January 29, 2013

Crumbling of Internal and External Borders Continues to Accelerate In 2013, Changing the Way Companies Need to Operate

  • Productivity Gap Grows as Revenue Increases, Staff and Budgets Shrink In IT, Finance, Procurement, HR and Supply Chain

MIAMI & LONDON, January 29, 2013 - For 2013, the new "borderless" business environment will present the greatest opportunities to companies in IT, finance, HR and other business services areas, as companies strive to reduce costs and meet aggressive revenue projections, according to a new Enterprise Key Issues Study from The Hackett Group, Inc. (NASDAQ: HCKT).

The Hackett Group's research identified new opportunities for companies to roll out a flexible, virtual, data-enabled model for service delivery. For 2013, the research found a growing productivity gap, as revenues are once again expected to rise while budgets and staffing will decrease slightly in IT, finance, procurement, and HR. Companies are also continuing to dramatically accelerate their use of Global Business Services (GBS) operations, an evolution beyond shared services which integrates and consolidates multiple business functions. Nearly 200 executives from large companies participated in the study, representing companies in the U.S., Europe, Asia Pacific, and elsewhere.

"The dramatic shift we're seeing in the global business environment bears similarities to the fall of the Berlin Wall in 1989," explained The Hackett Group's Chief Research Officer Michel Janssen. "Companies are fully realizing that growth is no longer limited by physical borders. Internally, functional borders between business services operations are also coming down in the wake of cross-enterprise, end-to-end process ownership. Finally, there are dramatically fewer barriers to service delivery placement, with Global Business Services operations able to provide seamless support to internal customers.

"All this has created a dramatic new opportunity for companies to improve agility and flexibility, and achieve new levels of efficiency and effectiveness through a focus on standardization, globalization, and a new technology-enabled model for service delivery," said Mr. Janssen. "But what's required is for companies to drive towards one view of their products/services, their clients, and their financials. This is something that most companies still find tremendously challenging."

The Hackett Group's research found that business services budgets and staff are expected to decrease just slightly in 2013, with operating budgets dropping by .5 percent and staff reduced by 1.7 percent. Both numbers are fairly on par with those for 2012. At the same time, revenues have increased by about 7 percent annually over the past two years, creating a productivity gap that requires business services organizations to do significantly more with fewer resources. To accomplish this, many companies are choosing to increase automation or eliminate non-value added work.

The Hackett Group's research found that to support the new borderless business environment, companies are focused in four areas in 2013:

  • Fostering the agility required to achieve profit goals when revenue falls short of expectations, and for business services functions to add value without adding to headcount and budget;
  • Continuing process improvement efforts to move toward a more standardized and global approach to the business and to business services operations;
  • Maturing the concepts of process ownership beyond the basics of process standardization, and creating value by working across functional, business unit and geographic borders;
  • Deriving actionable strategies from the mountains of potentially valuable data generated by business services activities.

Enabling growth by fully implementing enterprise process ownership is a major priority for most companies, the research found. More than a third of all companies expect to have cross-functional end-to-end process ownership in two to three years, a more than 4x increase over today. Nearly another third expect functional level ownership. Across business services, more than 90 percent of all companies expect to have either full process ownership across the entire enterprise or at least multiple geographic/business units in two to three years. The percentage of companies with ownership across the enterprise is expected to nearly double, to nearly half of all companies. Strong growth is also expected in tech deployment, managing process talent, tech standards, and master data governance.

While GBS is a major pillar for establishing a global growth platform, GBS leaders have struggled to meet the high expectations company leadership has had for them outside of cost savings, including alignment with corporate and business strategic goals and delivery of productivity improvements and high-quality service.

Finally, the study found that business services functions will be making strategic investments in business intelligence in 2013, and furthering data stewardship initiatives such as master data standardization and cleansing. The globalization of business functions is in part driving the increasing need for knowledge about customers, suppliers, employees and operations.

About The Hackett Group, Inc.

The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies. Services include business transformation, enterprise performance management, working capital management, and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including its award-winning Oracle EPM and SAP practices.

The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 52% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository, and best practice configuration guides and process flows, which enable The Hackett Group's clients and partners to achieve world-class performance.