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Shared Services Transform Ericsson’s Support Processes in Western Europe via the Business Support Centre Initiative

Ericsson, the largest supplier of mobile systems in the world, was facing changing market conditions that prompted management to review the operational model and transform the processes supporting its business.

Capgemini won the confidence of Ericsson management to assist with the design, set-up and operation of a Business Support Centre (BSC) for Finance, Administration and Purchase-to-Pay processes in Western Europe.

Having already derived substantial process cost reduction, the BSC facilitates a blueprint to transform Ericsson’s support processes, world-wide.

Client Profile

Ericsson is the largest supplier of mobile systems in the world. The world’s 10 largest mobile operators are among Ericsson’s customers and some 40% of all mobile calls are made through Ericsson systems.

Ericsson provides total solutions from systems and applications to services and core technology for mobile handsets. With Sony Ericsson, it is also a leading supplier of complete mobile multi-media products.

Ericsson, active worldwide since 1876 and employing about 64,000 people in more than 140 countries, is headquartered in Stockholm, Sweden. In Ericsson’s EMEA region, Market Units encompassing all of Europe build and maintain customer networks to sell products.

Business Issues

European telecom operators had invested vast sums buying 3G (3rd generation) licences for mobile Internet services at the start of the new millennium. The six largest licence holders alone invested over $200 billion.

Technical challenges with availability of 3G services, and the resultant volatility in the market, led to many operators postponing investment in 3G infrastructure or slowing down development of 2G networks. Almost overnight, the market went from having been very exuberant to becoming highly conservative.

Ericsson’s innovative role, at the heart of an industry allowing operators to provide mobile Internet services like video clips and high-speed access, was under threat. And Ericsson’s sales were in the front line of attack! Ericsson’s very survival hinged on a business model that needed to be highly adaptive and flexible to be able to face the challenges head-on.

Ericsson announced strategic decisions that would affect both its business and operations and forge a path to return to profitability. A core element was to consolidate non-core activities of local companies to a standard platform. A study across the EMEA region revealed underlying processes for Finance & Administration and Purchase-to-Pay characterised by:

Standard Global Applications
Capgemini played a key role in developing the Market Unit Solution (MUS) with SAP R/3® at its heart and the pilot of the Purchase-to-Pay (eP2P) solution.

The eP2P, based on SAP EBP®, was subsequently extended beyond the geographical reach of the BSC as a separate project, also managed by Capgemini.

• different processes supported by disparate systems
• high operating costs
• low reactivity to changing business requirements.

Ericsson EMEA decided to consolidate activities in both process areas and to re-engineer ways of working. A key element of the strategy was to establish a Business Support Centre (BSC) for Western European countries to facilitate:

• service efficiency and productivity to derive substantial process cost reduction
• quality, consistency and transparency in business processes and information
• organisational flexibility to establish a change agent to drive standards.

The decision, affecting local companies in 17 countries, demanded one of the biggest transformations in Ericsson’s long history. Recognising the value of partnership, Ericsson started looking for a range of skills, in strength and depth, in a partner.

 

Capgemini had a global profile coupled with local presence in affected markets and expertise in process and technology consulting. With credentials of Shared Services projects in complex global organisational structures, Capgemini was selected as business partner to help Ericsson design and implement the BSC initiative.

Solution

The BSC would provide Shared Services to involved businesses, re-engineer and standardise business processes, and support deployment of global, enabling business applications.

Vision and Strategy
Capgemini led the strategic visioning phase. The target market was for in-scope services in Ericsson’s EMEA organisation with initial customers being Market Units in Western Europe.

Ericsson decided to standardise in-scope systems and processes and integrate them into a common Market Unit Solution (MUS) based on SAP R/3®, and incorporating an eProcurement solution to facilitate a seamless Purchase-to-Pay (eP2P) process.

Capgemini co-ordinated the design of the BSC service delivery model with functions consolidated in four hubs. During the set-up phase, it was decided to consolidate in two hubs across three locations serving the 17 countries, with each hub organised in a matrix structure. Process-oriented teams would provide the services, with Service Managers assigned to Market Units managing customer relationships. The model facilitated front-office culture in the back-office.

Design
Experts from Ericsson and Capgemini collaborated in a single, cohesive team to derive a current state analysis. Based on information gathered, the team refined the Business Case, developed the service scope in detail and designed a future-state organisation. Service level agreements (SLAs) were established after negotiation with demand managers of hub countries. Within six months of project start, the BSC was formally established.

Transition
For customer units in hub countries, the BSC commenced service delivery from Day One with existing staff transferring to the new entity. Transition activities focused on achieving a change of mindset towards a service centre culture. The team derived a baseline against actual performance, refined SLAs and set new performance targets.

For customer units in other countries, all aspects - service migration, people and system transition - had to be considered.

Strong relationships with local management were critical to address the people issue, a key challenge of major transformation programmes. Effective change management at a local level facilitated awareness of the strategy and its impact, and secured buy-in.

The migration strategy of the collaborative team linked service migration to implementation of the MUS and eP2P. The BSC would become responsible for service delivery at a defined stage prior to system implementation and manage the process in-situ. A local management team in each country was responsible to secure sponsorship, plan the migration, manage change and support communication.

Service migration was organised using a consistent methodology. Key tasks were adaptation of future-state processes, recruit and train new hub-based staff, knowledge transfer, cutover to hub and post-migration support. Each deployment was managed as a project via defined ‘tollgates’ and supported by steering groups. Readiness was jointly agreed by the BSC and local companies based on pre-defined criterions.

Capgemini supported the BSC local service management in all countries. It also managed the first large-scale service migration to set the stage for subsequent rollouts. Effective project management enabled the BSC to migrate the last ten units within nine months.

Operate
With transitions for remaining countries complete, the BSC turned its attention to stabilise services, optimise resource utilisation and bed down all elements of a Service Management Framework. Service Managers now deliver services to each customer according to agreed principles and procedures.

Benefits

The BSC programme delivers standard systems and processes to support Market Units in Western Europe, thus helping Ericsson to re-establish its profitability. Benefits include:

• direct reduction of process costs managed by the BSC - about 30% in Finance and Administration, as well as in Purchase-to-Pay
• service consolidation deriving process and systems standardisation
• process-oriented teams focussed on service efficiency to facilitate continuous improvement
• organisational flexibility to changing business priorities, allowing Ericsson to adapt its shared service model without compromising stability and competency levels.