HP’s Journey to Shared Services Finance & Accounting Success

It’s not a question of should you do it, but when and how you do it. The “it” is the shared services operating model for finance and accounting (F&A). Companies that do not implement an F&A shared services will definitely be disadvantaged in the markets they serve. Not only will they fall behind on responding to change quickly, they will also have higher operating costs due to the inefficiencies and duplication of effort associated with performing F&A functions throughout the company. This article details how HP shifted to the shared services model, and how this approach helped improve our business.

Roadblocks

True to its value and reputation for innovation, HP was an early adopter of the shared services model when it began this journey over 15 years ago. In the early 1990’s, the company set a strategic goal to reduce operating costs by 30% within three years. At that time, the outsourcing market had not yet come into being for F&A. The only viable means of achieving the type of savings HP had targeted was to build captive shared services operations. As part of that effort HP wanted to integrate the back-end work of individual business units and countries, and reap the benefits of consistency in process, operating efficiency and first time quality.

 Figure 1: 15 Years of HP Shared Services Experience
HP Experience -15 Yrs of SSC ExcellenceEconomies of Scale - Place - Technology
The biggest challenge HP faced was transitioning from a fragmented operation to a process-based environment. F&A shared services are based on establishing standardized rules and processes – therefore this was a cultural change as well as a management challenge. Planning for and implementing a comprehensive change management program was key to our success. Many businesses undergoing F&A transformation underestimate the effort it takes to ensure a smooth cultural change.

Another major trial was the amount of time it took to achieve a simplified, streamlined, and consistent process across multiple business units in all regions that HP operated. This was no easy task considering HP is a global company operating in 178 countries.

Why Shared Services?

For HP, the decision to implement F&A shared services was driven by business needs. The goal was to optimize our cost base and enable our F&A operations to become more efficient. The key driver and benefit of shared services was increased productivity for all the various business units and regions. Taking individual businesses where there was no critical mass and moving them into a more industrialized model enabled better economics and allowed us to capture significant scale effects. Furthermore, centralization provided a springboard for additional process improvement through the use of technology.

 Figure 2: BPO Can Generate Significant Cost Savings
BPO Can Generate Significant Cost Savings

When one looks at most large organizations, one can make a 30 to 40 percent business case most of the time to transition their finance and accounting operations to a shared services model. HP saw several strategic reasons to move to shared services beyond the obvious cost savings including agility, acceleration of business growth and risk mitigation.

This centralization allowed us to re-invest our savings back into the business. The ongoing transformation program to date has resulted in:

  • Consolidation of 32 company-wide general ledgers into a single ledger
  • Improvement in on-time account reconciliation by 20%
  • Reduction in AP/AR processing time by 30%
  • Improvement in process quality by 30%
  • Standardization of operations onto a single platform
  • Reduction in finance function costs by 30% to world-class levels

This means that HP can close the books successfully, without error, and report the business results every month on time in 178 countries. We accomplish all of this in a Sarbanes-Oxley compliant fashion as well.

HP’s shared services operations were so successful that we began offering F&A outsourcing to external customers in 2000. We now provide outsourcing services to a significant number of Branded global customers from our 11 Global Business Centers located in the Americas, Europe, and Asia.

HP as its Own Best Case Study

An example of the type of agility that our shared services organization has enabled is demonstrated by the successful integration of Compaq. The HP-Compaq merger was billed as one of the largest mergers of technology companies. HP was able to successfully transition the $30 billion business with more than 1,200 finance roles into our infrastructure within 18 months. This involved several hundred projects moving in parallel. Having well documented and standardized processes allowed us to smoothly transition HP and Compaq processes onto a common platform and resulted in cost savings of approximately 50 percent.

Lessons Learned

Along this journey to F&A shared services and outsourcing, we learned several key lessons:

  1. Understand why you are pursuing a shared services/outsourcing model — It’s important to develop a compelling business case for moving to a shared services/outsourcing model. Whether it’s to reduce finance transaction processing costs or to increase operational efficiency, a company needs to have a clear idea of what a shared services and/or outsourcing operation will do for them.
  2. Secure buy-off from stakeholders — The shared services/outsourcing concept cannot be imposed upon the business units. Leadership within the company must obtain buy-off from the individual units. It takes an investment in governance and stakeholder sponsorship in order for shared services or outsourcing to succeed.
  3. Anticipate change — This also brings about an organizational change, therefore leaders need to develop a clear communication plan targeted at the various stakeholder groups. This allows the company to anticipate and manage risks proactively.
  4. Invest in training and recruitment — Roles and responsibilities change in this new model. Companies need to invest in training and recruitment of team members on the internal resources for their new shared services or outsourcing responsibilities.
  5. It’s a continuous journey — Shared services/outsourcing is not a journey with a beginning and an end. This is a continual process and HP is still on this journey and reaping the benefits along the way.

Specifically, there are two parts to this journey. The first phase is cost reduction, standardization, and simplification. The second part is value creation. HP is now on the second leg of this journey, which has enabled better analytics to make better business decisions. We can leverage the shared services operating model to close the books more efficiently and improve cash flow performance and optimization.

HP’s F&A Today

 Figure 3: HP Shared Services
HP Shared Services

Today HP’s F&A shared services/outsourcing operation serves HP business units in 178 counties as well as external customers. HP has 11 global delivery centers in India, Costa Rica, Poland, China, Singapore, Spain, Romania, and Mexico. It’s a worldwide network with consistent quality of service across all regions.

This F&A transformation has been vital in enabling HP to help customers with their own F&A journey — driving better business outcomes with less pain along the way.

HP believes that this operating model supports and enables the metamorphosis from a traditional back office function to a real service provider. Beyond relieving business units from transactional processes and administrative tasks, a true service provider delivers services in a centralized structure, while improving process and service quality at reduced cost.