Business Services Transformation Creating your own Shared Services Center 7 th Controllers’/Accountants’ Summit Association of CPAs in Commerce & Industry

Business Services Transformation

Creating your own Shared Services Center

7th Controllers’/Accountants’ SummitAssociation of CPAs in Commerce & Industry14 July 2015

www.pwc.com/ph/consulting

Business Services Transformation2PwC

PwC’s 18th Annual Global CEO Survey:Cost reduction is top of CEOs’ agenda

July 2015

Complete a domestic M&A

Complete a x-border M&A

Sell majority interest in a business or exit a significant market

Outsource a business process or function

Insource a previously outsourced business process or function

Implement a cost reduction initiative

Enter into a new strategic alliance or joint venture

End a new strategic alliance or joint venture

PwC

PwC’s Finance Benchmark Survey Findings:What sets top performers apart?

Cost-efficiency

Faster turnaround

Leaner operations

Sharper insight

3July 2015Business Services Transformation

4PwC

PwC’s Finance Benchmark Survey Findings: Priorities for making Finance more effective

Finance professionals recognise that the nexus of improved

technology, communication, and

collaboration is critical if they are all

going to be more effective in carrying out their functions


Setting the context

Shared

• No business unit control of central overhead

• Inflexible to business unit needs

• Remote from business

• Unresponsive

• Higher costs

• Different control environments

• Duplication of effort

• Variable standards

• Independent of business

• Synergies

• Lean, flat organization

• Dissemination of

best practices

• Business unit maintains control of decisions

• Responsive to client needs

• Economies of scale

• Consistent standards & controls

• Common systems & support

Shared

Centralized

SSO’s combine the benefits of centralized and decentralized operations

July 2015

Decentralized


Key statistics

of Fortune 500 companies have implemented a SSO58%is the average cost savings achieved due to SSO40%is the average improvement in productivity per year34%

SSO is no longer a strategy – it is a Best Practice

July 2015


Objective of this presentation

Introducing Business Services Transformation / Shared Services Organisation (BST / SSO)

Purpose

BST / SSO helps to:

> reduce costs

> increase business efficiency

> enhance control and transparency

Why is it important to you

July 2015


Agenda

1.BST / SSOs – an introduction

2.Case Studies – what are others doing

3.New trends based on our latest survey

4.Making it happen

July 2015

An introduction to SSO / BST

1


What is Business Services Transformation (BST) ?

A strategic approach to manage Business Support functions (Finance & Accounting, IT, HR, Procurement etc.)

1

Ability to improve service quality, transparency, control, drive compliance3

Freeing up time of business executives and cash of business to make better decisions4

Generate cost reduction (typically 20-50%)2

July 2015

11PwC

Common drivers for Business Services Transformation

• Drive value: provide business with real insight to make better business decisions

• Manage cost: take control of costs without sacrificing long-term success

• Flexibility: provide a scalable, standardized platform for future growth

• Organise and operate: build and run an efficient and effective organisation

• Manage talent: build capability, optimise resources and develop talent

• Manage controls, risk and regulation: create a robust, cost effective system of control and risk management in response to regulation


A broad range of services can be provided through an SSCNon-transactional processes are gaining importanceServices delivered by SSCs surveyed by PwC

Source: PwC - Shared Services: the Edge Over (2014)

Accts

paya

ble

Fixed a

ssets

Genera

l ledg

er

Accts

receiv

able

Interc

ompa

ny

Travel

expe

nses

Cash m

gt

Credit &

collec

tion

Externa

l repo

rting

Mgt rep

orting

Payrol

lTax

es

Cost a

cctg IT

Procure

ment

Treasu

ryFP&A

Custom

er se

rvice

s

Contro

lling

Facility

man

agem

ent

Regula

tion (

legal)

Other

0%

20%

40%

60%

80%

100%92% 90%

87% 85%78% 76%

52% 50% 49% 48%45%

42%

34%31% 29% 27%

20% 20%17%

7% 6%

20%

July 2015

13PwC

Shared services is part of an overall transformation of the Corporate Center

Shareholders/ investors

Business Units

Adapted from Goold, Campell, Alexander. Corporate Level Strategy

Core

Addedvalue

Shared services

Non-discretionary activities• Legal compliance• Tax and statutory financial reporting• Activities in support of shareholder/stakeholder

requirements

Discretionary activities that add value

• Leverage competencies• Guide major business unit decisions• Provide functional leadership• Co-ordinate organizational matrix (e.g.

geographies)Non-core activities which lie in the center because of economies of scale and scope• Accounting and Finance, IT, HR

transaction processing and service provision

• Legal, Corporate Communications• Marketing Services, Contact

Centre, Surveillance

Corporate Center Activities


BST can help address critical business issues

July 2015


Examples of different SSO modelsOrganizational Unit Centre of Excellence

Regional Global

Country

Duplicate Shared Service Centers by organization for each region

Process Approach – each process delivered from best-in-class

SSO’s are located by country processing data for each org. unit

SSO processes all BUs across a geographical region

A single SSO processes all BUs across all locations

Choosing the right model is critical for delivering business benefits

July 2015

Case Studies – what are others doing

2


Global Medical Devices Company

APAC Multi-function SSO

Geographic Footprint

1* Corporate HQ: USA

6 geographies:•Latin America•North America•Europe•Asia Pacific•Middle East•Africa

Business layers &HQ

Europe SSO : implemented

APAC –SEA : implemented

Rest of APAC: being transitioned

North America & Latin America SSO: being implemented

•Europe SSO:100+ staff•North America SSO: 300+ staff•Latin America SSO : 50+staff•Asia Pacific SSO in Singapore: 175+ staff•Satellite HR SSO in China

Implementation statusSSO 5SSO and/or

BPONo. of centres

Business Over view

•Revenue > USD 7 billion•Presence in more than 50 countries•Approx 29,000 employees

Core Finance Systems

•SAP R3, SAP, APO, SAP BW•Hyperion•Iscala•MDM, C2C & other HR

systems

America

South America

China

Europe

Singapore

Finance •GL closing •Intercompany accounting •Accounts payable•Travel & Expenses•Fixed assets

HR•Maintain HRIS •Expat management•Offer management•Learning & development •Policies & procedures•Benefits admin •Share Scheme admin•Recruitment admin•Management Reporting

Customer Service: •Customer Master Data•Order processing•Pricing validations•Service/Contract billings

July 2015


1* Corporate HQ:Switzerland

6 geographies:•Latin America•North America•Europe•Asia Pacific•Middle East•Africa

Global Electronics Manufacturing Company

Order to Cash•Order entry – Customer

billing•Accounts Receivable /

Cash Applications•Credit & collections

Purchase to Pay•Order processing•Accounts payable•Travel & expenses

account

General Ledger and Close•Fixed Asset accounting•Inter-company

accounting •Tax Accounting•Closing / Financial

reporting

Payroll•Master data & Payroll file

opreparation•Payment

Treasury back office

China Finance SSO Geographic Footprint Business layers &HQ

3 SSO’s operational

Currently conducting a dlocation assessment to ddetermine the location for danother Asia FSSO

Business Over view

•Revenue > USD 12 billion•Presence in more than 50

dcountries•Approx 96,500 employees

Core Finance System

•SAP

•China based Finance SSO •India based SSO •Europe based SSO•New location for rest of Asia being assessed

Implementation status

SSO 3SSO and/or BPO

No. of centres

Switzerland

India

China

July 2015


Global Manufacturing Company

Order to Cash•Order entry – Customer

billing•Accounts Receivable /

Cash Applications•Credit & collections

Purchase to Pay•Order processing•Accounts payable•Travel & expenses

account

General Ledger and Close•Fixed Asset accounting• Inter-company

accounting •Tax Accounting•Closing / Financial

reporting / Preparation of Yellow

Book

Payroll•Master data & Payroll file

preparation•Payment

Finance SSO Geographic Footprint

1*Corporate HQ: dGermany

5 Geographies: •Africa•Americas•Asia•Europe•Oceania

Business layers &HQ

SSO: being implemented

Business Over view

•Revenue > EUR 1.5 billion•Presence in more than 180countries•Approx 8,000 employees

Core Finance Systems

•SAP

Implementation status

SSO 2SSO and/or BPO No. of centres

Singapore

Germany

•Asia Pacific SSO in Singapore•Europe SSO in Germany

July 2015

New trends based on our latest survey

3


Implementation strategy for BST / SSO

Lift, Shift & Transform is the preferred option

for process migrations

July 2015


A shared service delivery model for Finance

Change Manageme

nt

Technology & Information Infrastructur

e

Organization & People

Transactional Process

Efficiencies

Finance Transformation

Plan

Order to Cash

Data Architecture

Organization Structure, Roles & Responsibilities, Performance Measurement, Career Development & Training

Finance Capability Development & Training

Procure to PayRecord to

ReportOperational tax

Eliminate, Simplify, Standardize, Automate:

Change Leadership

Existing ERP System

Existing Application

Platform

New Enabling Technology

July 2015


Greatest challenges while setting up BST / SSO

Different platforms, non-standardised processes and Change Management

are key challenges July 2015


Continuous improvement initiatives

Most BST / SSOs are not adopting Six Sigma or TQM – they prefer “normal” Business Process Re-engineering initiatives (e.g. Lean)

July 2015


Productivity improvement because of BST / SSO implementation

The general feedback was that SSOs need to be optimised further

July 2015


Extent to which processes are standardised in BST/ SSO

Process standardization is a big benefit => results in Operational Efficiency

July 2015


Benefits in relation to cost, quality and time

The business benefits of BST / SSO are clear !!!

July 2015


Realised cost savings because of BST / SSO

Payback period is < 2 years

July 2015

BST / SSO – key considerations

4


BST / SSO implementation – Key considerations

Strategy

SSO model

Key Considerations

Business case

Location

Functions and

Processes

• Cost vs. benefit analysis

• ROI / IRR / Payback

• Other business benefits

• Alignment to strategy

• Quality & Productivity of labour

• Tax considerations

• Infrastructure & accessibility

• Single tower or multi tower

• Nature, maturity and complexity of processes

• Business drivers

• Organic / In-organic growth plans

• Foray into new markets

• Local vs. Regional vs. Global

• CoE ?

July 2015

Making it happen4


A structured approach is required

Feasibility

Top-Down Analysis

AssessDesign and Construct

Implement

Impact AnalysisTransition/Change

Management

• Location assessment

• Fit/Ready assessment of processes

• Business case

• Implementation roadmap

• High level To-Be design

• Roll-out design

• Assess As-Is

• Design detailed To-Be landscape

• Identify gaps

• Mitigate risks

• Localize design

• Develop & conduct training

• Design SSO SOPs

• Integrate technology

• Post implementation support

Bottom-Up Analysis

Reassess• Align business case

Support• Project management – Communication & Project Tracking

• Process documentation – Documentation of As-is and To-Be processes

• Stakeholder management – Management of stakeholder expectations and concerns

• Update road map

July 2015


Up front analysis must be robustFeasibility – Fit/Ready Assessment Methodology

Fitness Evaluation Summary

Readiness Evaluation Criteria

July 2015


The seven essentials for success

1. Know your problem

2. Sell the change

3. Stand behind your benefits case with absolute confidence

4. Balance clear vision with detailed design

5. Start early, move fast

6. Understand the up front costs

7. Remember the retained functions change, tooSource: PwC - Transforming business services:

the seven essentials for success (2013)

July 2015

Thank you!

This presentation has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Consulting (Philippines) Inc., its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2015 PricewaterhouseCoopers Consulting (Philippines) Inc. All rights reserved. “PricewaterhouseCoopers” and "PwC" refer to PricewaterhouseCoopers Consulting (Philippines) Inc. or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate legal entity.

Benjamin Azada

Principal, Consulting

+63 2 459 3011

[email protected]

Gary Ona

Senior Manager, Consulting

+63 2 845 2728 ext. 3230

[email protected]

Documents

Business Services Transformation Creating your own Shared Services Center 7 th Controllers’/Accountants’ Summit Association of CPAs in Commerce & Industry