# Presentation: 301146

## Shared Services: A private sector example and some lessons learned

- 		Jonathan D. Breul
- 		Federal Financial Management Conference
- 		March 11, 2008

**Notes:**
Notes:

## Agenda

- 	1.	Research on federal government experience: franchise funds
- 	2.	Private sector example:  BP/Amoco
- 	3.	Importance of governance
- 	4.	Lessons learned
- 	5.	Questions?

- Infrastructure Transformation – IBM Confidential

##    IBM Center research on    federal government experience

**Notes:**
Notes:

## IBM Center for the Business of Government

- “Franchise Funds in the Federal Government: Ending the Monopoly in Service Provision,”  by John Callahan
- 	_[http://www.businessofgovernment.org/pdfs/Callahan_Report.pdf](http://www.businessofgovernment.org/pdfs/Callahan_Report.pdf)_
- “franchise funds have been successful”
- “seen considerable customer and service growth during their operation”
- “expanded, modified, and even curtailed their service offerings as determined by the markets that they serve”
- “operated on a self-sustaining basis and have practiced full cost recovery”

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##    Private sector example –   BP / Amoco

**Notes:**
Notes:

## A snapshot of the BP and IBM

**Financial and accounting services**
**A five-year journey **
**Growth by theatres, building on prior success**
**Evolution of important “partnering” relationship between BP and IBM**

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## Business transformation in multiple processes

**BPMS**

**AMS**

**SO**

**Finance and**
**Accounting**

**Customer  Relationship**

**Human Resources**

**Applications Transformation**

**Technology Transformation**

- ERP Management
- Data Administration
- Third Party Management
- End-user support
- Transformational Activities
- Related Legacy Apps
- Package Solutions

- Performance and sizing
- Monitoring and maintaining
- Database Administration

- Operating system upgrades
- Data Center Operations
- Network Management

- Oil and Gas Back Office processes
- Banking Back Office
- Insurance – General Claims Management
- Insurance – Life Policy Management
- Health claims processing

**Industry Specific**

**Procurement**

- IBM Research
- Process and ProductivityImprovements
- Web Enablement
- Annuity Based Solutions
- Global Resourcing
- Rustproofing and preventative

- Maintenance
- Skills Leverage
- Portfolio Analysis
- Assessments
- Systems Engineering, Arch. & Data Integrity
- Global Testing

- Web Services
- Accelerated Solution Delivery
- Global Solution and Competency Delivery Centers

**Business transformation in multiple processes**

- Customer Access Transformation
- Marketing Transformation
- Field Sales & Service Transformation
- Contact Center Transformation
- Infrastructure & Data Transformation
- Enterprise Connectivity Transformation

- Offshore Sourcing
- Strategic Sourcing
- Supplier Catalog Enablement
- Supplier Relationship Management
- Indirect-Direct Purchasing
- Contract Management
- End-User Support
- Indirect-Direct Purchasing

- B2E Strategy
- HR Process redesign
- Service Delivery Strategy
- Access to consolidated HR information
- Full HR Process Delivery
- Web enabled self service and contact center
- Vendor aggregation and management

- Cost Accounting
- JE Processing
- AP/AR
- Fixed Assets
- Project Acctg
- Inter-company Billing
- Credit & Collections
- Cash Application
- Internal/External Financial Reporting
- General Acctg
- Budget and Forecasting

- Infrastructure Transformation – IBM Confidential

**Notes:**
Switch – 19 and 20

## Progression of improvements at BP

**Common ERP**
**1994-97**

**Common Processes**
**1994-1997**

**Shared Services**
**1995-1997**

- x

- x

- x

**Continuous Improvement**
**1990-1995**

- x

- x

- x

**Accumulation of Outsourcing Scale**

_***Vision***_
**Leverage of Common Industry Platform and Best Practices**

**Client 1**

**Client 2**

**Client 3**

**Client 4**

**Common Processes**

- Industry
- Clearing house

**Time**

**Value**

**Business Process Outsourcing to PwC ****(1999)**

- x

**BP Amoco Merger ****(1998)**

- x

**Offshore Processing (2003)**

**Automation**
**1970-90**

**ARCO Integration ****(2000)**

- Infrastructure Transformation – IBM Confidential

## Three-tier delivery network

**Three-tier delivery network**

- Consolidate transactional activities in a low cost global hub
- Consolidate standard non transactional activities into regional centers
- Provide non standard expertise processes, such a business specific activities, from local expertise centers
- Six Sigma black belt leadership and methodology applied throughout network

- Processes include:
- Accounts payable
- Travel & expenses
- Accounts receivable
- Intercompany
- Fixed assets

**Tier 3**
**Global Hub**
**(e.g., Bangalore)**

- Processes include:
- Data scanning
- Query handling
- Statutory accounting
- Management reporting
- General accounting
- Credit management

**Tier 2**
**Regional Hubs**
**(e.g., Tulsa)**

- Processes include:
- Payment disbursement
- Project monitoring
- Cost accounting
- Financial analysis
- Budgeting & forecasting

**Tier 1**
**Expertise Centres**
**(client site)**

- Governance, relationship management and customer service

- Infrastructure Transformation – IBM Confidential

## Cost and working capital reductions

- Since 1995 worldwide, savings of 20-50% have been delivered to BP over life of the various contract.
- Since 1999 in North America, IBM has assimilated three major scope increases in response to BP acquisitions and outsourcing contract 	awards.  BP’s cost for the combined scope (a 20-25% volumetric increase) is lower than it was for the original scope.
- Transactional unit costs have steadily declined.
- IBM’s use of Activity Based Management gives BP better understanding of service consumption that ever before.
- Working capital improvements measured in tens of millions of dollars have already been achieved with more on the way.

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## Increased customer satisfaction

- Customer satisfaction is monitored on an ongoing basis within IBM and measured annually by a third-party.
- Annual satisfaction survey results started good and have improved each year.
- Strong governance program – global and regional governance contracts.

- Infrastructure Transformation – IBM Confidential

##    Importance of governance

**Notes:**
Notes:

## Why governance matters

- 	Lack of working governance mechanism will be the most common
- 	reason for failure of shared services arrangements.

- Infrastructure Transformation – IBM Confidential

## Governance challenges

- 1.	Establishing decision rights:
- 	-	Everyone is responsible, no one is responsible
- 	-	Decision rights and governance process
- 2.	Defining high value business services:
- 	-	Decision rights and governance process for shared services
- 	-	Communicating and enforcing standards and policies
- 	-	Identifying and implementing sharable services
- 3.	Managing the lifecycle of assets:
- 	-	Eliminate and prevent unnecessary service proliferation
- 	-	Change management for shared services
- 	-	Security and authentication
- 4.	Measuring effectiveness:
- 	-	Measuring service utilization and cost
- 	-	Measuring business benefit
- 	-	Access and visibility to information

- Infrastructure Transformation – IBM Confidential

## Effective governance of shared services

- Setting up an effective shared service organization requires the following elements:
- 	-	Governing council
- 	-	Operating standards-	Client relationships
- 	-	Client-focused team and service level agreements
- 	-	Capable sourcing and service delivery
- New governance models are required as agency-centric delivery models give way to integrated or shared-service delivery models.

- Infrastructure Transformation – IBM Confidential

##          Lessons learned

**Notes:**
Notes:

## Lessons learned

- Do not under-estimate effort to implement shared services.
- Need senior management full support.
- Target and document quick hits – successes.
- Operate shared services as a separate P&L canter.
- Implement performance measurement programs.
- Establish service level agreements.
- Choose the right geographic site.
- Limit # of different systems.
- Incentive based compensation.
- “Partner” for success.

- Infrastructure Transformation – IBM Confidential

## Questions?

- 		Jonathan D. Breul
- 		Executive Director, IBM Center for The Business of Government
- 		and Partner, IBM, Global Business Services
- 		1301 K Street NW, 4th floor, West Tower
- 		Washington, DC  20005
- 		(202) 515-4382
- 		_[jonathan.d.breul@us.ibm.com](mailto:jonathan.d.breul@us.ibm.com)_
- 		www.businessofgovernment.org

- Infrastructure Transformation – IBM Confidential

**Notes:**
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