BCG: Use of Digital Technology in Back-Office Functions Could Reduce Costs by up to 80%

Advanced tools like processing robots and artificial intelligence are moving from the manufacturing line to white-collar work and are improving functions like HR, IT, finance, procurement, and legal, leading to cost reductions of 20% to 80%, according to a new report by The Boston Consulting Group (BCG).

Many companies have already combined these functions into a centralized hub, called a shared-service organization (SSO). Now, new technologies—including artificial intelligence and cognitive computing—are helping SSOs work smarter and faster.

The report, titled How Digital Can Turbocharge Shared Services, notes that to capitalize on the new digital tools, however, companies must put the right foundation in place.

“Many companies are still at the starting line in terms of building an SSO that can fully tap into technology,” says Andrew Toma, a senior partner at BCG and coauthor of the report. “They still have multiple processes and an ad hoc approach that limits their ability to digitize the critical work that SSOs do.”

Three priorities

To build a next-generation SSO, companies need to focus on three priorities:

• Get the basics right. The first step is to create standardized processes that cover all steps of a particular transaction—from end to end—with a strong service mindset. For example, buying products through the company’s procurement function should be a single, smooth process, making life easier on the employee who does the purchasing.

• Deploy advanced new technology. Many companies have long used automation tools like voice recognition. The next wave includes things like robotic process automation (RPA), or software robots that can navigate among screens, open files, copy and paste data, and log in and out of different systems, all with no human supervision. Even more advanced tools—such as a type of artificial intelligence known as cognitive computing—can actually make judgment calls and “learn” over time, so their performance is constantly improving. These new tools work 24/7, with greater accuracy, and they don’t require a major investment.

• Develop new capabilities. The jobs that SSOs require will change, requiring greater digital capabilities among employees. For example, rather than requiring a finance person who can handle accounting, companies will require someone who can convert accounting principles into code.

Growing urgency

With these three elements in place, companies have a means to dramatically improve their SSO performance—and thus create far more value for the company. However, a key argument in the report is that companies cannot wait for the technological advances to slow down.

“The opportunity cost of not using these technologies is higher than ever,” says Fabrice Roghé, a BCG senior partner and coauthor of the report. “Companies need to create a plan to take action, not over the next two years but in the next quarter.”

 

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