What are the strongest development trends on the SSC/BPO market? And what process servicing models will bring tangible profits to companies? TMF Poland Commercial Director Rafał Nadolny discusses with Outsourcing&More magazine.
We are discussing the latest trends in the BSS and relations between the service suppliers and their customers with Rafał Nadolny, Commercial Director at TMF Poland and Michał Bielawski, Vice President of the Management Board of ADAPTIVE Solutions & Advisory Group.
Looking at the dominating trends on the SSC/BPO market we can get an impression that the companies are continuously faced with the either-or choice. They decide to either outsource or create their own shared services centre. Is it at all possible to avoid this either-or discourse in this situation?
Michał Bielawski (MB): In my opinion, the choice between SSC and BPO depends on the culture of the organization and the company's strategy for cooperation and approach to outsourcing. Companies that outsource a lot of tasks in the context of production or logistics also easily outsource their supporting functions such as finance. The companies that prefer to keep processes and data at home because of a strategic decision are more in favour of creating an SSC.
It is worth noting that more and more companies are using both models and, as it turns out, a hybrid model of this sort enables them to enjoy more freedom in taking steps and flexibility.
Rafał Nadolny (RN): That's right. Services provided by an outsourcer can be an excellent accompaniment to services provided by an SSC. In fact, only a few years ago, the market was dominated by the tendency to create 'self-sufficient' SSCs. The common perception is that cooperation with an outsourcer must mean taking over an entire area of activity, however this cooperation may only mean support from an outsourcer in a selected process or even a section of it.
Currently corporations deciding to set up SSCs increasingly transfer some selected fields to specialised external companies. Some processes require technical knowledge or occur so rarely that it is not worth building your own SSC to handle them. A typical example is the local tax compliance service provided for accounting centres, or the payroll service for HR centres. This example makes SSC responsible for the transactional part as well as understanding the business needs of the organisation, while the outsourcer provides specialist methodology needed to complete the process. Outsourcers and SSC can work together to achieve success. It is crucial to create a reliable governance model that regulates the principles of cooperation between the outsourcer and the SSC which will help minimise the risk of potential errors.
Moreover, examples where the SSC uses not only the knowledge and experience of the outsourcer, but also their infrastructure (virtual captive), or where the outsourcer, in cooperation with consultants, builds a dedicated team and transfers client's processes in order to return the ready-made unit to the client (build operate transfer) become increasingly popular.
It is common knowledge that the business services sector has for many years pursued well-tested and classical models of providing these services. Is there still room for change and improvements, and if so, what are the benefits?
MB: Our world is ever changing. What we thought would be valid for many years is now likely to expire much earlier. For the time being, it is GBS that seems to be the most effective model, because it offers comprehensive management for business/client support services. What we also noticed is that, apart from support, the so-called 'core business functions' gain more meaning. Observing the market trends, the outsourcer or the SSC is expected to apply this data in a business-like manner, and their efforts are to be assessed and valued not on the basis of qualitative or quantitative indexes, but based on business requirements and indexes.
RN: In our industry, we are constantly adapting to the changing needs and expectations of our customers. Classical models of cooperation, where the client used to adapt to the outsourcer, are no longer valid. Currently, the whole range of services are being adapted to the needs of the client. We have many projects where our specialists work either on the client's system and infrastructure or directly in their office with the remote support of the TMF Poland team (the so-called on-site model). In this case, the client maintains greater control over processes. Moreover, the implementation for the client is much faster and more efficient.
We all know that the SSC industry changes very fast. As suppliers cooperating with these companies do you also take part in these changes?
RN: The ability to adapt to change is, in my opinion, currently one of the most important competencies on the market. This applies as much to individual employees as to the entire company. The BSS industry is particularly dynamic in terms of change. And this is good, because it means we can gain new competencies and offer a wider range of services. Changes in the businesses of our clients has enabled us to engage with interesting projects which, with time, can be offered as standard service.
We can give an example of a project implemented for one of our Clients. The Client decided to sell one of its brands supported by its own SSC. The buyer also owned an SSC. Work on the transaction lasted several months. At that time, the TMF Poland team handled the service of the transaction of the brand being sold, implemented on-site, using the Client's systems and infrastructure. At the time of completing the acquisition, our team was responsible for transferring the supported processes to the purchaser's SSC and transferring the know-how to the new team. When the situation was stable we completed the project. Based on this we have created a standard SSC service.
MB: When it comes to Adaptive, the advisory & consulting industry, we do not have a standard offer. Each inquiry or project is personalised and prepared for the needs of specific companies, customers.
How important is our role in these changes? Crucial. Consultants or outsourcers are a much faster channel for the flow of information and innovation, benchmarking or best practice sharing than the companies themselves. The speed of sharing best practice or comparisons among different companies increases through an outsourcer. That's why companies employ consultants - in order not to do market research on their own, which will take a lot of time, but to find out things that others do much faster.
And what happens in the case of process transition, does the SCC cooperate with outsources in this respect as well?
RN: Of course. In the pre-transition period and during the transition itself there is usually a lot of work both for consulting companies such as ADAPTIVE and professional services companies such as TMF Group. The process transition is often related to the personnel changes in branches from which the process is transferred. In this event the transferring company needs to replenish its resources. TMF Group has offices in more than 80 jurisdictions worldwide which enables us to find and send a local specialist to nearly any place in the world.
Our accountants sometimes transfer the entire process to the client's SSC.
MB: If we want the transition from BPO to our own SSC be quick it is useful to be assisted by an outsourcer. Especially in the case of sensitive processes, such as the payroll process, in which process downtime may have serious consequences for the company. We often witness a situation when such transition programs are advertised inside the company, the people who are currently performing the process are leaving. So we experience loopholes in the operational area even before the transition has actually taken place. And this is time for the outsourcers. It is the so-called back filling. Adaptive also offers these services.
Another aspect is the question of know-how and experience of the people who have been involved in the process so far. Everything must be documented. Outsourcers have standard, extensive documentation, so they can be a company that will help in the preparation of process documentation. Another area of cooperation is to prepare future employees to handle the transferred process. Outsourcer often has the right resources today and can provide internal training for future employees.
When a company is considering the possibility of transferring processes - there is a common question whether it is better to create one's own SSC, to opt for outsourcing, or the hybrid model? When and which solution is the right choice?
MB: I think that an important factor impacting the answer is the selected strategy, so whether we strategically choose outsourcing or invest in our own centre. It is also important to bear in mind financial issues. Large companies with world market turnover create SSCs as standard at some point. When does it become profitable? One business case needs a minimum of 150-200 people to make it work within 2 and 4 years. For all the smaller or scattered organizations outsourcing is a much faster and cheaper solution, as the supplier has already prepared the structures, systems, etc.
You can also start with the help and experience of an outsourcer, prepare for transition, and once your processes are stable, think about setting up an SSC. On a larger scale, this may prove to be the best solution, especially for commodities.
RN: "It depends" seems the right answer as usual. Indeed, it depends mainly on the strategy, scale of operations and available resources (both tools and people), but also, to a large extent, on the client's organisational culture. Regardless of the choice of cooperation model, the transfer of a given area should be treated as a very good moment to define and set up processes on the part of the business. If this opportunity is missed, potentially neither creating an SSC, nor the decision to use outsourcing will bring the expected results.
Need more information? Make an enquiry with TMF Poland's experts today.
This article originally appeared in the November–December 2018 edition of Outsourcing&More.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.