How GBS is moving from labor arbitrage to value creation

CFOs use global business services (GBS) to build value, moving beyond simple labor arbitrage into strategy, technology and talent. 

In brief

• Global business services (GBS) enhances operational efficiency, governance and value creation for CFOs, supporting multiple functions like finance, HR and IT.
• Key focus areas for GBS implementation include strategic alignment, technology enablement, talent development, strong governance and continuous improvement.
• GBS leverages automation and AI to transform from a cost center to a profit center, offering significant insights and innovation potential.

Chief Financial Officers (CFOs) recognize that leading global business service (GBS) organizations can offer significant benefit to the enterprise:

• GBS offers the opportunity to enhance operational efficiency, access expert knowledge and maintain governance and standardization protocols.
• Forward-thinking organizations will recognize GBS as a strategic approach to improve working capital management, advance business functions and deliver enhanced insights.

The traditional CFO role has undergone substantial transformation, extending beyond the efficiency and effectiveness of operational tasks to include increased expectations for speed, accuracy, transparency, quality and trust in the data and insights delivered to stakeholders. Over time, it is perhaps not surprising that shared services – a typical resource for finance functions – has changed as well, into what is arguably its third evolution, namely GBS. GBS enables a next-generation way to deliver on the core imperatives that CFOs and the enterprise value.

Originally shared services were centered on specialized activities for particular countries or regions and were centralized in lower-cost locations. GBS, however, is global and multifunctional, supporting finance, HR, IT and other areas across the back, middle and front offices by aggregating those activities and resources who perform specific tasks. This can be done through wholly owned GBS (captive centers) or a hybrid approach in conjunction with a third-party managed service. According to the EY sponsored 2023 Shared Services & Outsourcing Network (SSON) survey, about 60% of executives report that their organizations are either operating within GBS models or transitioning to them, highlighting their importance in the finance functions of the future.¹

“When done properly, GBS can be a center of expertise, with highly skilled resources such as data scientists, product engineers, R&D specialists and marketers,” said Dorian Redding, EY Americas GBS Solution Leader. “In GBS, there exists a community capable of re-engineering and reimagining processes and delivering incredible insight into the organization, all while maintaining standardization, transparency and adherence to best practices,” said Redding. “This approach can help deliver value across the dimensions CFOs care about – including quality, cost, insight and value.”

• Quality: GBS holistically delivers enhanced governance and quality control via standardization, facilitating the transparency and visibility demanded by CFOs.
• Cost: By leveraging automation, GBS can develop proficiency in assisting internal clients, such as generative artificial intelligence (GenAI) based enablers to facilitate self-service options for vendors to independently access their invoices.
• Insight: Enriched with AI and data analytics, GBS enhances decision-making and fosters innovation, such as using insights to contest supplier pricing negotiations.
• Value: All working capital flows through GBS. Monitoring and maintenance of cash in GBS can help employ capital more intelligently.

Build GBS with five core areas in mind

For organizations looking to transition to a GBS model, or those already on the journey that haven’t yet realized the expected ROI, there are five areas of critical focus:

1. Clear strategic alignment

GBS should be closely aligned with its organization’s business strategy, especially for large multinational companies that are undergoing change or are integrating acquisitions or divestitures.

2. Technology enablement

Viewing GBS merely as a cost-saving measure undermines its potential for technology-enabled value and insight creation. Automation, AI and analytics are among the tools that can streamline processes, improve decision-making and drive innovation. In the SSON survey, 81% of respondents cite digitization and transformation as how they deliver value from their GBS. In many instances, companies are using workflow technologies, such as ServiceNow, embedded in the end-to-end process.

3. Talent development

A digitally skilled and motivated workforce is essential, necessitating training and development programs. For the truly motivated, GBS can be the entry point toward rewarding careers within the organization, using it as a leadership development funnel. CFOs often find that GBS resources have developed a better holistic understanding of the enterprise, as they see it from end-to-end.

4. Strong governance

For CFOs, governance is obviously a priority; it must encompass a clear set of activities and robust processes and controls, backed by defined roles and responsibilities, to help ensure accountability. GBS organizations “by nature” are already doing these things and can help CFOs standardize and govern more effectively.

5. Continuous improvement

GBS is not merely encouraged to deliver improvements — it is expected. Leaders are frequently tasked with achieving budget reductions of 5% or more to foster a culture of process improvement. GBS possesses comprehensive insight into its operations, enabling it to conduct thorough evaluations, establish key performance indicators (KPIs) and swiftly adopt leading practices, all aimed at amplifying the benefits it delivers to organizations. (A smart approach is to negotiate cost reductions into tech enablement.)

“With greater digitalization and touchless processing, we see future GBS roles having alternative skill sets to become more predictive, such as prompt engineering, in place of traditional processing roles, such as accounts payable clerks,” said Redding. “The technology of today should mean that many processes are preventive and don’t need a human touch. Instead, a smaller number of people are required to manage exceptions, and “intelligence” roles are squeezing as much insight out of the data coursing through GBS as possible.”

GBS is still often viewed as a cost center, with 83% of executives identifying cost optimization as the primary value of this model, while only 25% acknowledge an improvement in profit margins, according to the SSON survey. But GBS is well-positioned to transform into a profit center by leveraging data and automation.

“There are large GBS organizations that have significant data running through them, such as cash and inventory that could potentially operate as an independent entity, monetizing its data to generate revenue for the parent organization,” said Redding. “You cannot tell me that there’s not a significant amount of insight to be found within that.”

Regardless of what’s on the horizon, GBS’s best value proposition lies in the here and now. “By consolidating finance activities within a GBS model, organizations can cut costs, boost efficiency, enhance scalability and tap into specialized expertise,” said Deirdre Ryan, EY Global Finance Transformation Leader. “These tactics enables businesses to operate more efficiently and pursue sustainable growth, a goal shared by every CFO I know.”

Note: This is the fifth in a series of articles about the future of finance, based on EY research and insights working with CFOs.

Summary

Organizations are transitioning beyond traditional shared services to global business services (GBS) that contain next-generation capabilities and skill sets. CFOs gain more effective finance resources for delivering upon their priorities of quality, cost, insight and value. To capitalize on these models, leaders must link GBS to their strategic imperatives, enable strong governance with standardization and visibility, and address the impact on talent.