Why Global Business Service (GBS) is evolving into the Digital OneOffice

The days of the 5-10 year operations plan are well and truly over, as our new State of Operations and Outsourcing Study, conducted with KPMG, reveals. A new chapter in the world of big Global 2000 operations structures is opening up at an alarming rate, and many traditional businesses, still persisting with transforming their global operating model at a glacial pace, are in for a very rude awakening. This POV will explore why this happening, why now, and what enterprise operations leaders can do to move in a new direction.

Business stakeholders, both in operations management and the C-suite, are losing faith in the cost-savings they are likely to gain from their initiatives. Only 50% of C-Suite / operations executives were satisfied with cost savings from operations, given that this was the most critical driver for change this is disappointing. Coupled with these cost pressures, enterprises are facing unprecedented degrees of disruption from the evolution of digital business models that create entirely new channels to market based on vastly different cost structures. In short, unprecedented pressure is mounting on operations leaders to realise results for their C-Suites in the next 12-24 months (See exhibit 1), and many are struggling to figure out a coherent operating model that will accommodate the route to value in these new timescales being imposed on them. 

At the same time, traditional methods of shared services, outsourcing, and off-shoring have stopped delivering as much cost productivity value as they had done in the past couple of decades, as most firms have squeezed all the available value from the relocation of labor and centralization of operations. Net-net – the only available lever left to pull to find new thresholds of value is by making inherent changes to the structure of underlying data repositories, by broadening processes to support business outcomes and by breaking down silos between front and back offices – what we term “OneOffice” at HfS.

Exhibit 1: Crunch time for adoption of predictive data, cognitive & machine learning, and automation as targets set in the next 1 to 2 years

Question: In what timeframe do you expect to achieve YOUR C-Suite directives for the following?

Source: HfS Research in Conjunction with KPMG, “State of Operations and Outsourcing 2018, April 2018

Sample: Global 2000 Enterprise Buyers = 381

Cost saving remains the most critical goal

The chart in Exhibit 2 shows the criticality of the main objectives from the C-suite.

Exhibit 2: Cost-saving is still the most important directive for operations

Source: HfS Research in Conjunction with KPMG, “State of Operations and Outsourcing, May 2018

Sample: Enterprise Executives = 381

The chart shows a number of key things. Driving down operating costs remains the most critical goal for enterprise operations strategy. The next most important directives are creating better environments for data decision-making, implementing better automation, aligning operations to customer experience and investment in AI and machine learning. Cost is the ultimate goal, with data increasingly important, automation more in alignment with expectation, and AI being the gateway to new cost and operating models.

Operations and the C-suite are not satisfied with the cost-savings

Exhibit 3 illustrates the levels of satisfaction that both the C-suite and Operations management have with the achievement of their current set of directives.

Exhibit 3: Cost-savings aren’t at the right levels for exciting management

Source: HfS Research in Conjunction with KPMG, “State of Operations and Outsourcing, May 2018

Sample: Enterprise Executives = 381

Although, of course, this chart shows a number of things, let’s focus on satisfaction with the imperative to drive down operating costs. As you can see, both groups showed lower satisfaction with the operational cost-savings that they were able to achieve than with performance against most of the other items on their agendas, and satisfaction with cost-savings was lowest for Operations managers.

It is worth noting that there are some structural reasons why cost-savings, or at least satisfaction with cost-savings, might be so low, the most important of which is that it is easier to measure with certainty than it is for some other more subjective criteria. However, it remains clear to see from the results, that both the C-suite and Operations management are less than excited by their current ability to drive down operating costs.

Looking at the other areas of satisfaction, you can see that the C-suite is more optimistic about data automation and the organization’s ability to align its operations with its customers, than are the operational managers. Often, when there is this kind of discrepancy between the understanding of the C-suite and Operations management, it is because operational staff is being too focused on day-to-day operations, and not enough on playing to the bigger picture. However, this is different, because the big levers of change, at least in terms of cost-savings and the operating models available to Operations, are all showing lower levels of satisfaction. Is this a warning sign that the ramp-up for cost-savings is somewhat longer than expected, with all of the technology investments that are currently being implemented? This is worrying, particularly given the reduction in importance of other cost-saving levers, such as outsourcing and off-shoring. Furthermore, as the levels of investment in these technologies increases, so does the expectation of enterprises, impatient for a worthwhile return.

It’s time to see a return on the investments in automation and analytics

Looking at Exhibit 4, below, we can see the main investment areas and the timeframe operations initiatives have to deliver.

Exhibit 4: Pivot-point for benefitting from automation, analytics and alignment projects

In what timeframe do you expect to achieve YOUR C-Suite directives for the following?

Source: HfS Research in Conjunction with KPMG, “State of Operations and Outsourcing, May 2018

Sample: Enterprise Executives = 381

These charts show how urgent the situation is becoming. The C-suite is betting big on RPA and Analytics – with results expected to be achieved within the year or two. Expectations that bots solving most issues within the next 24-month period are simply unrealistic. It’s going to take at least three to five years, and there will still be fundamental issues that automation can’t just fix by itself.

While there are some ‘quick-fix’ use cases for RPA, some ‘low-hanging fruit’ which can show financial returns quickly, the holistic solution to driving enterprise cost-saving must be through more intelligent automation, aligned and integrated within an end-to-end business process. This type of endeavour, for all but a few customers, seems further away.

So where do we go from here? The answer is GBS… right?

Global business services (GBS) rethinks traditional shared services and sourcing structures. Using a centralised model that operates across multiple functional areas to better handle processes end to end. The idea being to provide a low cost, high-quality set of consolidated services a large organization can use holistically. However, there is no fixed definition of what is included in a GBS organization – just that it will be cross-function usually IT, F&A, HR and provide a central pool of services to be used by the organization globally.

We have seen the use of GBS increase over the past decade, however, the issue for current GBS schema’s and why they are failing is the internal service delivery focus. GBS traditional focus was to be the main lever for operational cost saving and not as a hub of innovation. And was not focused on external customer-facing services or achieving external goals.

However, we are seeing operating models mature in this regard – with more organizations looking not only to formalise and centralize processes but also to address wider innovation requirements of their organizations. The survey shows an increasing number of GBS operating models in use, rising rapidly from 17% now, to 30% in 3 years. The issue really is what GBS actually means and what it will come to mean in 3 years’ time.

What GBS needs is a OneOffice make-over, the survey respondents agreed:

• Over 80% agreed that GBS should lead integrating/coordinating intelligent automation;
• Over 80% agreed that GBS should lead knowledge and data to help customer interaction;
• Almost 80% agreed that GBS governance should extend across the entire process chain, from back to front office;
• Almost 80% agreed that GBS is a platform for services delivered via common governance structure.

Exhibit 5 shows the OneOffice conceptual framework – HfS Research’s operating model for the post-digital world.

Exhibit 5: The HfS Digital OneOffiice Framework Framework

In the Digital OneOffice conceptual framework, an organization’s people, intelligence, processes and infrastructure all come together as a single, integrated unit. They share a common goal, aiming at one set of unified business outcomes, tied to exceeding customer expectations. OneOffice is where teams operate autonomously across front-, middle- and back-office functions, to promote broader processes with real-time data flows that support rapid decision-making, based on meeting these defined outcomes. Hence, emerging technologies, like automation and AI, are significant enablers in helping enterprises to achieve the goal, where front, middle and back offices will cease to exist – they will become, simply, OneOffice.

The bottom line: If GBS is to be the platform for business, it needs to take on the OneOffice Fundamentals

As the transactional heart of enterprise organizations shifts from people to process, an operating model needs to emerge that can accommodate this change. Organizations need to find a way of delivering desired cost-savings without the traditional big levers of off-shoring and outsourcing. These models also need to provide the organization with better data for decision making, deliver innovation and drive the automation agenda.

It seems unlikely that this will be achieved, in the short term, with piecemeal automation strategies that pursue individual use cases. Likewise, similar machine learning or data analytics projects. The days of low-hanging fruit, certainly for intelligent automation and analytics, are passing – particularly if enterprises are going to deliver against the stiff timelines set by themselves and their C-suites.

If GBS is to be the platform for business, it needs to evolve into a broader schema, like the OneOffice conceptual framework, where the operating model of an organization embraces both new processes and technology, plus its hard to shift legacy processes / technologies. Enterprises need to build a hybrid model that provides an end-to-end management system, with a central hub for automation skills and operations, which will ensure that corporate data can be properly aggregated and curated.

Enterprises need to implement the OneOffice fundamentals.