Point of View

The OneOffice becomes the true digital operating mindset as GBS grinds to a halt

December 22, 2020

The global pandemic ripped its way through traditional business operations, where nearly a million Global 2000 employees in the US, India, and the UK had been happily executing work from service centers for the last few decades.

Most centers worldwide have had to rely on barely 20% of key staff in-house to keep their wheels turning while the rest worked from home. Many employees have been furloughed or had their positions terminated as leaders realized they could exist with significantly less staff through increased automation and, in affected industries, lower business volumes.

While GBS delivered on many of its promised business benefits, COVID-19 has had a significant impact on the mindset of leadership to shrink their back offices and refocus on impact work that only exists in the OneOffice

Why keep vast concentrations of workers in remote locations when you can have talent close to your core business who use digital technology to increase their value? The forced experience of keeping businesses operating effectively with most staff working remotely has made it hugely apparent to many leaders that they have several levers to pull to break out of an operating model in which higher-level activities associated with enterprise data and analytics support simply no longer make sense or add much value.

The business technology world has been buzzing for decades with the advent of connected global talent and the infinite possibilities of processes and data running in the cloud

Change has been perennially slow, as each innovation helped organizations run the same processes with greater efficiency, cost, and speed by exploiting greater access to global talent made possible by the advent of the internet and superior telecommunications (see Exhibit 1).

Exhibit 1: Evolution to the Connected OneOffice

 

Source: HFS Research, 2020

Global talent and services, the private cloud’s onset, and the early wave of digital services effectively enabled organizations to respond to customer needs quickly and competitively. However, few organizations were motivated to make fundamental changes to their processes because they did not have to. In recent years, it has become ever clearer that organizations unable to anticipate changing customer needs and behaviors will eventually fall behind and fail.

Does the global business services (GBS) operating model make sense?

Automation powered by the Triple-A Trifecta (process automation, artificial intelligence, and smart analytics) is rapidly gaining traction in both captive and outsourcing services environments. GBS came to the forefront in 2010 as a potential operating model and has achieved some traction over the last decade. While roughly 90% of the Global 2000 enterprises have a centralized model today, only 16% of enterprises reported having a true GBS operating model in 2019 despite nearly a decade of its existence. Before the pandemic shock punched the corporate world between the eyes, there was no dire need to change. We do not see enterprises using the GBS model in more than 20% of cases for the foreseeable future.

Almost overnight, COVID-19 flipped the endemic, decades-old corporate mindset of resisting change to one of demanding change

Does the unwieldy GBS organization built for another time and place go the way of the dinosaur, with the pandemic being the meteoric event that speeds its demise? The OneOffice (connecting the front, middle, and back offices to create a touchless and frictionless digital experience) is no longer a pipe dream. Almost overnight, it has become a “have-to-have” business environment and mindset to operate and compete effectively in this virtual pandemic economy.

The core challenge with GBS is that its raison d’être is still just efficiency and cost takeout

The concept of deploying global business services (a separate organization focused on multifunctional delivery, including transactional and expertise services) has been a beacon for many organizations. While GBS organizations’ growth was projected in 2022 to reach roughly 30%, we believe the pandemic has depressed this growth. The needle will not change significantly in the next two to three years. In fact, we see large companies dismantling GBS organizations for a more function-focused approach.

Companies may spend cycles on automation; they are much less likely to undergo large-scale organizational transformation now or in the foreseeable future. In a recent HFS study of 150 C-level executives, over 85% agreed that there are foreseeable captive carve-outs, especially in commodity services, to drive monetization and service delivery flexibility.

The rationale for a GBS organization is to manage and optimize cross-functional processes and centralize teams to do more value-added analytical work, both around operations within the scope of GBS and across other parts of the organization. A centralized GBS management structure was an alternative for many companies running with legacy environments to accomplish labor-intensive, complex cross-functional processes. While studies have shown that GBS organizations with high operating maturity levels can reduce general and administrative (G&A) transactional costs, this often comes at the price of organizational disruption, high overhead, and management complexity.

One of GBS’ aspirations has been to do value-added work for the whole enterprise. Examples include high-end data analytics (D&A) for financial optimization, risk management, customer, and brand analysis. Yet most GBS work is still transactional, either for function-focused or cross-functional processes (which is still the minority of activity). Often, the D&A activity is restricted to evaluating the GBS organization’s operational efficiency or providing more insight to F&A activities only.

While cost reduction is essential (especially as we continue to experience a recessionary economy), the focus is on surviving and thriving post the pandemic shock. COVID-19 has changed our business philosophy, accelerated digital initiatives, and started the search for a new wave of cost-reduction—all at the same time and at a pace that GBS organizations are not geared to deliver (see Exhibit 2).

Exhibit 2. COVID-19 has changed our business philosophy, accelerated digital initiatives, and started the search for a new wave of cost-reduction

Which of the following statements most accurately captures the current sentiment for your organization?

Percentage respondents

Sample: 150 C-level executives across the global 2000 enterprises

Source:  HFS Research, 2020

GBS organizations have not matured significantly across process optimization, governance, talent, delivery model, and data and analytics

As noted, value-added services, especially around data and analytics that reach beyond transactional analysis, have, for the most part, not cemented their place in the GBS units of most organizations, except for some of the major consumer products companies like P&G and AB InBev.

The process- and people-heavy aspects of service delivery have become less critical with large-scale automation and hyper-connectivity, both internally and with third parties. The use of service management platforms has also made the design, operation, and control of business and IT services more automated. In some cases, the use of machine learning (ML) and artificial intelligence (AI) can lessen the need for process standardization, which is the central focus of GBS (albeit RPA deployment does require a high degree of process and data standardization first).

If companies commit to large-scale automation, it is possible to link processes and workflows cross-functionally while retaining a functionally focused operating model, thus obviating in part the rationale for GBS. Indeed, you can now have high degrees of process and delivery maturity delivered in a functional model.

Moreover, the lack of a unified enterprise resource planning (ERP) system and standardization makes GBS less viable and prevents the organization from realizing GBS’ full benefits. In survey after survey, we find that large enterprises can have up to 10 separate instances. Remote working has also put a premium on automation deployment, further lessening any process or support group that is people heavy.

The advent of the OneOffice—collapsing the organizational silos powered by emerging technologies

Advancements in technology are pushing the boundaries of enterprise value creation. The operational transformation journey started nearly two decades ago with the rise of shared services and outsourcing (SSO). It evolved into global business services (GBS) driven by end-to-end (E2E) processes, and it is culminating with the advent of what HFS calls the “OneOffice” (see Exhibit 3). Organizational silos around the front, middle, and back offices are collapsing to create boundary-less organizations where there is only one office that matters—the office that caters to the customer.

Exhibit 3. The evolution of operating models and the advent of the OneOffice

Source: HFS Research, 2020


In our survey of 252 C-level executives across Global 2000 enterprises, HFS found overwhelming resonance with the OneOffice concept. Nearly 97% of C-suite executives aspire to achieve the OneOffice.


The concept of the OneOffice facilitates the automation of transactional work in, for example, human resources (HR), F&A, and supply chain, and it begins to obviate the need for a separate organization to manage it.

Digital delivery and hyper-connectivity allow enterprises to manage services functionally while still maintaining a cross-functional and end-to-end operating model. The experience for employees and customers may also be enhanced when enterprises move services closer to the function and point of activity deployment or creation.

Exhibit 4. Connect the front, middle, and back offices to deliver the “OneOffice Organizational Mindset”

Source: HFS Research, 2020

Enterprises can now achieve the promised benefits of GBS (lower cost of delivery, value-added insight and services, greater speed and efficiency of transaction processing) through large-scale automation and digitized workflow with less overhead and more efficiency, potentially doubling or tripling overall productivity. This new environment underscores the role and importance of strong governance through service line and regional COEs and engenders a strong position for global process ownership.

There is the potential for greater insight and increased decision velocity by generating data in an automated environment, regardless of the deployed operating environment. Indeed, there are arguments that data generated by function may be more valuable than more centralized capture methods because it is closer to the groups that benefit most.

The Bottom Line: GBS is no longer the North Star for surviving and thriving in this pandemic economy.

Digital is the only language that operations now understand. The OneOffice is where automation becomes a native competency, where human performance is augmented by unleashing creativity and personal interaction, and where the immediacy of data creates insights to support decision-making that can make or break the firm. In fact, if you cannot operate your organization as one integrated unit where data flows freely back and forth across your process chains from your customers to your employees, from your front office to what you used to call your back office, then you probably will not survive much longer in today’s brutal Pandemic Economy.

Enterprises can accomplish digitization in a GBS environment, but the point is that GBS is not a requirement for large-scale digitization of processes and the implementation of OneOffice.

 

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