Reimagining GBS and Outsourcing – Next Generation Operating Models

The Hackett Group Principal David Ketchin talks with Associate Principal John Sheridan and Senior Director Hermann Waschefort about the role of global business services and outsourcing in the next-generation operating model for finance, procurement, and other business services.

Show Notes

Welcome to the Hackett Group’s Business Excelleration Podcast, where – week after week – we hear from experts on how to avoid obstacles, manage detours, and celebrate milestones on the journey to world-class performance. This episode of the podcast, hosted by the Hackett Group’s

David Ketchin, tackled the topic of the next generation operating model.  David offers guidance and context for the conversation, which features guests John Sheridan and Hermann Waschefort.  John is a senior leader in the Hackett Group’s designated outsourcing practice, and Hermann is the UK Lead for Global Business Services. Together, the two guests offer insights on how the enterprise and business services are both responding to marketplace challenges and digital transformation and trying to maintain competitiveness.  John and Hermann also unpack pressures on businesses and business services and the impact of these pressures.

As the conversation gets underway, David asks Hermann to share what changes he is seeing in the enterprise-level operating model.  The first factor in the major change this model is seeing is digital transformation; technology is developing quickly, and businesses have had to rethink experience – both from a customer perspective and a supply angle.  Further, external forces like global warming have forced growth in agility and an ability to work with complexity.   Thirdly, the COVID-19 pandemic has played a role, demonstrating the capacity of businesses to maintain a remote workforce, and so altering the standard working model.

The conversation then shifts toward business services (finance, HR, procurement, IT, etc.) and how they are responding to the shift in their own operating models.  The business services are experiencing their own rapid changes as they try to keep up with what it looks like to deliver value to the company.  Three key changes are becoming the norm for business services, and the first is that functional teams are starting to work together more.  Further, global process owners are working more closely with IT product owners, and business partnering is shifting away from a generalized relationship and more toward commercial and focused relationships.

The Hackett Group has been able to observe the change process among its clients, some of which are now in the digital world class!  In terms of cost effectiveness and experience, their recent changes have proven beneficial, and an analysis of the particulars of their approaches to business in a rapidly-shifting market is instructive.  The first point to note is that 80% of the digital finance function has moved to next generation operating models; this fact demonstrates that the finance sector is evolving particularly quickly.  Second, digital world class companies boast up to 50% faster time-to-value ratios.  This second point has some caveats, though; businesses need a cloud-first mentality, as well as a measure of complexity.

Switching focus, David, Hermann, and John consider the topic of outsourcing.  When dealing with a global business service, the work can be done as a captive organization or through outsourced providers.  David has noticed many outsource contracts being signed, but he turns to John for a more thorough update on what he’s seeing in the marketplace.  John explains that the need to accelerate the digital journey is driving changes in the sourcing marketplace, causing clients to reassess and redefine service objectives, outcomes, and requisite deliverable values.   It is also changing the balance of responsibility and accountability within the space, and driving urgency for talent with technological capacity (and so driving demand for IT and business processes).  This is, ultimately, an exciting and challenging time for outsourcing professionals!

At this point, a lot of progress has been made.  When faced with change and difficulty, companies have looked within their own organizations and externally, and have figured out ways to create solutions.  There is now a high level of trust in the capabilities of service partners, and there are new drivers of change.  Skills acquisition, business value generation, outcomes, and effective use of automation and analytics are high priorities, and outsourcing partners need to pursue a transformational rather than transactional relationship with businesses.  As the conversation wraps up, the group discusses the structure of outcome-based relationships, which necessitates appropriate metrics, definitions, and dynamics of control and adaptability.  They also discuss the mutual responsibility between client and partner, how to see captive and outsource models working well together, and the imperative and opportunity of the present moment of change.

Timestamps:

• 0:52 – Welcome to this episode, hosted by David and featuring Hermann and John.
• 2:25 – What are the changes in an enterprise-level operating model?
• 4:31 – How are business services responding to the shift in their own operating models?
• 6:28 – The group talks about what digital world class clients have been seeing.
• 8:19 – Conversation turns to the subject of sourcing.
• 13:18 – Next, the group talks about relationship structuring and responsibilities.
• 18:49 – What do we have to get right to see captive and outsource models work well together?