Shared Services 2.0 Massachusetts Digital Summit October 19 th, 2009

Shared Services 2.0 Massachusetts Digital Summit

October 19th, 2009

Copyright ©2009, Oracle. All rights reserved. Oracle Confidential 2

• What are Shared Services?

• Why Do Organizations Adopt Shared Services?

• How are Shared Services Implemented and Optimized?

• How does Oracle Enable Shared Services?

• What’s Next/Trends?

Program Agenda

Theory


What Are Shared Services and What Are the Benefits?

• Reduces costs

• Improves productivity

• Promotes timely execution

• Enables better decision making

• Leverages existing and exploits emerging technologies

• Ensures acceptable levels of control and risk management

• Optimizes skills/capabilities of the organization

• Promotes collaboration across the extended enterprise

Shared Services is a service model designed to gain efficiencies in routine processing by leveraging

common practices and enabling technology

Key

Ben

efit

s


Pre-Shared ServicesSilos of Resources/Data

SalesMarketingDistributionManufacturingPurchasing

FINANCE

HUMAN RESOURCES

INFORMATION TECHNOLOGY

LO

B 1


FINANCE

HUMAN RESOURCES


LO

B 2


FINANCE

HUMAN RESOURCES


LO

B 3


Post-Shared ServicesIndependent LOBs with Common Model Support

SalesMarketingDistributionManufacturingPurchasingLOB 1

SalesMarketingDistributionManufacturingPurchasingLOB 2


FINANCE

HUMAN RESOURCES


LOB 3

SSC


Shared Service Models Are Highly Mature And Successful

95% of SSC implementations

rated “successful”

67

28 5 100

0

10

20

30

40

50

60

70

80

90

100

a b c sumYes, definitely a

full success.

Yes, however, we had some

issues.

No, we have major

problems.

Total

• Service delivery models for Shared Services are proven

– Ranging from sharing only technology and/or processes and/or people

– Varying strongly in scope

• Technology is mature– Core are global ERP/HRMS systems

– Wide range of tools in use

• Best-practices available in abundance

– From numerous successful implementations in all industries

Source: Hackett “The Future of Shared Services” 2005

% of respon-dents

Shared Services Are Highly Mature… …And Have a High Success Rate


Why Implement a Shared Service Center?Tactical vs. Strategic Business Drivers

HighLow Medium

TACTICAL

Hig

hL

ow

Me

diu

m

ST

RA

TE

GIC

Improve Service Levels

Process Morewith Same/Less

ProcessStandardization

ProcessImprovements

Increase Control

Capture Acquisition Synergies

Data Visibility

Coordinate IT

Accelerate ERPImplementation

HeadcountReduction

Increasing (sustainable) value/continuous improvement as f(x) of time


Top Business Drivers for Shared Services Are Process Standardization and Improvements

Source: Deloitte Research “The Future of Shared Services” 2003; Oracle analysis

Business drivers for adoption of SSC (% of respondents)

0 10 20 30 40 50 60 70 80 90

Capture acquisition synergies

Cross-division/location comparability

Coordinate IT

Data visibility and comparability improvements

Accelerate ERP implementation

Increase control

Improve service levels

Headcount reduction

Facilitate process improvements

Process standardization

Headcount reduction is not #1 priority, although important

Other business drivers

Process standardization and improvements


Overwhelming Evidence of Proven Financial Benefits From SSCs

• Average ROI for shared services implementation is about 20 percent– Average payback period approximately three years

– 74 percent meet or exceed their financial targets

• Measurable direct bottom-line impact, e.g. up to 45% reduction of finance cost through shared services

• Sizeable benefits achievable in payroll administration - the early adopter in HR shared services

– Top performers beat the average payroll cost per employee by 47%

• Shared services also deliver on intangible benefits– Such as productivity, quality and customer service


Shared Services Cover A Wide Variety Of Processes Across Multiple Functional Areas (1 Of 2)

Finance

• Cash disbursements

• Revenue cycle

• Accounting & External reporting

• Tax management

• Treasury management

• Compliance management

• Planning and performance management

• Business analysis

• Function management

HR

• Rewards administration

• Payroll services

• Data management, reporting and compliance

• Staffing services

• Workforce development service

• Organizational effectiveness

• Total rewards planning

• Strategic workforce planning


Procurement

• Supply data management

• Requisition and PO processing

• Supplier scheduling

• Receipt processing

• Compliance management

• Customer management

• Sourcing execution

• Supplier management & development

• Sourcing & supply base strategy


Services

• Order and contract management

• Service execution

• Service operation

• Planning & strategy


Functional Areas And Key Processes Covered By SSCs

Source: Hackett; Oracle Insight analysis


Shared Services Cover A Wide Variety Of Processes Across Multiple Functional Areas (2 Of 2)

Information Technology

• Infrastructure development & management

• End user support

• Application development & maintenance

• Quality assurance

• Risk management

• IT business planning

• Enterprise architecture planning

• Emerging technologies


Marketing & Sales

• Marketing communications

• Brand and product management


• Market research & analytics

• Sales execution

• Sales operation

• Sales planning


Manufacturing

• Production planning

• Inventory management

• Shop floor scheduling

• Capacity management


Corporate Services

• General administration

• Travel & transportation

• Real estate & facilities mgmt

• Government affairs

• Legal

• Quality management

• Risk & security management

• Corporate communications


• Executive office

Functional Areas And Key Processes Covered By SSCs

Source: Hackett; Oracle Insight analysis


Ensuring Successful Shared Services Implementation: Best Practices (1/2)

• Clearly define the Shared Services vision– Senior executive driven process with operating unit leader participation

– Clear alignment of Shared Services vision with overall organizational goals

• Develop a detailed business case for change– Develop “case for change”; include both hard benefits (e.g. labor cost reduction) and soft

benefits (e.g. service improvement, better visibility, etc.)

– Do not under-estimate the implementation and transition costs

• Define scope for economies of scale and skill– Scope includes “scale” based processes (e.g. Payables, invoices, etc.)….

– …and “skill” based processes (e.g. legal, marketing, tax, etc)

• Establish appropriate executive leadership– Steering committee includes HQ and operating unit executives

– Use distinct leadership for SSC development vs. operations

• Select the right people for the project– Select the “right” resources, not the “available” resources for the project

– Release SSC project resources from their day-to-day responsibilities

1

2

3

4

5

Source: “Ensuring Successful Shared Service Implementations: From Vision To Operation”, Accenture


Ensuring Successful Shared Services Implementation: Best Practices (2/2)

• Communicate extensively– Establish a clear communication plan (message outline, timing, audience, communicator)

– Communicate to potentially affected employees early-on

• Start transition planning early– Start transition activities up to 180 days prior to SSC implementation

– Focus on knowledge transfer, data conversion, and training activities

• Use technology as a strategic enabler– Streamline/consolidate core transaction processing systems (ERP, HRMS, etc.)

– Invest in workflow capabilities, case management solutions, and self-service tools

• Recruit and train the “right” team for the Shared Service Center– Use a mix of internal and external hires to develop the SSC team

– Develop and implement an enduring training plan

• Over support each implementation– Over staff the organization during the transition and stabilization periods

– On-site project representatives for support & issue resolution during stabilization phase

6

7

8

9

10

Source: “Ensuring Successful Shared Service Implementations: From Vision To Operation”, Accenture


Example Governance Structure for Shared Service Centers

COO

SSC Leadership

SSC Management

SSC Operations User Committee

Steering Committee

Advisory Board

• SLA approval

• Process & strategy review

• Issue resolution

• Operation unit behavior influence

• Continuous improvement feedback

• Service delivery strategy

• Scope expansion

• Significant issue resolution

• Funding review

• Resolve service performance issues

• Continuous improvement ideas

• New requirementsSource: “Optimizing Shared Service Performance through Better Service Management”, Accenture


Hindsight Reveals to Experienced Shared Service Organizations that Executive Sponsorship is Critical

Success Factors Deemed Most Important by Surveyed Executives

Strong planning and process standardisation are not enough on their own.

0% 10% 20% 30% 40%

Executive Support

Change Mgt /Communication

Standard Processes

Employee Engagement

Customer Buy-in

Planning

Source: Shared Services: A Benchmark Study, March 28 2005, Arthur D. Little / The Johnsson Group; based on a survey of 40 global organisations, workshops, and client engagements.


Best Practices Adopted By Shared Service Center Leaders

82%

71%

48%

45%

42%

40%

40%

39%

34%

31%

28%

25%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Service Level Agreements

Key Performance Indicators

Imaging/Workflow

Employee Development Programs

Account Managers

Continuous Improvement Model

Call Center

Balanced Scorecards

Employee Self-Service

Communications Model

Customer Self-Service

Manager Self-Service

Best Practices Employed In Shared Services OperationsPercentage of Centers

Source: “Shared Services: The Evolution of Higher Performance”, Accenture 2004

Governance related

Performance related

Technology related


Shared Services: Top Optimization Initiatives

Top InitiativesPercentage of Respondents

Source: Deloitte Research

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Increase automation tools

Streamline processes

Expand scope of services

Improve customer service levels

Improve controls

Expand the number of internal customers

Improve overall governance structure

Improve performance management

Develop/improve formal training programs


Most SSC Organizations Move Beyond Simple KPI Measurement to Form SLAs with Internal Customers Continuous Improvement and Self Service are also Key Drivers

68%62%

56%

49%44% 44%

40%

32% 32%

0%

10%

20%

30%

40%

50%

60%

70%

KPI SLA ContinuousImprovement

Model

EmployeeSelf-Service

ImagingWorkflow

Call Centre BalancedScorecard

GovernanceBoard

EmployeeDevelopmentProgramme

Source: Shared Services: A Benchmark Study, March 28 2005, Arthur D. Little / The Johnsson Group; based on a survey of 40 global organisations, workshops, and client engagements.

SLAs that do not promote simplicity, transparency, and accountability are likely to cause more administrative burden than benefit.


What Makes a Service Level Agreement (SLA) Successful?

Source: Booz-Allen & Hamilton 2000, “Getting Shared Services Right: Capturing the Promise”

Simplicity

• Short (1-3 pages) and simple to understand• Bundle services by business units to enable tradeoffs across

functions• Enable straightforward, ongoing communication

Critical Success Factors What You Need

Transparency and Choice

• Invoicing clear and understandable• Pricing provides insight into service cost drivers and encourages

desired behavior• Base level “lights-on” operations separated from optional services• Flexible, scalable service levels, up or down

Metrics and Accountability

• Track performance against internal targets and external benchmarks (without adding excessive infrastructure)

• Link business and service management


Integrated Technology Is a Key Enabler For Shared ServicesIT standardization in SSCs continues

Homogeneity of IT landscape in SSC

35%46% 53%

65%54% 47%

0%

20%

40%

60%

80%

100%

2003 2004 2005

UniformHeterogeneous

“One single integrated ERP system” identified as the single most important best-practice for SSC performance (Hackett 2004)

Source: Hackett “The Future of Shared Services” 2005


Technology Enablers For Shared Services

100

54

19

17

10

0

20

40

60

80

100

a b c d sumONE common

ERP system.

Legacy System

Multiple ERP

systems

Total

1. ERP

2. Data Analysis and Reporting Tools

3. Workflow

4. Document Imaging

5. Data Warehouse

6. ePayment

7. Employee Self-Service

8. EDI

9. Manager Self-Service

10. Financial Consolidation Tool

% of respon-dents

Top 10 Technology Enablers ERP Standardization Is A Given

Multiple ERP

instances

Source: “Shared Services: The Evolution of Higher Performance”, Accenture 2004

Copyright ©2009, Oracle. All rights reserved. Oracle Confidential

Oracle E-Business Suite Offers Rich Functionality For Shared ServicesKey Differentiators

Enable continuous

improvement

Enable continuous

improvement

Integrated processes across

HC and SSC

Integrated processes across

HC and SSC

Reduced workload for SSC staff

Reduced workload for SSC staff

Reduce IT integration and

maintenance costs

Reduce IT integration and

maintenance costs

• Single, comprehensive suite of applications covering all key functional areas for SSCs (Finance, HR, Supply chain, Procurement, etc.)

• Rich functionality for a variety of self-service tasks

• Pre-built, workflow across various functional areas

• Delivers complete process solution (e.g. Procure to Pay, Order to Cash, etc.)

• Daily business intelligence

• Pre-built reports and dashboards by user roles and responsibility


• Unifying Technology– Oracle Applications are designed to support multiple organizations in one instance

• Workflow– The key link between SSC and the divisions being served is built into Oracle’s

applications

• Interfaces– Management tools for open interfaces to legacy systems, and a comprehensive

application integration framework to enable seamless integration

• Self Service– Integrated applications to be used by the division being served, driving strong operating

efficiencies

• Business Intelligence– Powerful means to monitor and manage performance by both the SSC and the divisions

being served

• SEM Products– Activity Based Costing or Balanced Scorecard can be used to manage performance

against service level agreements

• Integrated Customer Relationship Management (CRM)– Oracle CRM Modules are pre-integrated into the E Business Suite application family

Key Oracle Differentiators for Shared Services

Source: Oracle Global Implementation Guide


Four Important Trends in SSCs: Outsourcing, Automation, Global Reach and Scope Expansion

• Outsourcing and offshoring– Once an organization feels comfortable with internal Shared Services it may decide

to outsource and/or offshore operations

– Mature offerings in Finance/IT available, HR/procurement/etc. taking up speed

• More automation– Most important objective of most SSCs: single global ERP/HRMS system

– Top 2-4 priorites are: vendor self-service, e-procurement, employee self-service

• Global reach - movement to global shared service models– Pressure to move to lower labor markets− Increased efficiency with lesser SSCs

• Scope expansion along all corporate functions

Copyright ©2009, Oracle. All rights reserved. Oracle Confidential

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Shared Services 2.0 Massachusetts Digital Summit October 19 th, 2009