The debate on the best global service delivery models for Order to Cash (O2C) has been around for a while. Finance leaders focused on harmonizing global O2C processes and driving process excellence have always wondered which model would work best 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 O2C leaders dedicated to continued success.
There are three different service delivery models for O2C leaders: Outsourcing, Shared Services & GBS. Let us understand the difference between each model and which one would suit your O2C operations, depending on where you are today.
1. The Outsourcing Model:
This model focuses on labor cost arbitrage. It involves you signing a contract with a third-party agency specializing in the work you need to get done.
2. The Shared Services Centers/Organizations (SSC/SSO) Model:
This model reduces complexity by centralizing mostly back-office functions but keeping them in-house. Shared service centers can be set up globally or locally and could be both centralized or decentralized.
3. The Global Business Services (GBS) Model:
The GBS model delivers best-in-class service to the internal O2C team as well as the external stakeholders involved. It is an emerging model formed with the combined evolution of business process outsourcing and shared services model.
You can read more about outsourcing, shared services, and GBS here – HFS Research
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:
1. Business Vision:
Leaders should self-assess the following criteria while planning for and selecting any service delivery model:
2. Costs Involved:
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 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 simple answer is ‘No.’ It depends. Choosing between outsourcing, shared services, and GBS 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. 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.
In the long run, success is not just determined by the approach chosen but how well it is getting executed.
For more material focused on managing Accounts Receivable (A/R) Shared Services, click here.
HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.