience has highlighted three key trends driving the shift to a Integrated Business Services approach.

 

Increased global operations

  • Solutions to address prior concerns such as language skills, time zone coverage, and regulatory requirements
  • Strategic choice to balance cost optimization and proximity when standing up operations

Leverage lessons learned

  • Skipping single-function concept and pursuing multi-function SSCs at the start based on lessons learned from mature SSCs
  • Adopting hybrid Shared Services models and customizing service delivery models by function

Focus on continuous improvement                                             

  • IBS as enabler of end-to-end process view is driving continuous improvement
  • SLAs and scorecards are leveraged to focus time and energy on continuous improvement
  • Continuous improvement as part of the culture of SSCs leveraging methods such as Lean and Six Sigma

An integrated business service group can be a great addition to one’s business if implemented correctly. The use of robotics, automation tools, analytics and other digital advances are key when wanting to succeed. However not only the digitalization is of importance for success, being agile is also part of it. But what does that entail? The collaboration of multiple parts of an organization should be fluent, for when communication between different departments is structured and on point, it is a lot easier to act on changes, so the setup is of importance. The results shown are in favor of an IBS, however that wasn’t really the question, the question: Added value or unnecessary organizational complexity? Still stands, however the answer lays in the implementation of an IBS, for it is clear, such a setup is an organizational hazard and if not implemented correctly it can cost one a lot, perhaps too much....but what if done well?

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