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Shared Service centres… To do or to have it done? 1/4

Summary of an Xplor France debate with Jean-Pierre Blanger – Ricoh, Jean-Marc Jagou – Exceo and Jean-Louis de La Salle – IDeAs

 

Many shared service centres have appeared recently. The debate between doing and have someone doing it for you is sparked up again. With technology ever changing and professionalism progressing, the dividing line between real outsourcing and internal shared service centres is quite blurred now. Both have to respond to clients whether inside or outside their organisation. Are there different strategies ahead or will one model disappear?

 

Is the line between a shared service centre and outsourcing as clear as it used to be?

J-P. B.: By nature a SSC (shared service centre) is designed to put together activities that are used frequently by more than one business unit. The goal is to avoid duplication, often with differing methods or tool sets. Reducing cost is important but is not the only purpose. Economies of scale also exist on technical expertise required to execute these processes, to reduce complexity and associated risks thanks to process industrialisation. The goal is to be more professional and have the business units focus on their core activities. With this perspective, the difference between internal SSC and pure outsourcing is pretty thin. Both must be highly professional and better than what the business units could achieve on their own.

Now if you take it from the company as a whole, there is a big difference between insourcing and outsourcing. It is the way you control processes, refine and adapt to a changing environment and all this whilst conforming to an information and document policy and strategy.

 

JLS. : The trend you describe needs to be put in context. Companies face a reality, whatever their size. Communication technologies are increasingly complex requiring generating longer financial cycles. On the other hand companies’ acceptable returns on investments get shorter and shorter. The only way to respond to this apparent oxymoron is to scale up to ensure a quick amortization of investments. This ensures quick return and allows you to put money aside as you must never stop adapting to change by putting further investment in new technologies and know how. So in effect scale provides you flexibility because the investment is quickly amortized and free cash flow becomes available. Strangely enough scale makes your future less uncertain.

Internal SSC just reflect that clients are aware of this. The really difficult thing is how to keep the know-how when technologies change quickly. Companies have learnt it the hard way. Excellent investments became rapidly less efficient if not obsolete. So technology investment is not what guarantees your long-term sustainability which is achieved through the ownership of your processes. So companies had to change.

It also reflects a specific of the French outsourcing market, which is not as developed as Anglo-Saxon countries. The internal SSC is a hybrid solution.

But one rule is that whomever you delegate it to, one can delegate efficiently what one understands

 

J-M J.: The choice is not driven by a high level consideration but by the nature of the process itself. Which process is key to your business performance? This is true of any process, document centric or not.

A process is never solitary. It lies within a chain of processes. A document process to receive an incoming check impacts clients’ receivables and may generate other consequences, such as legal action, suspending deliveries or a change in commercial terms. So the question is what does the business unit agrees to delegate or not, under which conditions and how it controls that. What internal SSC and Outsourcing have in common is that there is no ready-made process on the shelf. A similar process in a two banks could look the same but, when looked upon in detail, the two processes are not the same, because the policy is different.

I agree with my colleagues in the sense when we say that owning the control is key. It enables you to address change and also guarantees operational excellence and cohesiveness. Clear definitions of who does what are absolutely required.

Doing or having it done must be a rational choice based on an expertise level that you have or where you recognise that others have a better one.

 

On next Tuesday, our 3 experts will discuss about “Is the question “doing it or having it done” the right one?”

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This article was written on 19 Apr 2016, and is filled under Managed Print Systems, Point of View.

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