In this age of globalization and virtualization, Operations are location-agnostic. Shared service centres, located anywhere globally, are serving end customers as well organizations across horizontal and vertical operations. After initial apprehensions, the industry has started offering increasingly complex and specialized services, such as Finance and Risk across The creation of Shared Service Centre (SSC) or Centre of Excellence (COE) have become must-have strategies for process optimization.
In this blog, we highlight some of the key considerations for deciding on your right-shoring strategy.
Service is the new differentiator: We live in competitive times, and product differentiation is easily matched by competition. As such, the focus is increasingly shifting to customer service. The SSC model brings a dual advantage of improving speed & accuracy, while at the same time centralizing recurring operations, thus allowing front-end staff to spend more time with the customer.
Target Operating Model (TOM): A finalized TOM is the starting point for initiating a structure process optimization program. In our experience, organizations that identified SSC as part of their TOM and leveraged it across broad spectrum of functions like Operations, Technology, Risk etc, were able to better realize holistic optimization at organization level, as compared to those limiting it to a process or function level. The benefits are consequence of economies of scale, cross-pollination of ideas, and greater involvement of senior management. A carefully negotiated cost charge back model, supported by function heads is vital to make the model sustainable and achieve continuous improvement.
Regulatory considerations: This should be the first decision milestone in evaluating the possibility of processes to be hosted in another country. This is both with respect to taking up jobs as well as customer data outside the parent organization country’s legal jurisdiction. In our experience, while regulators in some markets mandate only a notification, others are quite stringent with approvals and early engagement with an in-principal agreement is essential.
Location is paramount: Cost advantage is a significant factor but variables such talent, language, scalability and presence of other players for similar processes are important factors that influence location selection. Organizations are known to forego relatively cheaper destinations in favour of locations that are stable (political, economic, environmental etc).
Captive or third-party outsourcing: A Captive unit to outsource operation brings its unique advantages of greater control and sense of ownership. It also ensures complete alignment to parent organization’s values, principles, culture and priorities. However, this model will not work for a small setup with less than 500-1,000 FTEs. However, third party players do provide viable alternatives for professionally run operation without the need of setting up an own entity.
Structured approach to succeed: The SSC model needs a tightly knit and well-defined governance framework covering engagement models, communication strategy, SLA management, escalation matrix and more. Upfront agreement and adherence will ensure effective performance management as well as achievement of supplementary objectives like process improvement, innovation automation, cost efficiency etc.
Transition precedes transformation: Organizations trying to run both programs simultaneously run the risk of failing at both the objectives. Any form of process optimization program needs to complete the transition to new operating models before embarking on the transformation journey. This recommendation relies on the fact that stabilizing the existing process itself can become an arduous challenge during the transition phase.
Automation paradox: Rather than considering automation (including RPA and ML) as a counterbalancing strategy for outsourcing the operations, they can be considered complementary to process optimization. SSC can help with centralization, standardization and making the process leaner to augment success of automation initiatives.
This is the fourth of the Banking Process Transformation blog series. Please read the rest here:
Visit LTI’s Banking & Finance page to find out more about our capabilities in this vertical.
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