Critical SSO trends

This year’s Shared Services and Outsourcing Week for Europe’s German-speaking market (Jahresforum Berlin) highlighted many of the critical global trends we have already seen elsewhere – specifically the pursuit of digital excellence; better use of data analytics to drive enterprise growth and revenue; and supporting the digitalization of business units by offering automation “as-a-service.”

For the 14th year in a row, SSON gathered some of the DACH region’s leading and evolving Shared Services and Global Business Services leaders to discuss, share and project the future of the business services model.

A number of significant trends emerged, including a general preference to shift away from “Shared Services” as a moniker in favor of "Integrated Business / Technology Services” (the “Tech” part reflecting in part the critical role IT plays in automated services delivery), RPA expertise sold on a consultancy basis, and an impressive understanding of the value-driving potential of data analytics.

Speakers in Berlin represented German behemoths like Siemens, Lufthansa and Henkel – but also organizations like Generali, Sanofi and State Street Bank. Germany is still Europe's third most popular location for Shared Services according to SSON Analytics data, driven to a large extent by cultural preference, HQ proximity, and language. At the same time, however, nearshoring (Central and Eastern Europe), offshoring (Central / Latin America or APAC) and bot-shoring are credible alternatives for multinationals keen to grasp as advantage.

Shared Services ambitions fed by data

SSON’s most recent survey indicates six out of 10 DACH SSOs are planning to expand into new service offerings over the next year. This appetite for growth is being driven by innovative opportunities, many of which are deriving from an improved evaluation of data analytics and business intelligence. We see, for example, scope expansion incorporating a shift from the back office towards the middle and even front office operations. The secret sauce driving this is data, so let’s start with that.

The big opportunity right now lies in data analytics skills. Data jobs are, in fact, the hottest jobs going at the moment. This was confirmed by a number of presenters, many of which acknowledged the value hidden in the multitude of data streams passing through a typical shared services operation. However, recognizing the value of data is one thing; translating it to action quite another. And this is where it will become interesting.

The current trend is to shift from data as “numbers” to data as "stories." Metro AG has applied this strategy with great success, as Theodor-Iulian Ladar, expert in HR Operations & Leadership shared. The challenge is to make the correct correlations, he explained, and ignore the red herrings that might distract you. He, as did many others, referenced the use of clean graphical design to visualize data for far greater impact. This has been practiced for years, of course, but what sets the trend apart today is the ability to connect the visual with actionable steps. To this extent, we will be paying more attention to what Gartner describes as the four stages of data: What happened? Why did it happen? What will happen? And how can we make it happen? (Said differently: descriptive, diagnostic, predictive and prescriptive data analytics.)

One use case Ladar shared concerned resource allocation, especially in restocking supermarket shelves, which is mainly driven by customer flow and ware movement. His team applied analysis and logic to staff data, and displayed the results so the underlying message was both obvious and striking. More specifically, demand for personnel was cross-referenced against availability for different teams, to generate optimal contract structures that minimized cost without impacting customer experience. In effect, he explained, data analytics helped artificially replicate part-timers – something hard to access in Eastern Europe – to reallocate staff across departments by matching peak demand in one area with low demand in another, delivering real agility. Of all the case studies shared across this conference, this one stood out. At its simplest, it analyzed skills and requirements for a given process, identified where these skills were available across an organization, and then matched the peaks and troughs of process activity to reallocate employees for optimal impact. Simple and yet brilliant.

The main challenge, Ladar explained, was to ensure the data was on the same playing field so that the numbers meant the same everywhere, and then to provide relevant context. Numbers alone don't tell the full story, however. Innovative solutions like these need to be internalized emotionally, he emphasized, and connected to a full and comprehensive understanding of the industry.

Elsewhere, Lufthansa Group Business Services’ Head of Data Analytics & AI, Tobias Claus, explained how artificial intelligence was deployed to contracts to identify important clauses, which were previously not used to their full extend and potential. Focusing on penalty clauses, for example, linked to supplier repairs within a specified timeframe, generated significant returns (penalties are calculated as a percentage of the underlying invoice). Now these clauses are built into an AI-driven tool, are transparent, and are visually communicated through Tableau (where ‘size’ indicates associated spend). In addition, payment terms and discounts can be extracted to machine learning and neural networks to drive further opportunities.

Another use case concerned extracting rebate clauses and combining this data with spend plans to offer clearer forecasts on the basis of which recommendations can be made to procure specific items sooner, in order to take advantage of discounts.

Rethinking sourcing models

While skills and technology are under the spotlight, the basics of shared services still hinge to a certain extent on sourcing models, process excellence, and customer service.

Outsourcing is still very much in vogue, never mind the talk of replacing BPO with RPA. And yet, the question, “Are you still outsourcing – or are you digitalized?” was posed a few times. It's not as simple as that, of course. Human talent, security, and compliance are concerns that can slow down, if not derail, the journey to digitalization. Audit and compliance in particular are emerging as two factors that can significantly hold up any digital transformation that incorporates intelligent automation, and should therefore be addressed up front.

While SSON’s data doesn't necessarily highlight a retrenching of outsourcing activity, it certainly identifies a rethinking of the type of work outsourced. Frank Grübel, Lead Outsourcing Management and Governance at Unicredit Bank AG discussed the relevance of outsourcing in an increasingly digitized "back-office" environment. The challenge of unwinding outsourcing partnerships, as many readily agreed, lies in recapturing the knowledge that has been outsourced. Whether insourcing or outsourcing, however, how to optimize a process remains a challenge and tapping the relevant skills is something of a hurdle for many. Process analytics along with process mining sheds light on this problem, indeed, drives greater process awareness on an “as is” basis. What is critical, however, is not just how a process is done, but why, explains Grübel. If Ford had asked people what they wanted, he reminded us, the answer would have been a better carriage, not a motorcar. Therefore, the strategic objective needs to be driven by the client. The general advice he offered was to drive radical new processes, rather than a 5% improvement on the old.

Robotics and intelligent automation

Robotic automation shows no signs of slowing down, indeed, the language used at this event showed just how familiar and business-as-usual RPA has become. However, while the original opportunity of replacing human-touch handovers has been well served through RPA, it has simply laid the groundwork for far more significant opportunities involving more intelligent, cognitive, and artificial intelligence-driven activities.

RPA still offers significant growth opportunities, given 37% of the global Shared Services market has still not ventured down the automation path (SSON 2019 survey). The advantage today is that RPA implementations can be combined with process mining, as DPDHL’s Shared Services and Digitization leader explained, to drive improved scalability and agility that deliver better results. Process discovery and process mining solutions offer invaluable insights given that there are literally hundreds of process variants for a given end-to-end process, and the cost of servicing these variations and the time and resources required can be crippling.

So, how are modern day enterprises optimizing process automation? In some cases, the strategy is for Global Business Services to act as an in-house consultancy to leverage the benefits of automation across the organization. The business effectively contracts with GBS to be taught how to run its own automations – in other words, RPA “as-a-service.”

A common hurdle cite by many is how to overcome the general misconception regarding what, exactly, robotics entails, and the resistance this can create. Lufthansa solved this through commissioning a film that was presented to the C-suite. The power of visual communication and story-telling once again was shown to overcome weeks and months of what might otherwise have been pushback.

One of the more critical challenges cited was how to come up with an appropriate pricing model for RPA deployments. While a number of SSOs started by identifying different levels of complexity (simple, middle, and complex) and pricing accordingly, the trend is now towards activity-based pricing – the detriment of the original flat-rate being that business units were not incentivized to collaborate effectively and minimize documentation or process changes.

The other issue that is often overlooked is just how time- and cost-intensive the maintenance of automation solutions is. Assuming a happy path for automation is simply unrealistic, given the numerous exceptions that occur for a given process, many of which go undetected until process mining is applied. One presenter explained that three of the 14 RPA resources in his Center of Expertise are dedicated solely to maintenance, in order to keep up with demand.

A powerful lesson shared at this event is that although the “sell” for RPA has traditionally been FTE-savings, the truth is that most organizations’ core systems are already fairly automated, and that the real wins derive from the added value delivered. Many organizations have introduced Automation Academies that teach business units how to build their own robots. This also addresses the challenge many leaders cited of encouraging ideas from the bottom up but then finding themselves unable to meet the enormous volume of suggestions. Automation Academies help businesses to help themselves by building their own bots.

Two other ideas that were highlighted at the conference, both borrowed from traditional IT implementations, included, first, the use of a solution design document to identify the ideal process path as opposed to the path followed by humans; and secondly, deploying user acceptance testing to demonstrate a live bot automation to customers, slowed down significantly to highlight individual process steps.

Engaging Employees

Setting the right objectives for data analytics and automation is only part of the story. The other is how to engage employees. As Richard Branson has said in the past, how you treat your employees is how they will treat your customers. ING is taking this message to heart by focusing on "moments that matter," and has identified onboarding as the most important of these moments. It marks the starting point for driving a culture that digital enterprises need in order to succeed. Recruiting, in fact, was highlighted as being far too important to be driven by cost efficiency considerations, as Andreas Mayer, COO HR & Head of Global People Services at ING emphasized. It’s also an area where artificial intelligence can generate significant value, for example in analyzing video interviews or resumes.

In fact, ING is transforming its HR model from an outdated, cost efficiency-based approach characterized by self-service to a more modern solution focused on helping employees impact company performance more directly. Impact is the critical differentiator, and it is enabled by the right skills and the right insights. Data, again.

Unilever has come to a similar realization, bringing management recruiting back in house in the belief that it yielded better results for the enterprise. In fact, Unilever is targeting simpler, more human, and more impactful HR services by rethinking how it provides this support. Data specialists review contracts, solution providers are leveraged to drive faster more effective automations, and artificial intelligence is helping evaluate online video interviews. In addition, the company has launched a Google-like online resource tool that sits on every desktop and provides real-time support across a wide range of questions. Machine learning will drive additional knowledge resources to support common questions.

The future ...

A final thought to end on, as enterprises face a global labor shortage. Cecile Alper-Leroux, Vice President of Human Capital Management Innovation at Ultimate Software shared the sobering fact that today, across the world, there are more people over the age of 65 than under the age of five. So how does a progressive, forward-looking organization ensure it is prepared for the future?

A number of untapped resources are emerging for consideration. First, many retirees are coming back to the workforce, for various reasons, bringing completely different requirements and expectations with them, but offering a valuable resource. Separately, many organizations are recognizing the potential of the 15% of the global population that is disabled (1 billion people total) – presenting the largest untapped demographic of the current global workforce. We are also seeing more awareness and recognition around neurodiversity (e.g., autism), with interview techniques reflecting a deeper understanding of this segment’s needs.

No matter where the workforce comes from, however, the critical challenge is to foster trust, which requires transparency and openness. And although external customers’ need to have control over their own data is widely recognized, this is still not mirrored sufficiently when it comes to internal employees.

Given the pipeline issue that challenges the future of work for modern enterprises, they will need to adopt increasingly innovative strategies regarding where and how they tap into talent. As if on cue, the fourth wave of intelligent automation is enabling humans to become better at “being human” – solving for at least some of the pipeline challenges. The main issue will be to support humans in seamlessly integrating with their digital counterparts – i.e., automated solutions. Blending machines, robots, and humans is the critical challenge facing all organizations as they develop a workforce to drive their future.

However, therein also lies the challenge. Machines alone are not worth much, and a recent survey quoted by one of the presenters indicates that 77% of humans are not yet ready for a workplace that combines people with robotics. It remains for service specialists to address this problem, in part by deploying some of the solutions that humans appear to mistrust most. AI, for example, can help deliver on the promises made to employees through better quality of service in a shorter time. Cognitive capabilities can address the imbalance in the current workforce by identifying gaps and opportunities.

As humans learn to trust their employer, take ownership of automation, and understand data, their own awareness around where “being human” adds superlative value will scale up.

The truth is that the future remains as human as it is today. Just more so.

Join the 15th Annual Jahresforum for Shared Services in the D-A-CH region 2020!

Email Barbara.Hodge@ssonetwork.com for details.