Predictions for 2011 in Shared Services & Outsourcing

With the uncertainties of 2010 and the Great Recession almost behind us, corporations and service providers will need to start looking at and driving deep process improvements in their back office functions. By the very nature and as the name implies, back office process improvement took a back seat in the overall scheme of things. With limited budgets and resources, corporations deployed their scarce resources and talent to “front office” type of activities such as increasing top line growth or driving quick wins in cost reduction through labor cost arbitrage or dealing with cash management to remain afloat. In other words, corporations "hunkered down" to survive.

However, it’s now time to start focusing on the back office non-core functions that was perhaps neglected in the past either due to circumstances or by design. By only focusing on labor cost arbitrage, corporations will only be able to take their cost reduction initiatives up to a certain point. Also, corporations generally deployed their expensive internal or external resources to those functions that either gave them the maximum return on investment or helped grow their core functions. And again back office took a back seat.

So here are my predictions / recommendations:

• Corporations who have not yet thought of shared services, should start actively pursuing, planning and quickly implementing a strong shared services function in one or more back office areas. And those who have already implemented a shared services model, should start driving continuous improvement (CI) or process improvements (PI) using common sense PI principles and tools from their CI/PI tool kit.

• Corporations who have outsourced their shared services functions to low cost external service providers need to start leveraging the labor cost arbitrage. They need to start utilizing strong domain expertise of the service providers to make quantum improvements in their business processes by driving out waste and inefficiency. While the domain expertise does not come cheap, it certainly is a lot cheaper than the domain expertise that corporations can acquire in their developed markets. This will give corporations a double benefit; low cost transactional arbitrage with a lower cost transformational advantage as well.

• For external service providers, here’s your opportunity of increasing your top line. Focus on CI/PI and help corporations make quantum improvements in their back office processes rather than simply throwing low cost resources to push transactions out of the door. You will not only help companies become better and more efficient; you will in turn help increase your top line as well.

2010 was the Year of The Tiger. 2011 is the Year of the Rabbit. Let’s take the roar of the tiger and the speed of the rabbit to drive quantum process improvements!!

Happy New Year!!