GBS trilogy on the digitalization of back offices III

Part Three: «Quo Vadis - Global Business Services?»

Sometime in the 1990s, the digital transformation of the corporate world began. While this process is ongoing, there are always waves in which the topic comes up in public debate. Now this is the case again in connection with AI, generative artificial intelligence. While, for all to see, the «interface» between companies and customers is revolutionizing, administrations are naturally transforming as well. Here, I would like to address the topic of «Digitalization of Back Offices» and dedicate this trilogy to the phenomenon of Shares Services and Global Business Services. In the first part, I defined the field, described my personal approach to it and explained why GBS fascinates me so much. In the second part, I took stock of the situation in the year 2023. In today's third and final part, I highlight the fundamental challenges of the topic and show where the journey could take us in the future.

One thing is clear: Global Business Services are a «child of globalization». In an open, networked world, why should accounting, for example, be done in each individual unit instead of merging them? The resulting economies of scale can easily be exploited, especially as accounting standards are becoming more and more aligned worldwide.

Today, in 2023, the question is whether the corresponding prerequisites are still in place in view of the new geopolitical developments (many already see us back in the Cold War). On the other hand, the «New Work/Future of Work» development after the COVID epidemic is just challenging some of the principles that have grown up. Yet the GBS issue is complex enough in and of itself. The six biggest and most important aspects and questions are: 

  • Initial situation and purpose
  • Corporate culture
  • Areas (which areas should be included?)
  • Sourcing (in-house, outsourcing or hybrid?)
  • Service Center locations
  • Technology and IT infrastructure

So this is a complex subject area in a complex world!

Two fundamental challenges for the future

In addition to these points, there are two other fundamental challenges:

  • Geopolitical developments: What impact will it have if the world once again divides into blocs? Some already see us back in the Cold War. The fact is that regional and decentralized regulations to protect global competition are growing rapidly, and IT systems can no longer be rolled out globally. Just last week, China banned the use of iPhones for central government officials, coinciding with the launch of the new high-end flagship smartphone from Chinese manufacturer Huawei.
  • «New Work/Future of Work»: Are we just guessing, or do we already know? After the COVID epidemic, we have probably arrived at the epoch in which the collaboration of people and machines in the digital environment is being redesigned. It's not just about technology and efficiency, it's just as much about people, organization, leadership. And, if you take the idea further, it's also about the impact on corporate culture and, taken to its logical conclusion, about meaningfulness, about purpose.

What does this mean for the development of the GBS industry? Does it even call it into question? Should the whole thing be spelled out again and regionalized and localized? To this I can clearly say: absolutely not, these developments are by no means new. In one of my Strategic Foresight, projects in IKEA's Group Shared Services team, we recognized this back in 2017 and included it in our scenarios. So for those who have analyzed this systematically, these are not new phenomena (here in this blog I do a follow up on the corresponding project).

From my point of view, the following three aspects are in the foreground for the future:

  1. People and automation: The skills shortage in the GBS industry will put the people factor on the same level of importance as the factor digitalization in the transformation of the Shared Services industry. In the «Future of Jobs Report 2023» from the World Economic Forum, 803 companies employing more than 11.3 million people across 27 industry clusters and 45 state the following, «Local skills gaps and the difficulty of finding appropriate talent and, along with regulatory frameworks, the main barriers to business transformation. Investing in on-the-job training, accelerating automation, and transitioning existing employees from declining to growing roles are the key workforce strategies for companies.» So, it's as much about training («re-skilling») in existing localities and having the necessary resources available when rebuilding shared services centers as it is about technology and generative AI.
  2. Nationalism and protectionism will undoubtedly increase, complexity will grow and possibly the pace of automation will slow down somewhat. But stopping this development? Not at all! The possibilities of generative artificial intelligence and the emerging metaverse are simply so overwhelmingly large that this development cannot be stopped.
  3. Flexibility and resilience: Organizational agility becomes the key factor to ensure both digital opportunities and growing regional and national requirements and the continuity of one's own business. An agile organizational structure with service centers in different geographies and Centers of Excellence (CoEs) in which relevant competencies are pulled together, as well as solid resilience planning with corresponding business continuity plans become a strategic imperative. Uncertain geopolitical developments as well as the fact that the number of so-called «Black Swan Events» has noticeably increased in recent years (financial crises, epidemics, wars) do not allow any other conclusion. Our world is VUCA!

My conclusion on the future of GBS

Instead of a threat, I see the upcoming developments as a promising opportunity for Global Business- and Shared Services organizations. Companies can hardly afford not to respond to these challenges and to further delay the digitalization of the back office. The digitalization of the back office must be approached holistically and strategically.

In addition, it would make sense for Global Business Services (GBS) to evolve into Global Business Operations (GBO) by not only remaining the driving force behind automation and the digitalization of the back office, but additionally becoming the home of the «New Work/Future of Work» theme. It's a step that's almost obvious. In our Strategic Foresight project in IKEA's Group Shared Services team, we already recognized this in 2017 and included it in our scenarios.

What is the situation in your company? Do you have a global business or shared services strategy? If yes, is it fit for the future? If no, are you planning to jump on this bandwagon? I'm interested in your feedback, whether it's a comment, networking on LinkedIn, or a related message.

PS Let the future be your guide - the best in life is yet to come.