The COVID-19 pandemic and the ongoing war in Ukraine have plunged the global economy into a crisis over the past three years, the scale of which has assumed considerable proportions given the already poor global economic indicators.
In particular, the curfews, the disruption of global supply chains, the scarcity of resources, the accompanying double-digit inflation in manufacturing input costs (over 85% in the European Union, the United Kingdom and the United States in 2022), and the increasing trend toward deglobalization have put companies in many industries under great pressure to transform. This is because flexible strategies were required to withstand the multi-layered challenges and practically ensure survival in the market.
Inevitably, digitization has been a driving force, offering direct or indirect solutions to some of these and other current challenges, such as the shortage of skilled workers, which has become much more acute in some countries with pre-existing demographic asymmetries, as in Germany.
So, the economic crisis has served as an accelerator for the already ongoing trend toward digitization in companies worldwide. One of its greatest benefits is that processes become easier to track, tasks be completed more quickly, and databases are easier to access so that, for example, reports and analyses can be reliably retrieved daily, while personnel resources are used for capital-intensive human studies.
In addition, digitization makes a large proportion of all human work in the company more flexible, so remote control becomes the new standard. All these benefits together ultimately lead to cost savings and hence competitiveness.
Global Business Services: What are they?
In this context, however, the question arises of how a company-wide digital transformation can best be accomplished since this task is essential but not trivial. The scientifically based and empirically proven answer to this is through the Global Business Services (GBS for short), which leading companies from industry and the service sector and from the public segment have also already successfully implemented, particularly in Western countries, and hence have been able to tackle some current challenges of the market, most times with competitive advantages. These are partly because of 25% to 40% cost savings in the back-office field. The decisive factor here is that while the GBS supports digitization, it is essentially a central concept for the organizational structure of a company. In concrete terms, an GBS is relocating one or more corporate areas such as IT, finance and accounting, tax, compliance, logistics, sales, and marketing or purchasing to an independent sub-company established for this purpose.
The areas mentioned represent only a selection of appropriate fields that can be outsourced to such a sub-company, so the list is not exhaustive.
This is where digitization comes in since it can start at a central point by bundling and standardizing activities. In this way, digital bots can replace repetitive tasks. The same applies to advanced analytics, for example, checking invoices without reference to order but based on historical records. As the GBS is the central point for all data, process mining and mass data analysis often start within these structures.
For some companies, it is already a new standard to work with bots as real employees in the systems, having their own IDs and logins to systems and being available 24/7. This allows a human workforce to focus on more value-oriented tasks and instead work based on exceptions that are automatically highlighted by the system. Centralization results in up to 90% higher process efficiency, which is one of the key benefits of this approach.
At the same time, the associated specialization of a GBS in relevant areas reduces the error rate throughout the operation, resulting in a high and uniform standard of performance across the company. Overall, this also usually facilitates the fulfillment of key compliance requirements, increases internal transparency, and ultimately improves service quality in the end-to-end business, which can typically be tracked with a performance measurement system.
Before taking action, however, it is essential for companies to determine the degree and possibility of standardization of their processes. After all, if discretionary decisions have to be made within them or special know-how is required, such reallocation to a GBS needs to be assessed in detail, as the undertaking would probably involve higher costs. If suitability is given, implementing a business services sub-company does not require excessive effort, provided that the corresponding procedure is structured.
What is needed is a business decision that takes risk assessments into account and proactive participation by the relevant stakeholders for a quick and efficient design. By its very nature, the investment is low relative to the subsequent cost savings and benefits. This includes the services of consultants, who usually take over such implementation processes and ensure flawless execution based on their many years of experience.
Expert advice for turning challenges into wins
One of these consultants who has helped global brands set up GBSs is Andreas Reimann, an experienced partner at one of the Big Four consulting companies and, with over 150 relevant projects in the last ten years alone, arguably one of the most renowned experts in this field.
His team specialized in the GBS business early on and has made a big name for itself. Andreas Reimann himself has observed that companies increasingly rely on GBS to drive forward their digitization, inter alia, because of the great market pressure, as he told me in an interview via Teams. In fact, four out of five companies in highly industrialized countries are generally said to have such a GBS and are expanding it over time.
According to him, the trend today is even much more toward automation. Research from prominent universities even shows that the future of GBS lies in cloud-based environments and is moving toward complete virtuality. Correspondingly, it is expected that companies will be more likely to turn to external providers for such an implementation, as they have the necessary specialization, experience and software to digitize a GBS fully.
The degree of need goes hand in hand with the five-stage development maturity model that Reimann has developed over time by helping well-known brands implement business services. This model clearly shows that as the complexity of a GBS increases, so does the need for higher levels of digital provisioning to make the adaptation successful.
In summary, GBSs are an excellent tool for digitizing or even automating certain corporate services, making operations more efficient, and saving costs. Figures from global companies that already use such a business service model support these statements, as does expert Reimann. At least in the long term, GBS can be a response to some of the current, multi-layered global challenges because of its reasonable approach to digitization.
