Latin American businesses implementing shared services centers are seeing significant benefits, such as lower costs; access to agile, standardized business processes; fewer errors; improved efficiency; and the generation of economies of scale which help boost growth.
These centers are helping IT departments to evolve from simple cost centers to service departments offering consultation services. This transition has not been without its challenges as many user departments have been wary of change. However, the long-term competitive advantages for the businesses themselves have proven to be significant – something that has been duly recognized by the technology leaders currently directing their businesses’ shared services centers in the region.
Nearshore Americas chatted to three such leaders about how these shared services centers have impacted on their businesses and how they are boosting both growth and profitability.
The Evolution of the IT Department
According to Carlos Lerma, CIO at Alestra, a shared service center is an evolution of the business’ IT department. These departments, previously functioning as providers and cost centers are now operating as service departments. “We currently have web and collaboration environments that have enabled us to function as a service department. Our internal departments have come to see us as an internal provider offering value and providing solutions enabling them to become more proactive and to improve their processes,” states Lerma.
Lerma adds that this has resulted in their being able to forge closer relationships with other business units; giving them a better understanding of their operations and helping them to become more proactive when proposing solutions that meet their individual needs. “A shared service center allows us to become more skillful, as well as proactive when it comes to meeting the business’ needs,” says Lerma.
According to Jorge Sanchez, Sherwin Williams’ head of Business Analytics & Process Optimization in Latin America, employing shared services has proven advantages. The company currently has one shared service center, overseeing all its operations in Mexico. There are also regional centers bringing together countries such as Uruguay and Argentina; Chile and Peru; and yet another bringing different Asian countries together. They also have a global center that uses an internal cloud to provide their subsidiaries with telecommunication, ERP, email, security and other services.
Sanchez explains that the shared services focus on two primary areas: technology and the supply chain. Offering shared services has allowed them to standardize their infrastructure and has facilitated information sharing within the company, on all levels. Shared services have integrated all procedures relating to the supply chain – from purchasing to payments made to suppliers.
“Previously, each country, division and business had their own method for dealing with suppliers; each negotiating in their own, individual way. Integrating the organization as a whole into one single model, gives greater leverage when negotiating with suppliers,” states Sanchez. He explains that purchasing the raw materials for Sherwin Williams paints accounts for around 70% of the total cost; so the ability to browse the global market, searching out the best available prices has a considerable impact on their profit margins.
Andrea Castelli, IT Mexico & Shared Services Center LatAm Manager for American Tower, a business operating and developing wireless communication sites, is in charge of providing shared services from Mexico for the operations the business currently runs in Brazil, Colombia, Costa Rica, Chile, Panama and Peru.
He states that he uses technology shared services as this offers a transparent administration process allowing companies within the same group to communicate in the same language and operate using the same processes. “I have seen case in which companies have not had one single process in common; making it almost impossible to achieve any significant improvements,” states Castelli. He also highlights how applying the same corporate guidelines to all subsidiaries proves much quicker, helps to pool resources and knowledge, improves practices and generates savings.
Improved control of operations is another benefit of employing shared services. According to Jorge Sanchez from Sherwin Williams, having a shared service center helps them get to know their operations better. They have looked to standardize all their processes; in fact, they started by researching the specific processes of each individual country and division with the aim of consolidating them into one single process. “I believe that this has been the most significant challenge. Silos are deeply ingrained in all businesses, and when you start talking about change, the first thing you encounter is a battle of wills,” he states.
Sanchez explains that the idea of using a shared services center came from the corporate side of the business. He also admits that the idea doesn’t necessarily please everyone as, “we were all used to wielding control in our own specific areas, and the idea of handing this control over to a third party is often met with opposition. But the end result is to generate economies of scale, providing greater growth; which is exactly what we’re looking for.”
From a budgetary perspective, Alestra consolidates the total annual IT budget in order to cover the needs of each of its divisions. “We carry out a yearly evaluation of their needs. This way, the organization itself doesn’t have to worry about preparing a special IT budget,” explains Carlos Lerma. He adds that, the shared services center helps advance the evolution of their platforms and systems, depending on what stage they are at in the renovation, consolidation or migration process. “The other departments are confident that their IT needs will be met without them having to worry about the process,” says Lerma.
Lerma, from Alestra, highlights the importance of having a clear catalogue of the services on offer, including their definitions and levels of service. “The most important thing is to clearly catalogue the services on offer. If you don’t have that, nothing will be clear. It’s like having a restaurant without a menu,” he states. He adds that this catalogue should be carefully structured; clearly defining the individual processes.
It is equally important to strengthen communication within the IT organization so that everyone is aware of what services are on offer, who is in charge of providing said services, and what levels of service and response times are expected. The same is true for the users, who should be aware, not only of the services on offer, but also of how to request these services, ensuring they are cared for within the required time frame.
It is generally recognized that going over to a shared services model when you have been used to the traditional supply method involves an initial adjustment period. Also, response times may be longer than those previously experienced. “The response time can cause issues, as something that was previously resolved in a matter of minutes can sometimes take hours or even days to resolve. But, at the end of the day, as one single process is involved, you are able to see where the opportunities for improvement lie,” states Sanchez.
Of course, resistance to change is always expected when taking on projects such as these. According to Andrea Castelli from American Tower, staff is often reluctant to employ external processes or standardize operations in accordance with corporate guidelines as they feel that, in doing so, they are losing control.
Lerma found that observing the users’ reaction is extremely interesting. He found that these users are used to communicating directly with a member of staff from the IT department and getting an immediate response. “When using shared services, they are told that they have to follow a process: contact the service desk, fill out a request and then wait for said request to be processed and considered before finally receiving a reply. At first staff on both sides showed a certain amount of resistance to the concept, but, in the end they all realized that following this process provides them with both control and peace of mind”, explains Lerma.
Not Just an IT Project
Castelli believes that for a shared service center to be successful, it should not be “marketed” as a project exclusive to IT. “It is not a project taking away from the importance of IT or the need to reduce costs. It is a project looking to streamline and optimize resources, while at the same time focusing these resources on giving you the competitive edge,” he states.
He also states that shared services can help you to develop a strong team when it comes to business knowledge. “I can assure you, that the simple fact of having one single center where the experts come together offers significant advantages when developing your capabilities,” he adds.
According to Lerma, “the benefits are directly felt by the business. This evolution of the IT department is a cog in the overall working of a business: driving change and innovation.”
Sanchez adds that IT becoming more involved in business processes and consultation is resulting in a change in paradigm for technological leaders. “The challenge now is to find ways to improve our processes making the most of the technology already installed. We are beginning to understand that we have to change the role we play; to go from being a purely technical area to a more functional one,” he concludes.