Dilemma For Companies With GBS Centers And Software-Defined Operating Platforms
To ensure access to skilled workers during the past few years of the global labor shortage, one strategy many companies used was to build or expand their existing global business service (GBS) centers (shared services organizations). But the GBS journey now faces the need to rethink its foundational assumptions and subsequently make significant change.
Mindset Around The Starting Point
For most companies that build GBS organizations, their initial mindset focused on improving efficiency. How could they save money and reduce their overall cost to serve? As they mature, they focus on impacting their parent organizations in other ways than cost reduction. Digital transformation and ongoing investments in technology also matured. Consequently, GBS organizations now seek to take value creation to a new level.
Thus, a new operating model is becoming apparent. At the heart of this shift in vision and approach is the realization that operations and technology are now far more intimate with each other and that the pace of change for both operations and the tech stacks that serve them is increasing.
The Case For Change
Many sophisticated global companies are now well into their digital transformation journey. They migrated significant technology estates to the cloud and added significant investments in tools and automation to improve their productivity and effectiveness.
By extension, and often by design, their GBS organizations benefit from these investments and now operate with a deeper tech stack. This improved their efficiency and lengthened their reach into their parent organization’s operations, increasing their impact and importance.
All the technology and operations change challenges the process-driven structures of GBS organizations, which were engineered for stability – not constant change. These challenges present issues of change management as well as talent churn.
One might imagine that these challenges would subside as a GBS organization completes its transformation and emerges into a new, more technology-rich, steady state. Inconveniently, it appears that a steady state is one of constant change as the GBS organization responds to the changing business needs of the parent enterprise. Here are two important facts about the change aspect:
- The driver is the ever-evolving technology stack and the reciprocal change in operations with the rebounding application of change in the technology stack.
- Not only does this change appear to be permanent, but it also appears that the velocity of this change is increasing and likely will continue to increase indefinitely.
GBS organizations today need a new model that can deliver stronger business results at a lower cost to serve while constantly evolving to meet the changing business needs and demands of the enterprise. This model needs to be built for change at scale, being far more responsive to meeting changing objectives and delivering more impressive results.
Platform Operations: The New Model
We at Everest Group call this emerging operating model “platform operations.” The easiest place to see this new operating model in action is the large tech firms such as Amazon and Google. They are often referred to as platform companies and often use platforms as their primary delivery mechanism.
Platform thinking has taken over all or most of the way they run their companies. They have and are building platforms for HR, finance, supply chain, procurement, and even how they manage and operate real estate. Most large financial institutions and many other firms also now use platform concepts to reconceive and rearchitect their operations.
What is perhaps surprising is that most, if not all, organizations that embarked on the digital transformation journey are also on this platform journey but without full awareness of the nature and significant rewards awaiting them as their platforms emerge.
GBS organizations are a case in point. They grapple with the increasing rate of change of both their technology and their operations but are slow to move to platform thinking and platform operations. To a large degree, this is a failure of vision. However, their technology is already well on the way to becoming a platform, and the constant churn of talent and reorganization of operations already mirrors the technology changes.
Platform Operations Defined
“Platform operations” is where a company’s technology and operations are managed, architected, planned, and funded as one entity. This model requires that both the technology and the associated operations are built on platform principles and designed to adapt, evolve, and change at speed. This requires emphasis on the ability to reconfigure the foundational technologies and operating talent quickly and in an integrated manner.
This model differs significantly from the traditional approach to operations and technology, where technology is planned, built, and independently integrated with the operations through a long and often painful change management exercise.
Benefits Of A Platform Operations Model
The first and most important benefit is the rapid and effective accomplishments of the platform’s business objectives and key results (OKRs). OKRs are best defined by departments or functions.
For example, the sales function is likely to have objectives and results around increased sales, better targeting of prospects, and more efficient deployment of sales and marketing resources. The finance and accounting function is likely to set its objectives around providing financial insight, managing risk, and ensuring compliance.
Platform operations align with OKRs and move quickly to deliver on those objectives and results. In some ways, this is similar to what an end-to-end process promised to deliver but seldom succeeded in accomplishing.
The second major set of benefits is that platform operations almost always deliver a lower cost to serve. They also provide a nimble structure built for continual change and meeting the ever-evolving needs of the business and the constant pressure of changing technology.
I will explain the path to moving to a platform operations model in an upcoming blog.
The promise of GBS organizations stepping up to deliver more significant OKRs and lower cost to serve while positioning themselves to be able to evolve and change at scale is alluring. But the prospect of moving away from the tried-and-true process-driven models is daunting.
Moving to a platform operations model in most cases does not require abandoning the existing technology stack or blowing up the existing operating model. Rather, it requires a change in vision and approach which will lead to accelerating attainment of the enterprise objectives and increasing the impact of key results. The good news is, as I mentioned already, the journey to platform operations has already begun for many GBS organizations.
Learn more in the webinar, Sustaining Momentum: Key Priorities for GBS Leaders Amid Economic Uncertainty.