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Auxis Architects Hybrid Shared Services Solution for Multinational

Jan 6, 2017 1:33:55 PM / by Admin

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Client

The Client is a $5B telecommunications company with primary operations in Brazil and Mexico, corporate headquarters in the U.S. and additional operations throughout Latin America.

Business Challenge

The organization was going through major challenges and was in dire need of business transformation, ranging from re-formulating its business model to delivering cost reduction mandates, to addressing ongoing issues in terms of financial controls, technologies and customer service. The Client needed a viable and sustainable customized solution to directly address its highly decentralized and inefficient operations.

As part of its restructuring process, the company had made the decision to establish a Shared Services Center (SSC) for its Latin America main markets and U.S. operations, and had engaged a top global management consulting firm to develop a SSC operating model and business case.

The study performed by the firm was very high level, and was unrealistic in terms of its operating model recommendations and estimated savings. As a result, Auxis was brought in to review and identify the gaps in this study, and to develop a realistic, comprehensive SSC model and detailed implementation approach.

Solution

After reviewing the previous study, Auxis rapidly determined that a more detailed, customized assessment would need to be performed.

The first step in the engagement was to establish an Operating Vision and Strategy for the company. This entailed holding facilitated meetings with company executives to gain alignment on the operating model for the organization, as well as defining the functions and markets that would be in scope, and determining the key outcomes that the business was seeking to achieve. The establishment of this Operating Vision was a critical first step in creating the operating model, as this provided the foundation that the various markets needed to follow.

The Auxis team was then sent to analyze the Client’s primary business operations in Brazil, Mexico and the U.S., as well as to review and document all potential processes in scope. These included traditional back office processes such as Finance and Accounting, Accounts Payable, Accounts Receivable, and Treasury, as well as very specialized processes areas that were unique to the Telecommunications industry, such as Fraud Detection and Revenue Assurance.

After developing a thorough understanding of the Client’s processes, Auxis determined that all “transactional” activities could more efficiently and cost-effectively be performed under a BPO model, while core business processes should stay at the SSC and/or market level. Based on this rationale, Auxis architected a comprehensive SSC operating vision that consisted of a hybrid approach, with some functions being moved to a BPO provider, and others being centralized in-house, or retained at the markets, depending on the uniqueness of the functions involved.

A total of 446 positions were identified as candidates for centralization. Auxis developed a detailed job mapping and leveling model to calculate labor arbitrage and severance costs.

Subsequently, a thorough business case was performed, offering multiple scenarios that compared Asia versus nearshore Latin American costs for the BPO operations, as well as the cost to retain these functions in-house. The business case included not only the labor cost savings, but all of the other factors and costs that many companies neglect to include when building these financial models: third party services for implementation; facilities and infrastructure build-out; employee severance and retention bonuses; tax “leakage”; longer term business process improvement initiatives, etc.

The level of detail of Auxis’ analysis allowed the Client to make a fully informed decision and be highly confident of achieving the ROI indicated in the business case. Mexico was selected for the captive functions to be centralized, and the company determined that the nearshore based BPO provider was more viable than an Asian based model.

On top of labor arbitrage, key process improvement opportunities were catalogued, quantified and prioritized, providing an implementation roadmap with additional potential cost efficiency savings. 

Results

Auxis’ analysis and recommendations addressed all of the Client’s key ongoing challenges, and presented a true hybrid model that was customized and implementation-ready.

 Although the labor cost savings from off-shoring to Asian vs. Nearshore were slightly higher, the client opted for a Nearshoring location in Costa Rica for multiple reasons:

  • Geographic Proximity
  • Time Zone
  • Cultural Affinity
  • Language Skills (Spanish, English, Portuguese)
  • Lower turnover
  • Infrastructure
  • Lower implementation & operating costs (e.g., T&E)

 

The proposed hybrid back-office operating model was expected to realize significant savings and benefits, including:

11.png Labor arbitrage of 35%, in addition to operating efficiencies of 20% 
21.png The combined savings opportunity added up to $18M
32.png IRR of 55%
41.png Payback period of two-and-a-half years

 

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