The debate on the best global service delivery models for Order to Cash (O2C) has been around for a while. Finance leaders who are focused on harmonizing global O2C processes and driving process excellence have always wondered which model would work best to achieve best-in-class status.
According to a recent survey by BusinessWire, as 82% of businesses plan to expand into new markets, having this conversation is crucial for O2C leaders dedicated to continued success.
There are three different service delivery models for O2C leaders: Outsourcing, Shared Services, and GBS. Let us understand the difference between each model and which one would suit your O2C operations, depending on where you are today.
Business process outsourcing (BPO) means delegating your manual, time-consuming business tasks to another company. This organization will own, administer, and manage these tasks while making sure it meets the specific standards and KPIs you agreed upon.
Business Process Outsourcing (BPO) model focuses on labor cost arbitrage. It involves you signing a contract with a third-party agency specializing in any work you need to get done. BPO offers organizations to reduce working capital and OpEx, increase cash flow, and resolve customer issues faster resulting in improved customer satisfaction.
A Shared Service Center (SSC) is a centralized unit within an organization that provides shared services to consolidate and streamline business functions (like finance, HR, IT, or customer service) to achieve greater efficiency, cost savings, and standardization.
A shared services model helps companies in reducing complexity by centralizing mostly back-office functions but keeping them in-house. Shared service centers can be set up globally or locally. It’s done to save costs and allows better decision-making.
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Global Business Services definition
Global Business Services is an integrated, end-to-end set of capabilities that are delivered globally to enterprise clients by a service provider. GBS providers offer a comprehensive suite of services that help companies streamline their operations, improve efficiencies and better serve their customers regardless of location.
The GBS is an emerging model formed with the combined evolution of business process outsourcing and the shared services model to deliver best-in-class service to the internal Order to Cash team as well as the external stakeholders involved.
You can read more about outsourcing, shared services, and GBS here HFS Research
|Business Process Outsourcing||Shared services centers||Global Business Services|
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 the two top parameters for you to keep in mind while selecting the suitable service delivery model:
Leaders should self-assess the following criteria while planning for and selecting any service delivery model. Below is a questionnaire for you to gather enough information to make a decision:
One of the most important factors to consider is the cost involved and the ROI delivered from the service implemented. Hence below are two important questions you need to ask yourselves:
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.
Outsourcing tends to make the most sense when an organization is looking for fundamental change, wants to move quickly in a short period, and views cost reduction as a top priority.
For sufficiently mature businesses, where the focus is not on just reducing cost but adding some value. A global 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.
GBS might work for leaders looking to transform their functions into a best-in-class service provider for their customers and O2C team, hence support organizational agility. It works best for any organization wanting to stay at the forefront of its industry, the ability to react quickly to opportunities, threats, or critical economic considerations.
The answer is ‘No.’ It depends. When it comes to choosing GBS vs. shared services vs. outsourcing, it does not necessarily have to be an ‘either and 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 either way effectively 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. If required, automating such tasks can prove to be impactful. In contrast, you can outsource the most transactional activities like Accounting and Cash Application to get significant results quickly, meanwhile also having centralized operations for other activities. This will help you scale processes and track progress securely. Here are 23 key order-to-cash metrics every GPO must track to improve working capital.
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