Global Business Services vs Shared Services vs Outsourcing: What Would Work For Your Order-to-Cash

Introduction

The debate around global service delivery models for A/R doesn’t easily come to a conclusion. Business leaders focused on global expansion face uncertainty as to which model would work best for them to achieve best-in-class status. Today, as more than 42% of UK businesses are more inclined to expand operations overseas, having this conversation is crucial for order-to-cash leaders dedicated to continued success.

There are three different service delivery models for Order-to-Cash leaders: GBS, Shared Services & Outsourcing. You need to understand the difference between each of the models and which one would be the right model for your A/R operations depending on where you are today.

The 3 Global Service Delivery Models For Your Business:

1. The Outsourcing Model:
   This model focuses on labor cost arbitrage. It involves you signing a contract with a third-party agency that specializes in the work you need to get done.
2. The Shared Services Model:
   This model reduces complexity by centralizing mostly back-office functions but keeping it in-house. Shared service centers can be set up globally or locally, and could be both centralized or decentralized.
3. The Global Business Services Model (GBS):
   The GBS model delivers best-in-class service to the end-user. It is an emerging model formed with the combined evolution of shared services and business process outsourcing.

To read more about outsourcing, shared services and GBS, we find this resource from HFS Research very helpful.

Selecting The Right Model

When it comes to deciding which model to choose and implement, there are multiple business factors to consider and the pros and cons of each model that you should be aware of.

Here are two-top parameters for you to keep in mind while selecting the right service delivery model:

1. Business Vision:
Leaders should self-assess the following criteria while planning for and selecting any service delivery model:

• What is your long-term costs goal? Are you more focused on aggressive cost reduction or interested in a long-term investment with higher ROI?
• Is scalability and expansion an important priority for you, or a secondary objective in the near-term?
• Does your vision include long term engagement with customers focused on service-delivery excellence?

2. Costs Involved:
One of the most important factors to consider is the cost involved and ROI that could be delivered from the service implemented. Hence below are two important questions you need to ask yourselves.

• Does the current budget allow us to put in the costs required for a particular service delivery model?
• By what timeframe would you be able to enjoy returns on your current investment? Does the ROI sound convincing to you?

The issue of “Outsourcing vs. Shared services vs. GBS” is a never-ending debate and the right answer requires an objective look at the unique requirements of each situation.

When Would Outsourcing Work?

Outsourcing tends to make the most sense when an organization is looking for fundamental change, wants to move quickly in a short span of time, and views cost reduction as a top priority.

When Would Shared Services Work?

For sufficiently mature businesses, where the focus is not on just reducing cost but adding some value. A shared services approach enables more control over processes and outcomes, which reduces risk. This is especially important for key activities that are strategic to the business or bound by strict compliance requirements.

When Does Global Business Services(GBS) Make Sense?

For leaders looking to transform their functions into a best-in-class service provider for the end-users as it supports organizational agility. Any organization wanting to stay at the forefront of its industry, the ability to react quickly to opportunities, threats, or critical economic considerations – GBS supports this.

The Bottom-line: Does That Make GBS The Best Service Delivery Model For Your Business?

The answer is ‘No’ – It depends. Choosing between outsourcing, shared services & GBS does not necessarily have to be an either/or decision. Many organizations use a hybrid model and are best served by a combination of outsourcing, shared services, and GBS—sometimes even within a single business function. Also, many activities can be managed effectively either way depending on the instance. For example, it would make sense that you decide to keep your critical and higher risk activities in finance such as Credit and Collections as in-house shared services whereas outsource the most transactional activities likely accounting and cash allocation to get significant results quickly, meanwhile also having centralized operations for other activities. In the long run, success is not just determined by the approach chosen, but how well it is getting executed.