Case #6: Bundled Outsourcing for Managing Shared Service Center

This sixth case is about RGM Group (RGM), a diversified global resources business, with major assets in Asia Pacific, South America and Europe, which is rapidly growing in geographical spread and revenue. RGM is currently having 55,000 people and achieves average growth rate of approximately 25 percent in the last few years and has been forecasted to continue its growth.

To support its growth agenda to be a high performance global business, RGM assessed the viability of setting up a shared services center that could function  as a scalable base in terms of providing IT, finance and accounting, and human resources support services to the client’s group of companies and other businesses.  Accenture’s feasibility study identified areas for synergy in support functions: human resource, information technology or information systems and finance & administration. Now we have two questions:

Would a Shared Service Center be the best option for RGM? Would it make sense to have business process standardization, streamlining and improvement opportunities within the business units and across the organization as a whole? Explain the reasons for your argument.

Building Texture. Courtesy of Iurte on Flickr.

Shared Service Center is an internal business organization which provides support services that are shared across multiple business units or function. It can be also a virtual or physical team whose process expertise is shared across multiple business units or functions, rather than duplicating staff in each business unit, to execute business processes in a consistent manner for optimal resource efficiency, saving cost and delivering high performance services.

Shared service model is different from outsourcing model, where an external third party is paid to provide a service that was previously internal. There is an on-going debate about the advantages of shared services over outsourcing. However, in practice, sometimes companies use the combination of both models, creating a Shared Service Center that operates globally in coordination with external parties.

Main purpose of shared services is the convergence, standardization and streamlining of an organization’s functions to ensure that they deliver the services required to the organizations as effective and efficient as possible. This often involves centralizing of back office functions such as finance, human resource, and IT. The key advantage of this convergence is that it enables the companies to get economies of scale within the function and enables multifunction working, when there is a potential to create synergies.

Shared Service Center is traditionally developed within an organization as a result of the need to reduce costs, standardize business processes and allow the business to focus on core activities. However, in the last 5 years, the benefits derived from the implementation of Shared Service Center have changed as companies look to drive not only cost reductions, but also increasing business value of their non-core functions. According to a study by Shared Service and Outsourcing Network (SSON) and the Hackett Group, it is found that only a third of all participants surveyed were able to generate cost savings of 20%. Companies were significantly more successful in achieving productivity and quality improvement goals through the implementation of shared services.

RGM’s Shared Service Center

Now, back to the case study. Given the opportunity to reduce costs, standardize business process and get better service quality that is promised by shared service model, it is clear that developing a Shared Service Center is a good option for RGM. Some reasonable reasons supporting this decision are as follow:

1. Shared Service Center allows RGM to consolidate and standardize its diversified global business operations.

   As a global company which operates in three different regions–Asia Pacific, South America and Europe–with its double-digits growth rate, RGM’s market development can be characterized by globalization, where mergers, acquisitions and consolidations are common practice, requiring the company to standardize operations to stay competitive. An effective way to keep costs down and improve efficiency is by moving certain functions to one central location and build a Shared Service Center.

   From an operational standpoint, success for RGM is about having strong global operations–highly standardized in terms of economies of scale–as well as strong local capabilities to serve and compete for customers. Shared Service Center can be a powerful tool for achieving the balance between highly standardized processes and a strong customer focus with high levels of service. Organization that drive a higher level of simplification on the inside through more standardized processes can achieve higher levels of business performance.

2. Shared Service Center turns RGM into a more adaptable company for any changes

   RGM’s growth agenda to be a high performance global business requires the company to be adaptable to change. Many companies are finding that shared services organizations provide an engine to drive growth, especially through mergers and acquisitions. They also find that shared services is a powerful engine to attain value from new synergies of a merger and acquisitions. Shared Service Center makes the company who implement it to be extremely adept at dealing with change. It helps the company convert rapidly from dispersed operations based on geographic or business units to centralized operations based on a globally consistent approach.

3. Shared Service Center turns RGM into a more customer centric company

   Shared Service Center  can be an important component to drive better customer centricity. Key success factor in shared services is to balance a focus on customer needs and the ability to deliver services at competitive cost. Shared Service Center gives RGM the opportunity to focus more on their core competence to deliver best services for their customers. Shared Service Center also enables quick market development and post-merger integration.

4. Shared Service Center can reduce cost and free up capital

   Reducing cost is common objective of building Shared Service Center. To some extent, it can free up some capital for core business operations. By allowing companies to minimize their investment in incremental infrastructure, it enables redirection of funds, which can foster expansion and growth of products and market. Shared Service Center can also leverage shared infrastructure. Acquisitions become economical because with shared services there is no need to pay for technologies and processes that in long term may be discarded. RGM only pays for core competencies they want as reliable information and consistent performance measures are already in place.

Based on the feasibility study by Accenture, there are three areas where RGM can build a synergy with Accenture in support functions: human resource, information technology or information systems, and finance. Accenture then proposed to give implement a bundled outsourcing model for RGM’s Shared Services Center.

Following the plan, Accenture worked closely with RGM in 2006 to set up its Shared Services Center. Accenture was, subsequently, appointed to jointly operate the center through a co-source model. As a co-source partner, Accenture brought to bear its experiences in setting up and operating large-scale shared services centers in other markets. Accenture introduced proven best practices that supported and improved the center’s processes, drove the use of appropriate tools and technology to improve the day-to-day operations of the center, and focused on employee-related initiatives.

This article is part of a series of case studies from Accenture Bloggers and Journalist Competition. The main purpose of this competition is to introduce the world of consulting, technology services, and outsourcing, which are the main businesses of Accenture. You may comment, discuss, or share this article by mentioning the original source.

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