Why letting go is the best way to take control.

From regulatory change to the war for talent and from economic uncertainty to geopolitical instability, organisations are facing an ever more complex set of challenges.

As a result, many business leaders find they are spending too much time on non-core activities and too little on actions which generate growth. 

The latest EY study of 1,200 CEOs across the world supports this view, concluding that “CEOs should analyse every aspect of their current business, operations, portfolio and ecosystem. They should also consider if the aspects are additive or dilutive to their journey and be prepared to make quick decisions on buying, building, partnering – or letting go.”

But to be able to ‘let go’, CEOs must first feel confident that even the most complex and critical non-core tasks can safely be entrusted to others. That can present a roadblock because traditional managed services are often perceived as lacking the agility, skillsets and close relationships required for such tasks. It’s a similar story with shared services, where many non-core business activities continue to be carried out at head office because of quality concerns about ‘letting go’.

All the above is driving an inexorable shift for providers to create a connected managed services experience, one that is built on trust that makes it easy for organisations to add and expand solutions as their needs change, whilst building adaptive future-ready businesses.

The shift means moving away from transaction-based contracts that largely focus on cost containment towards a more flexible, relationship-based model that supports businesses more broadly.

This new generation of managed services is not about taking on a function or two to achieve incremental improvements, it’s about building a platform for collaboration and long-term growth. It lifts the burden where it’s heaviest, not where it’s easiest to separate out, define and deliver.

As such, it requires providers who not only possess broad skills across a global network, but also have the compliance layer, professional integrity and consulting skills needed to deliver them safely and effectively.

What the world of connected managed services looks like

The first iteration was in tax, compliance and internal audit services, driven by the need for a more consistent delivery globally and, crucially, with outcomes robust enough to stand up to regulators. Then the pandemic accelerated closer partnerships on risk and cyber services. The changing role of the finance function further hastened the shift.

Common characteristics of this approach are:

Outcome-based: A shift from statements of work (SOW) to statements of outcome (SOO), driving a change from vendor relationships to partner relationships.

Knowledge-based: With in-house talent scarce, the right managed services provider offers technical experience, problem solving and the latest technology to deliver an enhanced compliance layer and faster remediation. 

Managed-capacity based: A shift from one-off project teams to consulting partners that deliver consistent change and transformation, acting as an accelerator to in-house talent.

The future of managed services

As the advantages of this new model become more and more apparent, it has the potential to grow rapidly and support almost all areas of critical but non-core activities.

The modular nature of these services is an advantage for both businesses and providers. Services can be added when necessary and reduced when no longer needed, making them flexible and cost efficient. It’s also simple to scale services up or down, depending on client application or customer demand.

We see opportunities in data analytics as a service, procurement activities and in ESG, where verifiable and trusted metrics can be collected, measured and assured by external providers.

But narrowing managed services to specific function areas may be underestimating its potential, the value can be even greater in cross-cutting activities such as business transformation. In leveraging an external provider’s people, data, technology, and consulting skills, organisations can accelerate their transformations, optimising core processes and making workstreams more efficient, which in turn will free up talent for more value-added tasks.

Stay ahead of the game: Four signs that businesses need to explore managed services

1.      Tasks that are scheduled to transition into shared service centres or global business services aren’t doing so because of a lack of available technical skills or confidence in outputs that are accurate, timely and can be relied upon.

2.      To be informed or advised that certain tasks won’t work in a shared services or global business services environment, which would result in head office having to continue to deliver non-core tasks.

3.      Incremental compliance, risk management and reporting activities are being routinely added to workload without pausing to explore alternative models that could provide full confidence of efficient delivery.

4.      Transformation fatigue or previous transformation failure are stopping teams exploring alternative or external models for efficiency gain. 

For businesses who recognise any of these signs, now may be the time to take action, letting go of non-core tasks and taking greater control of growth.  

To learn more about EY Managed Services and how EY teams can help, get in touch Managed Services | EY UK

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.