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Roundtable: crisis and shared services - an Asian perspective

In 2008 comes to an end, the signs of the global economy in 2009 are to say the least, inauspicious. But this crisis does not affect equally all geographical areas - and this is valid for shared services and outsourcing space as well as for the economy in general. In order to obtain a better defined image of how the different parts of the world are reacting differently to the biggest surprise for the financial system since the crash of Wall Street, the Shared Services and Outsourcing Network convened a series of regional roundtable discussions. The first - getting the opinion Asia - was held in late November and was chaired by Hugo Walkinshaw Deloitte, as shown in the transcript, for mature SSOs at least while the impact of crisis has yet to play itself out fully, there are certainly opportunities sown among the challenges ...

Attended:

Hugo Walkinshaw (chairman)
Shared Services Asia Principal Leader
Deloitte

Chen Theng Aik
SVP and Head of Asia Pacific Operations
DHL

Rodrigo Martins
GBS General Manager Asia
General Electric

Erik Moller Nielsen
GM Global Service Centres (Philippines)
Maersk

Hugo Walkinshaw: Regarding specifically the South-South cooperation is an added value - and I would like Rodrigo ask that we start this - what you see differences due to the current situation in terms of new things are being asked to address, or things were going a little slower or not so pronounced that suddenly come to the surface?

Rodrigo Martins: Actually we are seeing a growing interest of companies to join our shared services organization. In difficult times like these, the value of a shared group service brings to the table is even more evident. From every angle you look at our group is of value - from the high quality of an organization specialized in processes that are fundamental to the management of companies (not least in the current economic conditions, by the way), from the standpoint of cost savings due to scale in which we operate, and our ability to provide services on our infrastructure people, processes and existing platforms.

By all these reasons I see a general increase in demand for our services. It is also important to realize that we are constantly concerned about the productivity, the constant search for improved quality and efficiency in everything we do, and in times like this is even more important. On a more tactical level, we have been providing our businesses increasingly tools and analysis that make it easier for them to control and manage its costs. From our perspective we are helping our customers, GE businesses, and from their perspective it is a value added service they are receiving from us.

Hugo Walkinshaw: So most of which is essentially focused more and more emphasis on the things that are already underway. Maybe there's a couple of talks should not All this business unit, or the process that, in or out, and the current conditions are basically forcing the pace in these decisions?

Rodrigo Martins: Exactly that, more of the same, at least for our organization. I think companies see the value of what we are doing what they want to board more and more. They see that we have a dimension and we are able to provide good service at a competitive cost and that is good value for them at the end of the day.

Walkinshaw Hugo: And in terms of being asked to provide a whole new things, or to go in new directions are seeing any of that yet?

Rodrigo Martins: Do not see that in GE. Probably because being a shared service organization established they already have most if not all, typical shared services offerings. We have a service, which is relatively new to our group in Asia Customs. This service helps companies dealing with imports and exports worldwide. But the service is not new, since it was introduced some years ago in the Americas and is now available at world.

Chen Theng Aik: Due to the situation we are now, we are still contemplating our migration activities the SSC in Asian countries more expensive. Our officers have been told to do effective, and the substitution of counts, very carefully, and it is increasingly difficult for business units and that there is more interest for two reasons. One of them is pure salary arbitration and our ability to continue to leverage that, as that there is a growing interest in moving more activities to us, and what is traditionally considered taboo - not to be transferred to shared services - now all they could be on the table. With our South-South cooperation in Malaysia, there is no arbitration large Asian countries more expensive.

Point number two is that because things for businesses are becoming harder and harder, its staff is being looked at very carefully, so that any increase in volume, or even replacement after the resignations, is also getting harder and harder. When they have their own template freezing or restrictions count, it becomes more attractive to migrate to us. We ended up being asked to do more work that have traditionally been conducted within their organizations in the country of origin.

Hugo Walkinshaw: So a little more of a platform for recording MDs country to have to try to accelerate the timing of the transition.

Erik Moller Nielsen: I'd like to echo what you just said Chen, and really you just Hugo use the words we use: it is a platform of "burn." We are thinking about anything and everything, and we see a widening of the scope and depth of what is asked to handle. For example, in the back-office support of SAP, we are increasing the percentage of end to end finance process is being handled in the service center and we have a Six Sigma project will now take up to 70 percent. But we are also asking to do things almost more than we can handle at the time of settlement KPO work accidents very sophisticated, so we are moving in the scale of values, surely, at this time. Definitely see more offshoring in our way.

Hugo Walkinshaw: Well, it's definitely good news that at least someone is busy these days ... The only thing I would add to what you have said is that, first, specifically within our shared services environment - and this plays a little to the point of Rodrigo initially - we're doing much larger and more frequent use of South-South cooperation for almost daily operational data, since everything is moving so fast and so strong as to swing making decisions about hiring, costs and so on. We are putting much more emphasis on the basis of ad hoc management information coming from the center. I've noticed that much better are partnering with the center and are being forced to be much more reactive and sensitive data on production.

Secondly, looking at companies that did not go to shared services, however, I think we have initiated five new feasibility studies for shared services in recent eight weeks, so the feeling that companies out there that have not yet taken the step - or who have taken the plunge and now have U.S. or European centers - are now looking at Asia as a place of relocation, with a real sense of urgency and momentum. We are also seeing tremendous interest from large local companies that are I suppose, cash-rich and are looking to make this type of reorganization and structural investments while things are slowing down and have time in their hands. So even for people who are not in shared services is definitely the sense that this is the way forward in response over control and cost.

Sson: There seems to be a bit of a cross section of space here: on the one hand we have Who's Rodrigo doing more of the same kind of thing, and secondly we have to Erik actually provides a lot of new processes. Hugo, to what extent are companies approaching to investigate the launch of new initiatives for shared planning services for a wider, broader shared services could have been the norm in recent years?

Hugo Walkinshaw: I think people who have been sitting on the fence about how shared services even start, and have been going down the road of "our culture is that it does not, and not at sea, and not to make redundancies," and I think they have been expelled from the fence by economic conditions. I think it's the people who pick up the pace and realize they have to do some desperate measures, rather than a step towards a broader more sophisticated the track. I think the reason that there has been a bit of difference so far in the panel is a reflection of where we are all in the journey of shared services. My takeaway is that really what keeps us busy is to do things we expected to do, and hope to do, had planned, or already making a little - but do them much faster. I do not think there are plenty of brand new initiatives - however - coming in the space of shared services.

Erik Moller Nielsen: I totally echo that. I think this is the push that has come lately to push in development that was happening soon a little anyway. Some people in the organization (and we have a mature SSO, about eight to ten years and six sites in operation) is sought in the SSC to have been created to give maybe a little basic processes, and perhaps being a good use, but not the need to use, but in the current climate with falling turnover this is an action who wishes to take, if not for anything else other than the labor arbitration initially - but then we know that once has shifted we can optimize the process on the road. We are being asked to look at data mining, market analysis, and we will be creating a group of January 15 only to see that, and there are many many things that comes our way, so everything is good - and keeps us very busy.

Hugo Walkinshaw: The special bits at the end - drawing data and market analysis - are not things that every day at the center of shared services traditionally do, so I think your comment about the chain up value is the field. You can, I suppose you have had that in their views on the value chain, however, and this is just revving up its decision rather than an idea completely new that has come as a result of the crisis. So let's move forward, then, in terms of priorities for the next six months, can the whole world the name of your first one or two? Erik, what will be your main focus of the next two quarters?

Erik Moller Nielsen will on the side of talent, because now we are looking for different people in some of these issues, such as with the settlement of claims, we're seeing, we must find people with legal training. At first it is a challenge of human resources, and secondly it is site-building and planning of a site (and who are well there). Third - and goes with the capacity of the site - which is the use of workstations: how it push so that we use every desktop more once, maybe even more than twice every 24 hours? In this sense, our challenge is that most of our work is very time sensitive and urgent, in turn with times to half an hour, but we hope we can convince our internal client can save money if we can extend sometimes over part of this work and therefore that night - that means cost savings and not have to expand the sites.

Hugo Walkinshaw: That's an interesting dynamic, if it has has unused capacity at certain times of day or night, then obviously it is a more cost effective to use that instead of adding plants and increased total costs. I guess you're on the right side of the world to be running 24 / 7 shifts.

Chen Theng Aik: I think our big focus will be in two areas. One is in getting our unit costs down even more in the past, our internal business partners were very happy with our unit costs for large salary arbitration, but now things are pushed more and more that are saying "we have this wonderful and we arbitration are happy with that, but - you can get even lower costs? "So we're getting a lot of focus - is not that before, but now with greater intensity yet.

The other thing is that we are now moving into much more customer-facing activity than before, so that the entire collection, the activity of customer consultation, the activity that traditionally deal have not played too much on any great scale, and now we are moving more and more in that domain, and in some countries that have not fully realized in shared services, however, we have to find another talent pool and train more because before it was traditional accounting were looking for.

Hugo Walkinshaw: Only in reducing costs: it is interesting that you say that, because it was one of the first responses to the address here "is great - good service - far more, please - Can you make it cheaper?" So we kind of suffering under the same load. Practically - and I do not want to go into too much detail - when I see it I have to pay an installation cost that can not really negotiate around, I have to pay an IT infrastructure is a sunk cost that is depreciating, the only one I have flexibility in reducing costs is the efficiency around more and not to reduce wages, but people swapping out and bring more young people. Which is quite radical. I'm wondering, in terms of such areas, are you going through a similar thought process? Are those the kind of things you are looking to control costs?

Chen Theng Aik: For us a great area we are looking to increase our area of control of our team leaders, our managers, and so on, because there is a Even huge disparity between the salary levels of the team leaders and managers and what we call the associate level. So the increase in the number of partners is needed is great, and we will increase the span of control - so for the same number of team leaders and the same number of executives, we can carry more equipment? I think it is where the fixed costs come out and therefore reducing the unit cost. That is what the business partner is looking. The other area is what we do at present a consultant for some jobs outside of the migration project and now we are reducing our dependence on the external source and bringing more and more of our own resources in the effort migration projects.

Walkinshaw Hugo: Of course: reducing consultancy fees annoying ... The organization within the issue of control is good. I think we've seen where we have one or two more senior, experienced people to pass and taking larger roles in the new service centers we ended up sharing more young people to push up the pipeline to give them more opportunity to reduce the cost of paper instead of shopping around for new people who could be as expensive or more expensive than the originals. Span of control is a good angle.

Rodrigo Martins: The question here is whether or not the priorities have changed, and the answer for us is that they are not. From an operational standpoint, the priority for us is to continue consolidating activities in regional centers, one way to reduce costs is through scale and had to go through the path of consolidation of our activities at the regional centers we have here in Asia for quite some time. Another operational priority is the automation and standardization of our processes. So, what is not automatic standard or action is being marked. Our ultimate goal is, obviously, productivity and quality in everything we do.

Hugo Walkinshaw: So you still see opportunity around automation and optimization of IT?

Rodrigo Martins: Of course. As a matter in fact we are currently implementing a new version of Oracle, and we are taking advantage of that to convert part of our legacy IT platforms in a financial platform in all our shared services in Asia. So this in itself creates the opportunity for a lot of standardization and productivity gains for us.

Hugo Walkinshaw: I would say that reflects the nature of your business as you've grown tremendously by acquisition, from what I've got a diverse portfolio of businesses well and I suspect that you have a very diverse mosaic of ERP systems all over the place.

Rodrigo Martins: Yes - but is interesting because Oracle am referring this application is only within our own shared service organization. That said, some of the other businesses that need a better platform robusta may want to use our system. It is a fairly unique situation, perhaps specific to GE.

Hugo Walkinshaw: That's interesting - But it sounds like it could be a debate in itself!

Erik Moller Nielsen: Before: As we are also Chen looking in the span of control. At this time we have ten members by the team leader, but in some places of experimentation that have moved to 15. Let's see if we can do that everywhere. And the organization also will debut in the first quarter a new, flatter structure, so that in every department we will accept only three layers, from the department head or head process to partners. Then the cost savings, because we had very large gains in productivity through the optimization process this year, we decided the extra capacity we have gained that means we can close one of our six sites, so we are closing the site in China and February / March next year we will have only five sites in Asia instead of six.

Hugo Walkinshaw: So, over lines of comment on the consolidation and increasingly Rodrigo scale in fewer places - which is actually helping the span of control.

Erik Moller Nielsen: Yes, and more than 700 people have now in Guangzhou will be replaced in our other five centers that have a lower cost and FTE can handle things with the same efficiency.

Hugo Walkinshaw: OK. Now to see the talent and the people: what is happening with the economic climate in terms of their ability to find and retain people that you need?

Chen Theng Aik: I think like any other place that's popular shared services, Malaysia is no different in that what happens is that our more experienced players tend to be poached quite often: it will remain a challenge. To train people and get two or three years of experience good, solid, long run the risk of losing that open new sites and grow rapidly and are looking for experienced hires. So the emphasis is always there, to follow either to do a lot of job rotation or increase their reach so they can have internal career without having to look elsewhere.

The other area is related to an observation I made before: we have traditionally focused on the processes of accounting standard, but now we are moving more oriented towards the client side to side: billing, consultation, and collections, so it is necessary to develop that kind of talent that can drive customers receive calls, make collections of credit. Those are my two main areas of interest in terms of talent in the coming months.

Hugo Walkinshaw: That's very interesting to me, because the initial assumption when looking at this is that - given the crisis and the fact that people are losing their jobs work around the world - you might think might not have a bigger pool available in the market due, perhaps, graduates of the university could have fewer opportunities in the industry and could have more access, and others who do not want to abandon ship if you're with a company that can provide stability, under the circumstances we have now. So my first reaction was that talent would be a problem a little easier to treat.

However, after talking with some people, and now we have just heard that from Chen, who actually sounds like business as usual: there are more players entering in space and shared services really is just going to remain a talent competition.

Erik Moller Nielsen: Still there is competition for talent - but we think we can handle reasonably well here in the Philippines. We see the large reduction in India - and that's not unusual there - but this year we are below our target of 15 percent in Manila, and we see this as a challenge for entry level positions we're hiring for, even in a horizon two or three years. Also found that - given a little more time - that can be hired for more specialized positions, recently hiring a candidate Belt Black and so on. It is not a major problem - in fact, not stop its expansion, say.

Rodrigo Martins: The target for us in relation to people is to conserve and develop. One of my priorities for next year is to further the plans of the structure of our career: to ensure that we are promoting our people in the business of GE. Obviously, I agree with the point that in crisis situations tend to have a greater pool of talent available outside but we really have to care for people who have in the house first.

Hugo Walkinshaw: You're right: you have homegrown talent and it is trying to keep them, and I think that the instability of the current environment will influence some people during the next three to six months, but at some point recovery begin and will be slow but once people start to see recovery and that there are other organizations out there putting in shared services, will be coming your best people again. So I think there may be a small window of people who sit tight because they feel safer in any port in a storm, but I do not I think it will last long, and I think that's where he focuses on the development and retention will be crucial.

I think the only comment was others around the talent pool is that there have been some organizations - particularly in financial services - which have effectively disappeared, which have been subsumed into other companies have collapsed or fair, and there were a couple of interesting articles that come out of India about subcontractors who have had to close the facility within a fairly short because, for example, you had to buy another bank and the bank already had a facility to buy and did not need another, so that hundreds were watching or in some cases thousands demobilized persons, and therefore had a great ability to be released from subcontractors, if not shared services centers. I do not know if any of you with operations in India - or potentially in Manila, where many of the banks have to back-office operations - I've seen any of that happening?

Erik Moller Nielsen: We have not seen any of that happening yet.

Rodrigo Martins: Well, we have operations in India and Manila, and although I guess this should be happening, I have not heard anything directly.

Hugo Walkinshaw: I think it will be interesting to see how buyers of services that manage, especially in India, I was talking to some guys from one of the biggest U.S. banks recently announced a lot redundancy and were noting that this would have an impact on its outsourcing providers, and not in their captive centers in the premises. I am thinking in particular about the Lehman Bros, the Merrils, which had facilities that are obviously going to be affected. Let's talk a bit about outsourcing as it carries very well in that area. I guess all of us to a certain point, somewhere, somehow you are using some type of outsourced services to third parties. I am interested in two points of view here. One of them is How do you see in the short term their strategy around outside companies with change, in any case, and the second, do you think there will be no impact on outsourcing industry based on the happening right now?

Rodrigo Martins: As for the outsourcing of what we do, the focus is to assess the value of what they are getting for the money you pay, with special consideration to the quality, not just cost. Assigning greater control over services provided and prices being charged by the outsourcing business: this is what we've been doing all along but I think in difficult times tends scrutiny to increase. We also attach great importance to strong partnerships, which in times of hardship are expected to help.

Although this may not always be the case for our group, I suspect that some companies prefer variable capacity now, as opposed to fixed capacity, and therefore are looking for opportunities to outsource rather than develop internal capacity.

Hugo Walkinshaw: My initial response was also thinking that most people want to use outsourcing for exactly that reason. They will say "well, it's much easier to make a cost reduction, so I want to get another 20 percent the costs down and I want to be somebody else's problem, so I'll give a third, because I have the variability. "

Erik Moller Nielsen We are working on a hybrid outsourcing model further, the third-party contract made directly from our business units - but I'm sure that the current climate we're facing now will lead to an acceleration of that. In general, we have a chance to bid for it, but sometimes it just go straight to a third party. I know that other vendors are knocking at the door of the home! We have an interesting benchmarking exercise currently underway, and we will get results shortly, where we have been the benchmark of three of our centers against BPO providers with other providers to ensure that we are not out of line and that we are competitive in services and cost levels.

Chen Theng Aik: I think my situation is very similar to Erik we are especially in captivity, from time to time business is the opportunity to try some of outsourcing.

Hugo Walkinshaw: I have another idea on outsourcing that can be taken away, which is: I've always been interested in some of the buyers of services - particularly the largest - for its funding model, in terms of how they actually manage to take on some of the contracts. Sign the agreement and then go through a period of anything from six to eighteen months of transition, and very often their entry fee does not start until you go live, so you really have to finance a large part of the development and implementation - And I am concerned as to whether the purchasers of services still have access to the same amount of credit financing and used to consider the concerns of industry bank. Are the pockets will continue to support this type of funding model?

But let's move on: Finally, in terms of here and now, what are the things we shared services leaders should be looking out for in terms of quick profits, and the immediate priorities? What are the two or three areas to consider, for other shared services leaders out there?

Chen Theng Aik: I think all it comes to the next level and not be complacent and say things like "yes, we are a pretty good sample, with a good cost base and do nothing ". I think all the things we've said here today must be taken to the next level of intensity in terms of low cost, in terms of process improvement business, in terms of longer duration of control: I think everything has to be all weapons - firing on all these points. At times like these, no one can afford to stand still.

Erik Moller Nielsen: Not sure of quick profits, but I think that focus areas would be key at this time to maintain a low operating cost of truth, to keep third-party purchasers of services in the bay, and secondly to keep your key talent you have - no It is therefore very difficult to implement and optimize the process. And you need to maintain maximum flexibility, whether reduction of the organization, or growing rapidly: I think that to stay agile is the key now.

Hugo Walkinshaw: I think again I can see the thoughts at the forefront of the mind almost all business units, and the interesting thing to me is that from a perspective of shared services are probably the most agile of the company. Our daily business is flexible, if a service provider, and is a challenge to fight in all business environments, so I feel really shared services is better suited to this type of environment than almost any other part of the business.

Rodrigo Martins: I totally agree with you. And I add to that: remember why there first ... The fact that we are in the midst of an economic crisis now, no need to reinvent everything. Remember why they exist and keep the concentration - of course, be aware of what is happening with the crisis, but not distracted by it. Focus on implementation everyday of their objectives, and manage what is under their control.

Hugo Walkinshaw: I think it really is a tremendous opportunity. I know it's difficult at this stage to see the lights too bright and rosy picture, but in reality almost all the SSC should be feeling much more power, there is a lot more attention to people turning to them for help with the business, there is no expansion of the scope, there is new opportunity: the situation I can not see where it would be a problem that can be in shared services is if you're in a place where your organization really failed completely, and then frankly you actual problems. But I would say it seems like you're in a massive high if you're in a shared service center, if your organization still work. We had some internal discussion about this and believe it is a good place to be now. It's time to shine.

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About the Author

Jamie Liddell has worked in journalism since he was a 17-year-old cub reporter for The Tico Times, Costa Rica's highly regarded English-language weekly newspaper. Holding an MA in English from Clare College, Cambridge University, Jamie came to SSON from the world of overseas property publishing where he worked on the industry's best-selling publications for the UK and Ireland, and gave seminars at consumer and b2b exhibitions and conferences internationally.

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