1. Shared Services: A private sector example and some lessons learned
Jonathan D. Breul
Federal Financial Management Conference
March 11, 2008
Notes:
IBM Confidential

2. Agenda 1. Research on federal government experience: franchise funds
2. Private sector example: BP/Amoco
3. Importance of governance
4. Lessons learned
5. Questions?
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

3. IBM Center research on federal government experience
Notes:
IBM Confidential

4. IBM Center for the Business of Government
“Franchise Funds in the Federal Government: Ending the Monopoly in Service Provision,” by John Callahan
“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”
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

5. Private sector example – BP / Amoco
Notes:
IBM Confidential

6. 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
Federal Financial Management Conference Jonathan D. Breul March

7. Business transformation in multiple processes
Finance and
Accounting
Human Resources
Customer Relationship
Industry Specific
Procurement
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
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
Offshore Sourcing
Strategic Sourcing
Supplier Catalog Enablement
Supplier Relationship Management
Indirect-Direct Purchasing
Contract Management
End-User Support
Customer Access Transformation
Marketing Transformation
Field Sales & Service Transformation
Contact Center Transformation
Infrastructure & Data Transformation
Enterprise Connectivity Transformation
Oil and Gas Back Office processes
Banking Back Office
Insurance – General Claims Management
Insurance – Life Policy Management
Health claims processing
BPMS
Switch – 19 and 20
ERP Management
Data Administration
Third Party Management
End-user support
Transformational Activities
Related Legacy Apps
Package Solutions
IBM Research
Process and Productivity Improvements
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
AMS
Applications Transformation
Technology Transformation
Performance and sizing
Monitoring and maintaining
Database Administration
Operating system upgrades
Data Center Operations
Network Management SO
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

8. Progression of improvements at BP
Vision
Leverage of Common Industry Platform and Best Practices
Industry
Clearing house
Common Processes
Client 1
Client 2
Client 3
Client 4
Offshore Processing (2003) x
ARCO Integration (2000)
Business Process Outsourcing to PwC (1999)
Value
Accumulation of Outsourcing Scale x
Shared Services x
BP Amoco Merger (1998) x
Common Processes x x
Common ERP
Automation x x
Continuous Improvement
Time
Federal Financial Management Conference Jonathan D. Breul March

9. Three-tier delivery network
Global Hub
(e.g., Bangalore)
Tier 2
Regional Hubs
(e.g., Tulsa)
Tier 1
Expertise Centres
(client site)
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
Processes include:
Data scanning
Query handling
Statutory accounting
Management reporting
General accounting
Credit management
Processes include:
Payment disbursement
Project monitoring
Cost accounting
Financial analysis
Budgeting & forecasting
Governance, relationship management and customer service
Federal Financial Management Conference Jonathan D. Breul March

10. 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.
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

11. 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.
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

12. Importance of governance
Notes:
IBM Confidential

13. Why governance matters
Lack of working governance mechanism will be the most common
reason for failure of shared services arrangements.
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

14. 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
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

15. 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.
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

16. Lessons learned
Notes:
IBM Confidential

17. 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.
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential

18. 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
(202)
Notes:
Federal Financial Management Conference Jonathan D. Breul March
IBM Confidential