Monday, August 18, 2014

Time to Plan

A recent conversation with the EVP for Global Shared Services of a major CPG company went down an interesting line of reasoning that I thought worthy of sharing.  It’s all about the increased cycle-time for planning.
Like many large global companies, this one operates a Shared Services entity that comprises all of the common back-office functions.  Further, there is a fair amount of outsourcing being managed as part of the service strategy.  A sign of maturity, there are global process owners in place who carry responsibility for demand management and services architecture, through to service performance management. 

The outsourcing arrangements were constructed using then-current industry best practices and are yielding favorable cost performance.

With that backdrop, here are the top planning-related concerns that the EVP for Shared Services outlined for me:

1)     The original economic equation that supported outsourcing comprised broad scope of services to a small number of providers under long-term contracts; does this strategy still apply in a world of service-level arbitrage?  In other words, would we be better served by contracting with several providers for essentially identical functionality, and select between them on a much more frequent cycle?

2)     How early in advance of the expiration of my ERP license agreements should I develop the tradeoffs between renewal and migration to best-of-function SaaS platforms?  Are BPaaS options available as internally- or externally-sourced alternatives?  What sort of services integration strategy works best in this situation? 

3)     C-suite executives are looking for agility as the highest-priority commitment.  They need confidence in our ability to scale up and scale down in response to both marketplace trends and changes to our corporate structure (e.g., acquisitions and divestitures).  How do I gauge the agility of our shared services functions, and what form of planning model is considered best practice to accommodate such shifts?
4)     Should the shared services scope of operation reach forward to the middle- and front-office functions of the company by applying the lessons of back-office optimization? 

As we discussed each of those situations, one reality became increasingly obvious.  The planning cycle for the shared services organization needed to change dramatically.  As is common, this organization utilized an annual process for assessing business demands and service performance.  The EVP concluded that she needed a persistent tempo of service planning … a capability and a symbol of the shift towards a utility-oriented model of operation.
The implications of this form of planning – with forward-looking indicators driving decisions around such things as capital investments, services contracting, integration architectures, and so much more – were far-reaching.  In fact, one of the first steps to be taken was to engage Supply Chain leadership around the fact that “What we buy, from whom we buy, and how we buy all must change.”

That fact frames the opportunity and threat of the shift to an “As A Service” economy.