Advisory Services

Shared Services: A realistic concept for the regional telecommunication companies

CANTO 2005 Annual Telecommunications Conference and Trade Exhibition, St. Kitts, June 2005

Patrick Newton

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Telecom companies need to respond to the issues and trends affecting them

Industry Overview

Key Industry Trends

•Globalization

•Rationalization, M&A

•Deregulation, Privatization

•Cost Reduction

•Technology innovation

•Information to Knowledge Transformation

•Risk Management

•Government Regulations

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These external and internal factors lead to a refocus in the way we manage our business

Higher internal demandsExternal factors

Need for business management refocus

• Higher quality support• Higher reliability of delivery• Lower vulnerability • Standardization

• Need for cost reduction• Technology opportunities• A more demanding client• Efficient and effective work

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What is Shared Services?

We can define Shared Services Center (SSC) as follows:

The joining of similar processes spread over several organizational units or departments with the objective to render services in an efficient and effective way to other internal organizational units or customers.

Characteristics SSC

•An innovative approach to standardizing and streamlining the delivery of common processes in one or several physical locations

•These processes are traditionally transaction oriented and have common characteristics across business units

• It will lead to economy of scale because of standardization and a more simplified process, a more integrated ICT infrastructure and because of a reduction of overhead costs

•Leads to a clearer (internal) customer relationship because of having a well defined service level agreement

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Adds value by:B

usin

ess

Orie

nta

tion:

Characteristics of each Quadrant:

Made up of different skill sets

Must be managed and motivated differently

Has different set of objectives, goals and vision

What processes are best suited Shared Services?

EnterpriseGeneric

BusinessUnique

Technical Skill Low Cost Producer

Corporate Controland Strategic

Planning

SharedServices

Business Unit Analysis

Business Unit Transaction Processing

Shared Services

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HUMAN RESOURCES

BenefitsRecruiting

PayrollTraining

Career Planning

FINANCE &ACCOUNTING

General AccountingAccounts Payable

Accounts ReceivableFixed Assets

Financial ReportingTax AccountingTax ComplianceBilling/InvoicingLoss Prevention

MERCHANDISING

Order ManagementReplenishment

InventoryLogistics

Point-of-Sale

PROCUREMENT

Strategic ServicesTactical Purchasing

REAL ESTATE

Lease AdministrationProperty ManagementConstruction Services

INFORMATION TECHNOLOGY

Data Center OperationsCommunications Operations

Network Support

Second Generation Shared Services

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Concentration of management means:

Joining similar processes which are spread over several organizational units or several departments within one organizational unit into a shared service center, with the objective to deliver more efficient and effective services to internal units or customers.

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Organizational management models

Degree of standardization

Degree of centralization

Decentralized

Coordinated decentralized

Concentrated(Shared Services)

Joined SSC(possibly outsource)

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Decentralized model

MT

Unit Unit Unit

Dept. Dept. Dept.

Management

Management

• Every unit or department has its own services management

• Advantage: close to core processes and customization possible

• Disadvantage: difficulty to manage efficiency and quality from an enterprise perspective

ManagementManagement

ManagementManagement

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Coordinated decentralization model

• Management of services is done on unit level

• Advantage: close to core processes, customization possible, clear on quality standards per unit level

• Disadvantage: difficult to manage efficiency and quality from an enterprise perspective

MT

Unit Unit Unit

Departments Departments Departments

Management ManagementManagement

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Concentration model

MT

Unit Unit Unit

Shared service center

• Management through MT

• Advantage: enterprise focused on efficiency and effectiveness

• Disadvantage: standardization and distance from core processes.

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Joined shared service center (possibly outsourced)

MT

Department Department Department

MT

Department Department Department

Shared service center

• Management trough a Joint Venture

• Advantage because of economy of scale

• Disadvantage: distance from core processes, possible standardization issue

Organization 1 Organization 2

Joint Venture

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“Establish relationships and terms & conditions with identified suppliers based on defined requirements”

“Determine the need for and availability of materials, goods and services”

“Manage supplier relationships over time”

“Commit with supplier for purchase of materials, goods or services”

“Verify physical receipt of materials, goods and services”

“Strategic Work” “Transactional Work”

“Determine appropriate supplier for delivery of required materials and/or services”

“Define and establish purchasing strategies and tactics, including commodity level strategies”

Materials &Services Receipt

StrategyDevelopment

Negotiation& Contracting

Monitoring &Management

Requisitioning SourcingOrder

Placement

Purchasing Fundamental Business Purpose“Ensure the acquisition of, payment for and management of materials, goods and services which

satisfy on-going business requirements at lowest total cost and in a way which is aligned with company and operational goals and objectives”

InvoicePayment

“Confirmacceptable supplier performance and pay for materials & services received”

Integrated Technology Enablement

Shared Services Business Case : the Purchasing process

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Shared Services Business Case : the Purchasing process

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Leveraging the Internet – the E-Business Landscape

B2C = Business2ConsumerB2B = Business2BusinessB2W = Business2Workforce

Internet Computing

Model

eStorefrontClick&mortar

eServicesB2C B2B

B2W

eDataeBackoffice

eHR

eFinance

ePurchasing

eChain eSales|Service

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B2B Solutions – The Digital market place

E-MarketResearch|Quote|Buy|Sell|

Deliver| Service

CustomerMarketplace

Customer.com

SupplierMarketplace

Supplier.com

Service.com

Knowledge Management

Telephony Media ERP|CRM|SCM

Portal

Supplier KnowledgeCustomer

Knowledge

Corporate.com

Web

CustomersSuppliers

Portal

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The digital market place model consists of the above core components.

B2B Solutions – The Digital market place

DemandManagement

Logistics

SupplierIntegration

BuyingServices

Auction ExchangeRFQ

Catalog Configuration Management

Content Management

Credit ManagementTransactional Accounting

Data Management

Digital Marketplace

CustomerRelationshipManagement

ProductData

Management

OnlineSales

SellingServices

Customers

Designers

Sstem Integrators

Distributors

OEMs

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Cost reduction due to shared services per function

20-50%

20-40%

25-35%

20-30%

10-25%

5-20%

5-20%

5-20%

10-20%

5-15%

5-15%

0 5 10 15 20 25 30 35 40 45 50

Human Resources

Facilities and Services

Accounts Payable/Receivable

Information Systems

Environment, Health and Safety

Legal

Tax

Procurement

Planning/Financial Analysis

Treasury/Risk Management

Public Affairs

Savings %

Source: Booz-Allen & Hamilton

TransactionBased

Services

Expertise-Based

Services

Cost reduction with SSCbetween 25% - 40% withROI between 1-3 years

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Management and Organizational restructuring will ask for an integrated approach

Humans Resources and CultureHumans Resources and Culture

Organization and ManagementOrganization and Management

Processes and ProceduresProcesses and Procedures ICTResultResult

20© (year) KPMG (member firm name if applicable), the (jurisdiction) member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in (country).(Insert document code)

Thank You!