philips: sense and simplicity
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The Evolution from a Internal SSC to an Outsourced Model:
Goh Kim Lee
Singapore
22nd Sep 2010
to an Outsourced Model: Philips Hybrid Journey
AGENDAAGENDAAGENDAAGENDA
1. Our journey of SSC: from internal to external/hybrid
2. Scope of services3. Evaluation of the first three years4. Next steps
2
4. Next steps
SBS Finance
Our History1998-> Philips established standalone SSC created in Bangkok(Thailand) for
Lighting sector. India setup SSC in Culcutta in 2001.
2002 Philips established multi sectors Shared service centers in Lodz
(Poland), Chennai (India) and Bangkok (Thailand) for accounting work
2007 Shared service centers divested to Infosys BPO
Confidential 3
2007 Global SBS Finance created (local captive centers)
2009 Transaction based pricing introduced
2009 Introduction of Infosys model in Latin America
2010 Start of rule based controlling project
Why going captive initially and not directly to outsourcing?
• Philips had 3 key attributes required to be successful:
1. The know-how with prior experiences and knowledgeable staff
2. The presence in off-shore to provide support
3. The scale to generate enough savings (>500FTEs per center)
• Strength of approach:
4
• Strength of approach:
– Capture all the savings initially (but also all the costs)
– Avoid some initial risks of outsourcing
• creating a partnership together with transition,
• internal buy-in during the migration from onshore to offshore SSC
Why in 2007?
• Key migrations were done and service centers were due to shrink because of process improvements
– Impact on staff career opportunities
– Cost are no longer optimized because of lower scale
5
– Cost are no longer optimized because of lower scale
• In a still maturing market with key players still positioning themselves, Philips saw an opportunity to create extra value by divesting the shared service centers.
• Transition risks are limited as Philips hands over a mature existing business (transformations are achieved, staff remains unchanged, governance model already in place, costs are competitive)
AGENDAAGENDAAGENDAAGENDA
1. Our journey of SSC: from internal to external/hybrid
2. Scope of services3. Evaluation of the first three years4. Next steps
6
4. Next steps
SBS Finance
One Service Provider concept
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Front Office
Philips
One face to the customer
3. Business Model
Confidential 7
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GM&S
R2R
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(Back Office)
Harmonised processes (value chain)
SBS Finance
InfosysSSC‘s
Service processes
RBCI&EB
“Judgement”
Based
Controlling
Remains with the
sectors
Analysis on sub
SBS FinanceScope of services
Confidential 8
“Rule Based”
Controlling
Transactional Accounting
Analysis on sub
process level will be the
basis for a decision
what to bring in scope
Must transfer to
SBS F
Our Portfolio includes traditional Finance services but also Procurement and Compliance Mgt
Requisition ProcessingCatalogue ManagementAccounts PayableTravel Expenses & P-CardFreight PaymentsInter Company Accounts Payable
XXXX
XXXX
Procure To Pay
Local
Regio
nal
Global
XX
XXXX
Confidential 9
CreditsAccounts Receivable and ApplicationCollectionsInter Company Accounts Receivable
Inter Company Accounts PayablePayment Services
General Accounting and ClosingFixed AssetsExternal ReportingTax AccountingTax Filing and ReportingStandard ReportingCompliance Management
XX
XXXX
XXXX
XX
XX
XXXX
XX
Invoice To Cash
Record To Report
XXXX
XX
AGENDAAGENDAAGENDAAGENDA
1. Our journey of SSC: from internal to external/hybrid
2. Scope of services3. Evaluation of the first three years4. Next steps
10
4. Next steps
• Further efficiencies: economies of scale across sectors
• Communication: the BPO contract requires one point of contact per country with
Infosys.
• Scope compliance: more than 20% of the work that should be transferred to
SBS Finance
The 6 reasons why Philips decided to create a global SBS Finance organization
11
• Scope compliance: more than 20% of the work that should be transferred to
Infosys is still done in the sectors.
• Harmonization: the speed to reach harmonized work instructions is too low.
• Innovation: together with the Finance Excellence Network we can implement
process innovations quicker.
• People: managing knowledge (including back ups) and career opportunities.
Our Vision
We want to be recognized as an excellent
provider of financial services to all Philips
businesses worldwide.
SBS Finance
Vision & Mission
12
Our Mission
We are a business focusing on customer
needs and delivering excellent quality and
sense and simplicity in financial services at
competitive prices to all Philips businesses.
• Depend on each other
Scope: execute the Shared Business Service Finance concept by bringing all transactional accounting into the SBS Finance front office (Philips) or back office (Infosys), to be ready by mid 2010. In addition, provide attractive opportunities to our internal customers to migrate rule based controlling work to SBS Finance or Infosys.
• Delight customers
Customer satisfaction: achieve a high level of customer satisfaction by delivering quality and “sense and simplicity” services at competitive prices.
SBS FinanceOur strategy is linked to the 4 Philips values
13
“sense and simplicity” services at competitive prices.
• Deliver great results
Costs: support Philips in bringing the total Finance costs closer to benchmark targets by pursuing further efficiencies in our front office organizations, by actively migrating the appropriate activities to the low cost centers of Infosys, by strongly driving innovation (together with the Finance Excellence Network, Infosys and our customers) and through a high level of harmonization and automation.
• Develop people
People: offer a professional and customer oriented environment that provides solid career opportunities for (finance) professionals, but also safeguards essential (accounting) competencies within Philips.
Infosys locations
Scope Compliance: close to 80 %
Customer satisfaction
The partnership with Infosys is stable and working well
Confidential 14
�Lower cost
�Flexibility and cost variability
�Capacity for outsourcing scope expansion
�Improved service
�Improved BPO relationship management skills
�Leveraging technology
�Better staff retention and motivation
Compared with the initial outsourced objectives:
Savings 2008-2010
The 4 building blocks of SBS Finance
Increasing the efficiency within the standard scope;
De-bottlenecking and further
automating processes
Completing the standard scope
Executing for accounting the
agreed scope for Infosys
Confidential 15
Broadening the scope
Substantial savings in
accounting and controlling
by more aggressive outsourcing
Decreasing the Infosys Charges
Adapt our way of working to
reduce the Infosys costs under
transaction based pricing
Harmonization of accounting processes
First assessment in 2008 (pilot):
Why harmonisation in accounting:
•Less complexity offers next step towards lower costs•less complex customer for Infosys (better service/re-locations)•Facilitates faster process improvement
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45% of processes is more orless harmonized
25% can be
harmonized with
some effort
30% will take quite
some effort
Creation of harmonized
Work instructions
a. Impact analysis
b. Harmonize if possible
SAP landscape
Fiscal requirements
Business requirements
2009 2010
AGENDAAGENDAAGENDAAGENDA
1. Our journey of SSC: from internal to external/hybrid
2. Scope of services3. Evaluation of the first three years4. Next steps
17
4. Next steps
Our Strategy towards World Class
Initial Cost Level
Salary Arbitrage Savings
Process Improvement Savings
Current
Confidential 18
�Move to low cost countries to fund process improvement
�Go for costs, stay for quality
Future Cost Level
World Class
Definition RBC:
•No/less face-to-face contact
with the business functions
needed and
•can be captured in work
instructions
Remains with sectors
Infosys is already involved
in rule based controlling
work on a small scale
Increase Scope of Rule Based Controlling
“RuleBased”
Controlling
“Judgement”Based
Controlling
Accounting
19
instructions
•are of routine nature
requiring relatively little
business knowledge
This model allows the controller to focus on core business activities and support business
functions, e.g. sales, production rather than transactional activities.
Present scope
of SBSF / Infosys.
SBS-F has the ambition to act as an analyst How the RBC project will work: business model and scope
Business PartnerScorekeeper
RBC JBC
Analyst
Infosys Local FinanceSBS-F
Accounting and controlling function
Move to Shared Service
Environment
Stay with the business
function
• Infosys is performing the scorekeeper role which is highly repetitive and standardized
• The analyst function within SBS-F requires also a certain degree of business knowledge
forming a value adding front-office function for business reporting and analysis.
• Local finance focuses on the added value part of controlling, requiring in-depth business
knowledge building on the pre-work performed by the scorekeeper and the analyst.
(definitions of scorekeeper, analyst and business partner found in appendix)
20
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