November 29, 2011

Companies Can Generate up to $314 Million in Annual Savings By Achieving World-Class Performance in Finance, IT, Other Functions; Integrated Global Business Services Seen as a Key Strategy

  • By Facilitating Technology Enablement and Global End-to-End Process Ownership, A GBS Operating Model Helps Companies Drive to World-Class Performance

ATLANTA & LONDON, November 29, 2011 - Companies can generate up to $314 million in annual savings and improve both efficiency and effectiveness by achieving world-class performance in finance, IT, HR, and procurement, and a key strategy is the implementation of an integrated Global Business Services (GBS) operating model, according to new Book of Numbers™ research from The Hackett Group, Inc. (NASDAQ: HCKT).

The Hackett Group's new research found that companies with GBS operations, which integrate and consolidate multiple business functions, can drive real cost reduction, and are a key to achieving world-class performance, in part by facilitating both greater technology enablement and global end-to-end process ownership. The Hackett Group's research found that companies which achieve world-class performance across business operations achieve cost reductions of 29 percent. For a typical Global 1000 company with $28.8 billion in revenue, these reductions amount to $314 million in annual savings. At the same time, top-performing GBS organizations deliver dramatically improved effectiveness, including a nearly 30 percent improvement in quality of service, nearly 6x the improvement seen at typical companies.

The days of significant transaction processing across most of the back office are quickly coming to a close. For example, The Hackett Group's research shows that over 70 percent of all corporate finance transactions are already handled by a GBS. Most companies are now taking an integrated approach, and the trend away from stand-alone shared services operations and towards multi-function GBS operations is accelerating rapidly. According to The Hackett Group's research nearly 75 percent of GBS organizations now integrate processes from across more than one business function, an increase of nearly 50 percent over the past two years. Finance continues to be the dominant anchor function of GBS organizations, followed by IT, HR, customer services, and procurement.

The Hackett Group's research also includes an analysis of the best shared services center locations across the globe that companies can turn to for low-cost labor as part of their GBS optimization and business process outsourcing efforts. While India and China remain the leading countries to turn to for high-volume transactional work, the research recommends looking at other countries for skill leverage, and also for work where cultural and language skills may take precedence. The research identified several countries as promising next-generation sourcing locations, including Chile, Columbia, South Africa, Indonesia, Sri Lanka, and Bulgaria.

The Hackett Group's Book of Numbers volume, entitled "Global Business Services: The Revolution Continues," provides a detailed analysis of the challenges companies face as they shift from separate functional departments to an integrated multi-functional GBS organization, and critical insights on how to overcome these challenges. The shift requires dramatic changes in the service delivery model and mindset and culture of companies. In addition, the volume describes in detail the best practices used by companies that achieve peak GBS performance. The new Book of Numbers volume contains more than 60 pages of insights and over 30 charts and tables detailing metrics of both typical GBS organizations and top performers.

"Our research clearly shows that operating models with stand-alone functions for IT, finance, and other areas are giving way to an integrated service-oriented approach," said The Hackett Group's GBS Global Practice Leader Honorio J. Padrón. "Even before the recession drove a 'whatever it takes' attitude to cost-cutting, savvy companies were beginning to use Global Business Services to transform the delivery of business services based on processes and services rather than functions. Now the trend toward GBS is accelerating, and the benefits are becoming even more clear.

"The opportunity for companies to reduce costs and also improve effectiveness and business alignment by shifting to a GBS approach are impossible to ignore," said Mr. Padrón. "Instead of taking an inward-focused cost center mentality, top GBS organizations are operated as a 'business within a business.' They act and think like an outward-looking customer-centered service provider. The result is that they drive greater value and play a more strategic role within their companies."

According to The Hackett Group's Chief Research Officer Michel Janssen, "What we're seeing with GBS is a dramatic transformation of the corporate back office. But the change requires a real cultural shift, which can be quite challenging. The Hackett Group's research shows that companies need to truly standardize and consolidate activities across multiple functions in order to achieve the necessary economies of scale. Decision-making authority has to shift, to enable cross-functional process design and a standard services catalogue across a company. World-class companies have shown that training is required to help staff build strong skill sets in areas like business relationship management and demand management."

Additionally Mr. Janssen says, "Research also demonstrates that companies must maintain a focus on continuous service and process improvement, as well as give consideration to how best to globalize the service delivery model to leverage offshore resources and optimize costs and skills."

About The Hackett Group, Inc.

The Hackett Group (NASDAQ: HCKT), a global strategic business advisory and operations improvement consulting firm, is a leader in best practice advisory, business benchmarking, and transformation consulting services including strategy and operations, working capital management, and globalization advice.

Utilizing best practices and implementation insights from more than 10,000 benchmarking studies, executives use The Hackett Group's empirically-based approach to quickly define and implement initiatives that enable world-class performance. Through its REL group, The Hackett Group offers working capital solutions focused on delivering significant cash flow improvements. Through its Archstone Consulting group, The Hackett Group offers Strategy & Operations consulting services in the Consumer and Industrial Products, Pharmaceutical, Manufacturing, and Financial Services industry sectors. Through its Hackett Technology Solutions group, The Hackett Group offers business application consulting services that help maximize returns on IT investments. The Hackett Group has completed benchmark studies with over 3,500 major corporations and government agencies, including 93% of the Dow Jones Industrials, 83% of the Fortune 100, 87% of the DAX 30 and 48% of the FTSE 100.