Shared Services Slash Costs

World-class companies can cut labor costs in half, Hackett says.

Looking for ways to save? A recent study by the benchmarking firm the Hackett Group suggests that implementing a global shared services model can cut costs substantially. Hackett estimates world-class companies with global business services units save more than 50% in labor costs and 25% in other costs.

Michel Janssen, Hackett’s chief research officer, describes global business services (GBS) as “shared services on steroids,” as companies include more functions and processes. Finance is usually the first function moved to a shared services center, but a global business services unit might also encompass HR, IT or procurement. According to Hackett, 75% of Global 1000 companies surveyed have shared services units that integrate the processes of more than one business function.

Companies take a wide range of approaches to shared services, Janssen says, and where savings are realized depends on the maturity of the effort. Companies that locate shared services units offshore save initially on labor costs, he says. But as companies continue to utilize shared services, “the ultimate savings is automation,” Janssen says. “If you can arbitrage from a human being to a computer that requires electricity rather than benefits, that’s a bigger source of savings.”

The stagnant economy is reinforcing the trend toward global business services. “If you can’t grow the top line, the next best way to get profit increases is to work on the back office,” Janssen says.

As the trend toward global business services picks up steam, the field “is becoming a profession in its own right,” Janssen says. “People learn specific skills around global business services,” he says. “It’s not just something that’s in the corner anymore.”

At the same time, offshoring or outsourcing so many lower-level jobs poses a long-term challenge for companies’ talent management. “GBS’s are creating havoc in the traditional talent pyramid,” Janssen says. “It changes the dimensions of the talent pool.”

He notes that he started his career as an assistant financial controller. “My job now would probably be in a low-cost country.”



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