October 1, 2009

Research Alert: Beyond Shared Services - Hackett Sees Companies Accelerating Evolution to Global Business Services

  • Nearly Half of All Shared Service Operations Now Encompass 3+ Functions; By Breaking down Boundaries, Companies are turning the Back Office into A Core Competency, Driving Service Orientation and Value Creation to New Levels
  • Juniper Networks and StatoilHydro Lead the Way With Powerful Transformation Efforts Driving Dramatic Cost Improvements

ATLANTA & LONDON, October 1, 2009 - Many companies are now moving beyond shared services to manage their back-office operations, and a new Global Business Services model is quickly beginning to emerge, according to new research from The Hackett Group, Inc. (NASDAQ: HCKT).

Global 1000 companies are dramatically transforming their service delivery model for finance, IT, procurement, HR, and other General & Administrative (G&A) functions, and are benefitting from value being created by new Global Business Services organizations which break down functional boundaries, serve as an integrated strategic part of the business, and are driven by a true service orientation in terms of culture and performance. This transformation has been accelerated by the current economic environment, Hackett finds, and companies need to examine this trend now or risk being left behind.

Over the past 15 years, shared services organizations have grown in popularity, to the point where they are now the standard approach for how large companies manage G&A functions. According to Hackett's research, 93 percent of all large companies today are making extensive use of shared services organizations. Shared services organizations have helped the world's largest companies save millions of dollars by enabling efficiency and effectiveness improvements and also driving enhanced productivity, quality, and customer service.

But today, many companies are taking the next step, evolving from stand-alone shared service centers for individual functions to integrated Global Business Services operations which take a multi-function approach. A recent study done by Hackett and the Shared Services & Outsourcing Network, which surveyed more than 250 SSON member organizations, found that nearly 45 percent of all companies surveyed had incorporated three or more functions in their shared services operations, with some incorporating as many as five functions.

Companies have learned that once they break the physical connection between processes and the business units, they have much greater latitude to drive changes such as process improvements, standardization, and moving functions to low-cost labor markets. As companies evolve towards a Global Shared Services model, they can extend this concept further, moving away from silos by function and creating a single organization with shared reporting. This facilitates a more strategic perspective, enabling companies to transform G&A from a must-have cost center to a new enterprise core competency that can significantly differentiate and move companies to world-class performance levels.

"There's no question that shared services has been a powerful driver of G&A cost reductions and quality improvements at most companies. But it's also clear that the shared services model has fully matured over nearly two decades, and companies on the cutting edge are beginning to take the next steps. In most cases, those steps are towards Global Business Services," said Hackett Global Business Services Practice Leader Roy Barden.

According to Hackett Global Business Services U.S. Practice Leader Honorio Padron, "In some companies, Global Business Service is an evolution, and in others it is a revolution of the way that G&A services are supporting the business. Hackett's research shows that companies that are moving toward Global Business Services differentiate themselves from typical companies in several key ways. They establish a performance culture keyed to problem solving and customer responsiveness. They move beyond service level agreements to truly focus on improving customer satisfaction, and even integrate these considerations into their budgeting and investment decisions. Finally, they understand that change management is critical, and that this includes clear, open communications and staff involvement in problem solving. Companies that fail to adapt their G&A will be left at a significant competitive disadvantage," said Mr. Padron.

Juniper Networks, StatoilHydro Lead the Way

One company at the cutting edge of the Global Business Services trend is Juniper Networks, a leading networking products and services company with $3.6 billion in annual sales in 2008. Over a 12-month period, Juniper Networks transformed its shared services operation into a global services operation, with the help of an existing shared services facility in Bangalore, India. Success at standardizing processes and increasing transaction volumes has already led to cost improvements of 25 percent, more than three times the initial goal.

"Operational excellence is at the heart of our corporate growth strategy," said Juniper Networks Vice President, Global Shared Services Mark Burrows. "The goal for our Global Shared Services operation is to offer world-class, customer-centric business support. To make this happen, we've focused on process standardization, increasing transaction volumes, and process improvements. At the same time, the voice of the customer has been very important, and we started with a detailed functional analysis to help identify which processes could be moved offshore and which needed to remain locally managed. We also looked at which were ready to move as is, which needed streamlining or simplification, and which we could fix after the move."

At Norway's StatoilHydro, one of the world's largest oil and gas providers, Global Business Services is a key element of the company's overall improvement agenda, which focuses on utilization of common processes and tools to ensure economies of scale and skill to create one global company based upon a global delivery model across functions.

With a mandate from CEO Helge Lund, the company launched a transformation process to establish a multifunctional global shared services organization by September 2006 with a lofty ambition: world-class by 2011. Global Business Services now provides services for processes in IT, HR, finance, facility management, procurement, and communications, and has established itself as a business unit with service level agreements for all customers, clear performance targets and value-adding services.

This year, StatoilHydro was recognized as "Shared Services Organization of the Year" and "Best Mature Shared Services Organization" at the 2009 European Shared Services Excellence Awards, presented at the 9th Annual Shared Services & Outsourcing Week in Budapest.


About The Hackett Group

The Hackett Group, Inc. (NASDAQ: HCKT), a global strategic advisory firm, is a leader in best practice advisory, benchmarking, and transformation consulting services, including shared services, offshoring and outsourcing advice. Utilizing best practices and implementation insights from more than 4,000 benchmarking engagements, executives use Hackett's empirically based approach to quickly define and prioritize initiatives to enable world-class performance. Through its REL brand, Hackett offers working capital solutions focused on delivering significant cash flow improvements. Through its Hackett Technology Solutions group, Hackett offers business application consulting services that helps maximize returns on IT investments. Hackett has worked with 2,700 major corporations and government agencies, including 97% of the Dow Jones Industrials, 73% of the Fortune 100, 73% of the DAX 30 and 45% of the FTSE 100.

Founded in 1991, The Hackett Group was acquired by Answerthink, Inc. in 1997. Answerthink was renamed The Hackett Group, Inc. in 2008. The Hackett Group has global offices in the United States, Europe and Asia/Pacific.