IT

The revolution in IT technology and operation over the past two decades has been remarkable. For most organisations IT has rapidly gone from an adjunct to the business, to being core to the business and its success.

As IT has become fundamental to the business, the IT function is reaching a crossroads in defining its role and purpose going forward – will it take on the mantle of providing strategic leadership in terms of proposing and developing new products and offerings, or will the business units add IT and digitalisation capability themselves to provide such leadership, and look to the IT function to simply maintain ‘keeping the lights on’. This is being exemplified by some organisations now appointing Chief Digitalisation Officers (CDO) in the business to drive just such change.

If the IT function is going to provide the technology leadership, digitalisation, and drive change in the business then it needs to increasingly partner with the business, evolving its capability and developing its expertise in products and services to add value and support the differentiation of the company products and services.

The IT function role will need to continue to evolve as the majority of companies become technology companies, to the extent that soon technology will be embedded in nearly every project, service and process, and in turn will be integrated into broader digital eco-systems. Increasingly powerful IT systems and applications will form the backbone of the business with the data that it provides at the core of the company’s future competitive advantage.

IT functions going forward will need to be prepared to change to meet the new challenges and opportunities;

• The IT function will take a bigger role in Strategy, with it being less seen as a necessary overhead, or business enabler, to being seen as core and as a value generator. IT will have an increasingly bigger role in defining and delivering the customer experience and to partnering the business to make more informed decisions quicker.

• IT functions will increasingly be structured into two distinct groups based around ‘run’ services and ‘change’ services. The focus of the former will be on driving efficiency, doing more with less resources, while the latter will be increasingly aligned and collaborative with the business unit needs and requirements.

• IT functions will continue to face tension between the need from the business for flexibility and speed, while balancing this with the need to protect, secure, and de-risk. The tolerance to failure will be much lower and a ‘fail-fast’ approach to new systems will likely prevail. The appropriate use of Agile development and rapid change will be the key to ensuring success in a digital world.

• IT Outsourcing (ITO) is already highly mature and will continue to grow and develop, not just in Run services but taking a greater role in not just the provision or development of tools but in the commitment to business outcomes. ITO will be used not just to reduce costs but to provide access to wider capability and scarce skills.

• IT Security is only going to become ever more important in a world where the threats, risks, probability and scale of impact on the business are growing seemingly exponentially. This is going to require a constant focus and drive, and necessitate adding new approaches to addressing security moving from just being focused on looking outwards, to also looking inwards and improving security in the constituent IT components.

• As business operations increasingly embrace digitalisation, automation, and downloading niche business applications to drive efficiencies, the role of the central IT function in Governance will also need to change as it will have less direct control over IT operation which will present security, integration, testing, and change management risks.

The IT function is going to continue to face a skills shortage, as demand for new skills outstrips supply. It will become increasingly difficult to attract, develop, and retain key capabilities and skills. This requires a change in thinking and approach to recruitment and talent management. Core IT function professionals’ skills will need to be supplemented by increased commercial acumen, and a greater business understanding.

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Finance

The Finance function capability and responsibility has grown significantly in recent times. As businesses face increasingly disruptive influences the Finance function is expected to take on a broader and deeper set of strategic responsibilities than ever before.

The core function of Finance remains, the delivery of business value through the efficient management of financial resources, taking a role in driving business productivity, and meeting reporting requirements (performance, tax, regulatory).

Finance functions can be forgiven in recent times from becoming distracted by the increasing regulatory burden, particularly in the Banking and the Insurance industries (be it BaselIII, SolvencyII, GDPR, IFRS17….), the very mixed global economic outlook, the potential of an escalating global trade war (with the impact of tariffs and duties), the prospect and implications of Brexit for firms operating in the UK and Europe, and the coming to an end of an era of cheap finance. However, while these events will continue to require attention, there is a pressing need for the Finance functions to re-focus on their business leadership role.

In the past, Offshoring, Shared-Services, Outsourcing, and Centralisation have all played a key role in Finance function productivity. Going forward it is going to be cheaper, better, and faster technology that is going to re-shape the Finance function be it delivered internally or through an external third-party Transformation partner. The Finance function will need to;

• Continue to ‘up their game’ in strategic business partnering, supporting faster decision-making based on deeper and more robust intelligence.

• Develop a Finance operating model that appropriately balances global, regional, and local activities, and focuses on its core competencies. This will also mean the Finance organisation structure is going to need to change, moving beyond the traditional function boundaries with a greater focus on end-to-end processes and activities, and a greater business alignment.

• Embrace Transformation tools particularly Robotics Automation (RPA) which will eliminate the vast majority of transactional based Finance process and activities – even where Outsourced and in Shared Services today – whether this is led internally or whether an external third-party provider is used to deliver this. Finance activities in particular, such as General Accounting operations, cash disbursement, revenue management, tax, finance controlling, and reporting (internal and external) are ripe for rapid automation which if done properly will release significant resource capacity, reduce transaction costs, while increasing speed and accuracy.

• Increasingly re-invent and re-engineer Finance processes to fit new technology, rather than trying to fit technology to traditional processes that were designed to leverage human thinking. These processes will need to be looked at from an end-to-end perspective and not as tactical initiatives looking at isolated process components.

• Recognise that Shared Services will continue to play a greater role in the Finance operating model, with a drive to harmonise, simplify, and standardise common processes across the organisation. The constraint for many organisations that needs to be addressed will be where Finance is run on multiple platforms and / or multiple instances. Where consolidation and integration is not economically viable then RPA tools may provide a partial answer.

• Acknowledge that Finance & Accounting Outsourcing (FAO) will continue to grow significantly. For transactional based processing the cost lever will be less about simply wage arbitrage ‘doing the same with lower cost labour’ but on leveraging the Outsourcing provider Transformation Tools and capability to deliver underwritten benefits and outcomes. Further, FAO will move up the value chain as it takes an increasing role in functions such as Treasury, Risk Management and Audit.

• Provide greater focus on risks and controls. Transformation tools such as RPA, Cognitive Intelligence, and Data Analytics have the potential to improve controls while reducing both internal and external compliance costs, however these technologies will also pose other challenges, from process integration and system compatibility issues to data protection, and security concerns.

• Urgently better leverage the wealth of data in reporting, and translate this into actionable intelligence and insight – providing real value adding to the business leadership and operation.

The impact of the Finance function evolution will be a need for Finance professionals to develop their skills to meet the challenges of the rapidly changing environment and to recognise the changes required to manage new technologies, and to provide true business partnering. Equally, attracting, building, and retaining talent will look different in the future. Roles and competencies will need to be redefined and future leaders will need a broader skill set and greater exposure to the wider business.

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Middle Office

The Middle Office refers to those industry specific functions that are often considered to be core to the business, for example, research and development, underwriting, claims processing, mortgage processing, or product management.

The Middle Office today is facing a revolution. Straight-through-processing (STP) techniques, LEAN/6sigma application, and new technologies combined with digitalisation are re-defining the Middle Office functions by pushing activity both towards the front-office and conversely into the back-office functions.  There is an operating model shift, with judgement being increasingly taken out of delivery and focused on strategic thinking, planning, and policy setting, with delivery activities being increasingly simplified, streamlined, commoditised and made more transactional.  This is being accelerated by the use of specialised business applications and the deployment of Transformational tools such as Robotics, Cognitive Intelligence, and Data Analytics playing an increasingly important role in the Middle Office.

The future of the Middle Office ‘ways of working’ is set to change dramatically over the coming years, requiring a different outlook and new capabilities;

• More sophisticated Data Analytics will enable faster and better decision making with data being pulled from multiple sources (or taken from a data lake) and interpreted to provide insight and actionable intelligence.

• Robotics Process Automation (RPA) and Cognitive Intelligence (CI) will eliminate transactional based administrative activity, freeing up resources and providing faster and more accurate processing.

• Delivery focused roles will move from ‘doing’ to ‘overseeing’ a potential plethora of tools performing such delivery, with human intervention required for exception management.

• Digitalisation of products and services will lead to the general removal of delivery tasks and activities empowering the user of the products and services, and providing an increasing wealth of data that can then be exploited for business gain.

• Shared Services will continue to provide an appropriate operating model when activities and processes are core/differentiating to the business, but are not suitable for centralisation as they require significant business unit/country input.  These processes and activities can gain from the development of a Centre of Excellence (CoE) providing focus, investment, and expertise.  For example, in areas such as Investment Management and Capital Reserving.

• Outsourcing of Middle Office activities will continue to grow where roles are not automated. This will lead to greater Knowledge Process Outsourcing (KPO) type activities, where judgement is required albeit within policy frameworks. Increasingly people with specialist skills such as lawyers, actuaries, medics, clinicians and architects are being required in Outsourcing firms to provide remote support and often exception handling to digitalised systems.

The future of Middle Office activities, whatever they may be today, will change as functional boundaries are broken down by an increasing focus on end-to-end processing.  This will require different skills and consequently the approach to attracting and developing people will also need to change.

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Procurement

The Procurement function has never had such an important role in organisations as it does today.

It is no longer just in the manufacturing and consumer products companies where Procurement can make the difference between the company making a profit or a loss. The role of Procurement has evolved across all industries such that it has become a key function and partner of the business. This is a reflection of the trend in external spend for not just low value commodity items but strategic products and services, and increasingly diverse and more complicated supply chains.

As a result, the role of Procurement has evolved and the skills and capability requirement within the function has changed. In many industries outside of manufacturing and FMCG (Fast Moving Consumer Goods), Procurement was seen as the poor relation and at times a blocker rather than an enabler for what the business wanted to do. This is increasingly changing. As we look ahead, Procurement is going to continue to change;

• Transformation tools, such as Robotics Automation (RPA) and Cognitive Intelligence (CI), along with the better use of Procurement technologies will eliminate vast swathes of low level processes and activities leading to the full automation of ‘Procure-to-Pay’ (P2P) processing with manual intervention by exception. Amazon is known to be developing a system that will automatically solicit bids, evaluate responses, award business, write contracts and execute on them.

• The Procurement function will play an increasing role beyond the focus of supply to taking a stronger role in delivering effective supply and demand management – balancing the relationship between the two.

• There will be a clearer split and polarisation in pushing supply activities to being commodity purchases focused on lowest unit cost for the specification, and development of higher value business partnerships focused on total cost of ownership and outcomes.

• Increasingly there will be a focus on turning supplier relationships and capabilities into competitive advantage in the marketplace. This will require a new way of thinking to leverage the opportunities the supplier base can open up.

• From an organisational perspective, Procurement is increasingly likely to become more centralised as a function and have stronger representation at the leadership table. As the emphasis will be on the centralisation of the function, the use of Shared Services in Procurement is not likely to feature strongly in organisational models.

• Procurement Outsourcing has had mixed success over the past decade both with some notable successes and spectacular failures. How Procurement is outsourced is likely to evolve with less focus on the full Procurement function and more on the end-to-end ‘Source-to-Pay’ (S2P) / ‘Procure-to-pay’ (P2P) processing activity including finance and contractual aspects.

• Advanced Data Analytics and digitalisation of processes will provide a wealth of actionable intelligence that can drive improvement in procurement and supplier management.

As the Procurement function evolves, so too will Procurement professionals need to continue to up-skill with a greater focus on ‘problem-solving’ and acquiring stronger digital/technology skills. They will need to develop a greater business awareness and be able to work effectively across functional boundaries. Procurement’s focus will turn to categories where suppliers have more leverage that will lead to an increasing demand for skills such as being able to rethink specifications and provide more effective ongoing governance.

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Contact Centres

The Contact Centre remains the ‘shop window’ for many organisations and is key to customer satisfaction and in many cases sales generation. This ‘front of house’ activity is changing rapidly as organisations re-define the customer experience and new technologies dramatically lead to a re-invention of the Contact Centre. The Contact Centres of today and the future are not just evolving they are being revolutionised;

• Multi-channel has given way to Omni-channel. Voice is now simply one communication channel in a suite of channels incorporating email, web-chat, self-service, SMS, Twitter, and other social media. Contact Centre technology is providing a holistic view of the customer experience. It provides a consistent, more personal service, and linked communication, recognising that a customer journey may begin in one channel, be addressed in another, and feedback provided in a third. This unifying of customer communications across channels is providing businesses with better insight, improving customer experience and helping agents to identify better opportunities for future sales.

• The role of Cognitive Intelligence and Robotics is expanding and developing rapidly beyond the ‘virtual agent’ and is getting more involved in live customer interactions, playing a deeper role in predicative analytics, integrating various media channels, and contact routing. This is equipping agents with better and faster information, and speeding processing, resulting in better customer experiences.

• Data Analytics are essential now to turn the wealth of data gathered into insight and actionable intelligence. These ever sophisticated tools are integrating data from unified communications platforms at unprecedented speeds providing dashboards, statistics, analysis, and in some instances feeding into Cognitive intelligence tools that then action accordingly.

• Contact Centre operating models are becoming less wedded to physical location. There is a greater use of virtual centres with increased remote working and hybrid solutions. This has been enabled by improvements in cloud communications and management tools. Lower overhead, time zone flexibility, and flexible working hours have made remote Contact Centre working an increasing trend.

• Shared Services will continue to play a big role in Contact Centre operating models, given that by putting Contact Centres in Shared Services there can be a more consistent approach to customer interaction, investment in customer experience, tools, technology, and economies of scale can also be shared among business units.

• Customer Contact Centre Outsourcing (CCO) will continue to be used more selectively by businesses. Smaller/mid-sized business will leverage CCO due to a lack of critical scale and constraints in their ability to invest, while larger businesses will continue to look to use CCO predominately as overflow capacity and to address temporary requirements that may be time limited eg. manage a product recall, or PPI claim processing. While Outsourcing continues to grow rapidly in most other business functions, CCO is growing at a much slower rate which is a reflection that many organisations want to maintain direct control over customer interaction, and indeed in many cases Contact Centre activity is seen as a key part of their business differentiation.

• Self-service will continue to be key to reducing interactions by making it an easier channel to interact with, more intuitive, more relevant, and quicker to use.

• Customer experience and satisfaction measuring is becoming ever more complex, with increasing sources and measurement techniques. It is clear that Amazon’s Negative Response Rate (NRR) strategy will continue to be a major part in calculating Contact Centre customer satisfaction.

The role of staff in Contact Centres is going to increasingly develop and be re-defined as technology in particular, plays a greater role in delivering the customer experience. Staff capabilities and training will need to be re-thought to drive increased benefit and enhance the customer experience.

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HR

The role of Human Resources is evolving, the HR function is becoming less administrative and more ‘strategic business partner’ within the organisation.

The pressure continues to build on HR functions to do more with less, while at the same carry on up-skilling to provide increasing support to the business leadership. To achieve this, most organisations will need to remove low/non-value adding HR activity and increase talent training and development. As the HR function role evolves, we can expect;

• The HR function will need to continue to grapple with increased regulation, increased complexity in benefits, and variations in terms and conditions which are exaggerated by acquisitions and mergers. – More organisations will embark on efforts to streamline, harmonise, and standardise T&Cs and benefits.

• Strategic thinking to become the HR function core competence in the future – a true business partner. This will lead to greater focus on developing workforce agility, supporting the identification of the new skills, talent, and know-how required to ensure business success, and providing expertise on the human aspects of a continuous stream of transformation projects and activities as ‘business change’ becomes the new ‘business as usual’.

• HR administrative activity to be increasingly eliminated through a combination of the increase of self-service portals eg. leave booking, training booking, training records, accessing payroll services, and the application of Transformation Tools such as Robotic Automation (RPA).

• HR Outsourcing (HRO) will continue to increase and move up the HR value chain. It will move beyond the more established areas of payroll and recruitment, into increasingly providing the full suite of HR offerings including benefits management and regulatory compliance.

• Global organisations will increasingly leverage Shared Services / Global Business Services to provide value-adding services to the workforce regardless of location and increasingly make access available outside of traditional working hours.

• Data Analytics will play a greater role in planning and organisational development. The use of metrics and wealth of data collated on staff within the organisation, will lead to the use of data and metrics far beyond established attrition ratios and employee engagement levels. For example, moving towards supporting promotion criteria and hiring strategies.

• Managing an increasingly dispersed and remote workforce will provide additional challenges including employee engagement, communication, and productivity management. Technology will play an increasing role, for example by measuring work output and impact rather than traditionally being focused on time worked.

One thing is certain, just as in the past, nothing is going to stand still. When HR was once ‘Personnel’ many of those that made up the function happened upon it, today HR increasingly consists of highly specialist HR career professionals and this is only going to continue to develop further.

Tomorrow’s HR professionals are going to need to be able to combine a highly evolved set of existing HR skills with new skills and recognise that today’s ‘best practices’ that were developed under very different business conditions, will need to be re-thought going forward. Increasingly HR professionals are going to need to be less inward looking and more market focused, needing to have a greater understanding of the industry and of competitors, a greater awareness of pending business impacting regulation, and to continue to learn and adapt quickly to ‘get ahead of the curve’.

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