Global Business Services vs. Shared Services vs. Outsourcing: Which Is Better for Your O2C Process?

Introduction

Businesses today increasingly move away from the traditional models to carry critical functions like the O2C (Order to Cash) process. To achieve economies of scale and build a robust structure to offer and manage business services, they need the right strategy at hand and pick the one that best fits their needs. 

But the question is when faced with a range of options such as global business services, shared services, and outsourcing, which one should you choose? This blog will talk about GBS vs SSC vs outsourcing, their meaning, advantages and disadvantages, examples, and more. Let’s dive in. 

What Is Global Business Services (GBS)?

Global business services (GBS) is a unified framework that integrates an organization’s back and front office operations into a single, cohesive unit. This integration helps them not only streamline processes, but aims to provide customer-centric and digitized flows for end-to-end processes.

When talking about cohesive units, it can also include agile operating units, centers of excellence, and emerging technologies. The scope of using GBS today is huge and goes beyond consolidating tasks or reducing costs. Instead, it focuses on enhancing service quality, improving decision-making, and fostering innovation. By centralizing services and using advanced technologies, it helps companies become more efficient and agile.

Global Business Services Example

Let’s say an FMCG brand selling health snacks worldwide wants to streamline its operations, standardize the O2C process, and improve efficiency across organizations in all geographic locations. 

Before GBS, the brand dealt with: 

• Decentralized order processing where various regional offices and business units managed their own order processing led to high inefficiencies and inconsistencies. 
• Varying billing practices across regions causing confusion and delays in revenue collections. 
• Different offices in different regions manage their accounts receivable, resulting in fragmented collection efforts and varied collection practices. 
• Severe customer service issues, especially at regional levels, like order issues, returns, and payment queries, resulting in inconsistent service levels. 

After implementing the GBS model for O2C processes, the brand was not only able to centralize functions but also unlocked significant improvements in operations and overall business performance across the globe. 

• The brand consolidated its order processing functions into a centralized GBS center, a single point of contact that handles all order entries, processing, and management across all regions. 
• Through its GBS center, it was able to implement standardized billing and invoicing procedures. This, in turn, helped ensure consistency and accuracy in invoices sent to customers globally, reduce disputes, and improve cash flow.
• The GBS center helped the brand build a robust accounts receivable management, thereby consolidating collection efforts and streamlining follow-ups. Additionally, the approach allowed for better credit management, more effective collection strategies, and improved tracking of outstanding receivables.
• The brand established a unified and seamless customer service experience that handled all customer-related issues through a single, global platform. This also helped improve customer satisfaction and resolve disputes in no time. 

Benefits and Challenges of the GBS Model

While GBS offers significant benefits, it’s not without its hurdles. The model requires a careful balance of global standardization and local adaptation, and its success depends on strategic implementation and continuous improvement. Here are some of the significant benefits and challenges associated with the GBS business model. 

Benefits of the GBS model 

GBS models for businesses are made flexible, allowing companies to adjust to industry changes, market conditions, and tech innovations. 

• Cost efficiency 

GBS helps save costs by providing economies of scale, reducing repetitive work, and streamlining processes. By consolidating and standardizing various support functions, businesses can unlock improved financial performance and operational efficiencies. 

• Enhanced service quality 

Global business services help you implement best practices for streamlined O2C functions and standardized processes and ensure alignment with quality metrics. This approach results in improved service delivery and consistency across different business units and regions, higher customer satisfaction, and enhanced business performance.

• Strategic alignment 

Global business services help enable a more strategic approach to support services and align them with the company’s overall strategic objectives. It also helps businesses go beyond mere cost reduction and create business value as well. This alignment will also support better decision-making, more efficient resource allocation, and a competitive advantage in the market. 

• Talent development and retention

Global business services offer scope for talent development and career opportunities. You ensure access to diverse experiences and cross-functional roles within a global structure. This will not only increase employee satisfaction and retention but also attract a more diverse workforce with deep expertise. 

• Enhanced agility 

GBS models are designed to be extremely flexible and adaptable to changing business needs, aligning with market conditions and tech advancements. Additionally, they allow you to scale services according to your business needs and manage resources more effectively.

• Strategic partnerships and collaborations 

GBS helps foster successful collaboration across different parts of the business and with external partners, improving knowledge and business outcomes. It also helps leverage external expertise, partner with third-party service providers, and implement best-in-class capabilities. 

Challenges of the GBS model 

Most of the GBS model challenges stem from uncertainty and ambiguity in decision-making regarding whether or not the business model will truly add value to the business. This absence of an accurate baseline often results in failed business cases and calls for implementing accurate metrics and assessments in the GBS landscape. 

• Cultural difference 

Managing a global workforce requires focusing on cultural differences and practices, as these can impact a team’s cohesiveness and quality of work. Disparities in language and communication styles often lead to miscommunication and minimize productivity and collaboration efforts. A business must ensure the implementation of multilingual language support or the adoption of new communication technologies or processes.

• Security risks 

Since it deals with sensitive information, GBS always poses threats like data thefts and breaches. You may face significant security risks when sharing data with employees who may not be physically present at the same site as the company. This also means that companies need to ensure their data is secured through processes like access restrictions, data encryption, and backups. 

• Lack of quality control 

GBS may not always meet the required or expected quality standards. This could be due to reasons such as communication barriers, a lack of standards in the service provided, or processes followed to deliver those services.

• Integration with internal systems 

GBS is often seen inaccurately integrated with a business’s internal operations, leading to high errors and inefficiencies. Businesses must invest time and resources to ensure that their GBS are integrated with their internal procedures and processes. 

What Is a Shared Service Model? 

A shared service model is a delivery model businesses use to consolidate similar processes into a single unit to support the entire business operations. It often operates as its own entity, almost like a third-party service provider where each separate department is treated as a customer. 

Basically, a shared service center (SSC) is a centralized unit within an organization that streamlines business functions (like finance, HR, IT, or customer service) to achieve greater efficiency, cost savings, and standardization.Just like GBS, shared services help companies reduce complexity by centralizing mostly back-office functions but keeping them in-house. Shared service centers can be set up globally or locally. They save costs and allow better decision-making.

Shared service center best practices

Shared services are often established as standalone units within a business, located in one region or a network of distributed SSCs established to support different business functions. However, shared services remain a popular option for companies seeking to scale their businesses while managing costs efficiently. 

 Here are some of the best practices for shared service centers.

• Define the scope and objectives 

Identify the functions and activities you want the SSC model to perform and define service level agreements (SLAs) to monitor service quality and timeliness. Also, ensure that you communicate all the performance indicators and metrics to measure results accurately and achieve the organization’s strategic goals. 

• Accurate implementation of technology and automation

Leverage the latest technology and automation to enhance the SSC’s capabilities, scalability, and performance. This would include evaluating and choosing the right tools and systems to support SSC functions like ERP, customer relationship, business intelligence, and RPA and integrating and configuring them to meet the SSC requirements.

• Developing skills for effective management of shared services 

You would need to recruit and retain qualified and skilled staff who can perform the SSC functions and provide them with the necessary training and development opportunities. This will also ensure competence and foster a customer-oriented and service-excellence culture. 

• Track and evaluate the performance 

Collect and analyze data related to SSC functions, such as service volumes, quality, timeliness, costs, compliance, customer satisfaction, etc., and identify areas for improvement. Track the progress of SSC performance and outcomes to ensure alignment with business objectives.

Shared services model example 

Suppose a brand having diverse product lines selling durable goods like bulbs wants to implement shared services to standardize O2C processes and aim for higher integration across departmental functions. 

Before the shared services model, the brand dealt with: 

• Regional offices managed their own order processing, leading to fragmented expertise. 
• Differences in invoicing formats and processing times due to managing billing regionally. 
• Inconsistent handling of order-related issues due to locally managed customer services. 

After implementing SSC, the brand now could: 

• Focus specifically on centralizing the O2C functions, such as order management, billing, and collections. 
• Create and use a unified system and standardized templates for invoice generation and distribution, reducing errors, ensuring compliance with global standards, and accelerating the billing cycle.
• Work closely with regional teams to address specific local compliance and customer service requirements, as SSC can handle the bulk of O2C functions centrally. 

Benefits and Challenges of Shared Services 

With shared services, you can retain control over the service delivery process and establish standard processes and performance metrics, ensuring consistency and quality. However, despite offering seamless business processes, SSC also has numerous drawbacks.

Benefits of shared services

Shared services offer various benefits, such as enhanced efficiency and service quality. Here are some of the benefits of using SSC. 

• Cost savings 

Shared services, like GBS, help consolidate and standardize business processes, achieving cost efficiencies and economies of scale. You can eliminate redundancies, share processes, leverage the latest tech, and focus on core business processes. 

• Improved service quality

SSC allows you to establish a consistent level of service quality across several business units and departments. It also enables you to meet customer needs more effectively, improve customer satisfaction, and yield better business returns. 

• Better data management

Shared services help standardize and centralize data management, reducing the risk of errors and improving the data quality, enabling better-informed decision-making. 

• Improved control and compliance 

SSC ensures centralized control over processes, ensuring better compliance with external regulations and internal policies. Additionally, it offers improved control and visibility over operations so you can better detect and mitigate risks effectively.

Challenges of shared services

Here are some of the prominent challenges you may face when implementing shared services. 

• Initial investments 

Setting up SSC requires significant initial investments in tech infrastructure and training. Ensuring adequate resources for the transition phase can drain resources and compromise operations. 

• Customization hurdles 

You may have difficulty striking the right balance between customizing and standardizing processes and meeting departmental needs. Consistency in service delivery requires strictly following the standards.

• Employee mindset 

A usual SSC company tends to spend energy only on keeping the daily operations smooth. The talent base may end up skewing more towards the processing mindsets. This would make adopting digital functionalities challenging due to a lack of expertise in tech and innovation. 

Global Business Services vs. Shared Services

When deciding between global business services and shared services, here are some key differences to remember. 

• Complexity and size of the organization

A shared service model may be more relevant for smaller businesses with simpler structures, allowing them to take a more focused approach to specific functions. Conversely, a GBS is a better fit for larger, complex businesses with diverse business units and global operations. It offers a more integrated and comprehensive approach to managing various functions.

• Geographical expansion

Shared services are good for businesses with localized or regional operations, as they efficiently cater to region-specific needs and business units. In contrast, GBS works better for businesses expanding globally and needs centralized control and better coordination across regions.

• Scope of capabilities 

Shared services are better suited for companies that want to streamline operations and centralize functions like IT, HR, or finance. They help achieve cost savings and business efficiencies. GBS is for organizations that need to integrate with the system for functions beyond SSC, like procurement, customer service, etc., to drive growth and value creation.

• Strategic alignment 

SSC focuses primarily on process efficiency and cost reduction, which makes it suitable for companies prioritizing immediate cost-cutting and standardization. However, GBS offers a more strategic approach, aligning support services with business objectives, improving customer experiences, and creating long-term value for the organization. 

• Technology benefit 

Shared services are comparatively easier to implement if a company already has a robust tech infrastructure and system to support shared service capabilities. Contrastingly, advanced capabilities and digital tools are needed to implement GBS. It’s more suitable for companies that can support and drive focused digital transformation. 

What Is the Business Process Outsourcing Model?

Business process outsourcing (BPO) means delegating manual, time-consuming business tasks to another company and focusing on labor cost arbitrage. You will own, administer, and manage these tasks in outsourcing while making sure they meet the specific standards and KPIs you agreed upon. 

It involves signing a contract with a third-party agency specializing in any work you need done. BPO allows organizations to manage working capital and OpEx, increase cash flow, and resolve customer issues faster, resulting in improved customer satisfaction.

Business process outsourcing example

Let’s say a bank outsources its customer service operations to enhance customer engagement. In this case, whenever there are customer-facing queries or complaints regarding online banking services, transactions, etc., they will be entirely handled by the third-party service provider.

This way, the bank can also ensure: 

• Effective and accurate order management and compliance with the predefined standards. 
• Best use of third-party expertise to improve collection rates, manage overdue accounts, and handle customer disputes efficiently.
• Consistent and high-quality service experience as the vendor brings expertise in handling all customer interactions, including inquiries, complaints, and follow-ups. 

Benefits and Challenges of Outsourcing 

Outsourcing is the best way to scale your operations without initiating heavy investments in tech or hiring using third-party vendors. However, in the long run, the model may impact the flexibility and consistency of business operations. Here are some of the benefits and challenges of outsourcing. 

Benefits of outsourcing 

Partnering with a specialized third-party provider offers numerous benefits. You can enhance efficiency, reduce costs, and improve service levels while ensuring better allocation of resources and focusing on your primary business objectives.

• Lower expenses

Outsourcing is much cheaper for businesses at their initial stages as they don’t have to hire permanent employees. This means they can reduce their costs both in terms of recruiting the perfect expert and training and onboarding employees when implementing new processes. 

• Increased productivity

Outsourcing means you don’t have to spend much time on low-priority processes and focus only on the ones that help improve the bottom line. It also means you can help your employees free up their time from repetitive tasks and focus on what matters more. Of course, this would also mean getting things done faster and juggling multiple business functions at the same time. 

• Leveraging deep expertise 

Outsourcing allows for meaningful collaborations with professionals with deep expertise in handling core business functions and ensuring compliance with industry regulations. If you feel risks are tied to a specific project or deal, experts will help navigate them and strategize better to avoid pitfalls and gain a competitive edge.

• Reduced staff issues 

Businesses, especially those in their initial stages, face numerous challenges hiring skilled and talented professionals without straining their reserves. Outsourcing helps them overcome poor performances, dismissals, and talent shortages while performing the same tasks with better diligence, accuracy, and accountability. 

Challenges of outsourcing

Outsourcing is becoming increasingly popular and helps optimize business processes for businesses that don’t want to spend on hiring costs. However, the model has its disadvantages, too.

• Negative impact on staff

Since outsourcing reduces the job duties and responsibilities in a business, you may find employees dissatisfied and uninterested in carrying out the remaining business functions that are deemed to be mundane and menial. They may also find it difficult to compromise with the existing remuneration if the business pays more to the outsourcing than its employees. 

• Data theft and confidentiality risks

Outsourcing means sharing all mission-critical information and sensitive data with the external team for the smooth functioning of the business and better outcomes. However, this also increases the chance of data theft and makes internal systems vulnerable to hacking and breaches. 

Therefore, it’s immensely important to have a written contract between you and the outsourcing company that clearly includes the responsibilities for data protection and confidentiality terms and conditions and ensures its implementation at all levels. 

• Lack of Consistency

Even if you set out written contracts before outsourcing, varied and inconsistent contracts can lead to ambiguity and inefficiency. Moreover, any changes in the outsourcing firm’s team structure can lead to delayed deliveries and inconsistency with previous work. 

• Low flexibility

Unlike an in-house team, where you can get access to updates and insights whenever required, it may not always be as smooth with the outsourcing teams. There needs to be proper and prior communication before asking for information, reports, or analysis. 

Business Process Outsourcing vs. Shared Services Centers vs. Global Business Services

Each model has its unique features, benefits, and challenges. Understanding these differences is key to choosing the right approach for your organization’s needs. Here’s a comparison of all three models to provide a clearer picture of how they function and what they offer.

Choosing the Right Global Service Delivery Model for Your Business

When deciding which model to choose and implement, it’s essential to consider various business factors and understand the pros and cons of each option. Here are the top two parameters to keep in mind when selecting the most suitable service delivery model:

1. Business vision

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:

• What is your long-term cost goal? 
• Are you more focused on aggressive cost reduction or interested in a long-term investment with a higher ROI?
• Are scalability and expansion a priority to you or a plan for later?
• 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 the ROI 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 to Choose a Business Process Outsourcing Model?

Outsourcing makes the most sense when an organization is seeking fundamental change, wants to move quickly, and prioritizes cost reduction.

When to choose a Shared Services model?

For established businesses aiming beyond cost-cutting, global shared services offer greater control over key processes, reducing risk. This approach is vital for strategic activities and those with strict compliance demands, ensuring added value and secure operations.

When to choose the GBS model?

GBS is ideal for leaders aiming to elevate their functions into top-tier service providers, enhancing organizational agility. It suits organizations striving to lead their industry, offering the agility to swiftly respond to opportunities, threats, or key economic changes.

What’s the Best Service Delivery Model for Your Business?

When optimizing business functions using GBS, Shared Services, or Outsourcing, there’s no one-size-fits-all solution. Many businesses benefit from a hybrid approach, combining elements of each model to best meet their needs. This flexibility allows organizations to manage different business functions most effectively, balancing in-house control with outsourced efficiency.

Take finance, for example. Critical and higher-risk activities like credit and collections might be best kept as in-house shared services, where direct oversight is crucial. Automation in these areas, particularly with advanced tools like those offered by HighRadius, can significantly enhance efficiency and accuracy. On the other hand, more transactional tasks such as accounting and cash applications could be effectively outsourced, allowing for quick scalability and progress tracking while maintaining centralized control over other functions.

Enhance Your GBS Capabilities With HighRadius’ Order-To-Cash Software

When deliberating between global business services (GBS), shared services, and outsourcing for your O2C process, it’s imperative to acknowledge the unique advantages each model offers.

Amid the choices of GBS, shared services, and outsourcing, the paradigm leans towards the strengths of GBS as an optimal choice. The integration of data analytics and AI is revolutionizing the GBS landscape. These technologies not only streamline operations but also provide deep insights for better decision-making and strategic planning. With the right tools, businesses can transform vast amounts of data into actionable intelligence, driving efficiency and innovation.

HighRadius’ cutting-edge Order-To-Cash Software, powered by AI and advanced analytics, are tailored to empower GBS models. Our tools seamlessly integrate with your existing systems, enhancing your ability to manage finances, track progress, and scale operations effectively. Moreover, our exclusive features like collections cloud, credit management suite, deductions management solution, cash app, EIPP, etc., will help you stay ahead in a rapidly evolving global market and not only keep up but lead the way in efficiency and strategic growth.

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