Building a GBS Without Building a GBS
There is an interesting paradox emerging in many organizations today. Companies announce the establishment of a Global Business Services organization, often with ambitious objectives around efficiency, standardization and simplification. At the same time, the chosen operating model is not to build a substantial internal GBS capability at all. Instead, the majority of activities are outsourced to external providers, while only a small internal structure remains, typically a Head of GBS and a number of Global Process Owners. At first glance, the logic is difficult to challenge. If the primary objective is cost reduction, why would a company invest heavily in building internal shared service capabilities when external providers already possess the infrastructure, locations, talent pools and delivery capacity? Why spend years building what already exists in the market? The economic rationale appears compelling. The organization gains access to scale, benefits from labor arbitrage, avoids significant upfront investments and can accelerate implementation. For leadership teams under pressure to deliver savings, the model appears attractive and pragmatic.
The timing becomes even more compelling when a major ERP transformation, such as SAP S/4HANA, is underway. SAP S/4HANA implementations naturally drive process standardization. Local variations are challenged, legacy activities are eliminated and end-to-end processes are redesigned. In theory, introducing S/4HANA and outsourcing simultaneously creates a unique opportunity. The company does not simply move existing work elsewhere. It redesigns the process first and transfers a standardized operation into a modern delivery model. Instead of building a GBS organization and then transforming it later, the organization attempts to leap directly into the future-state operating model.
Viewed through this lens, the approach is entirely rational. Yet it raises an intriguing question. If most execution is outsourced, what exactly is the role of the internal GBS? Traditionally, GBS organizations evolved as centers of expertise. They accumulated process knowledge, developed operational capabilities, built automation expertise and became incubators of continuous improvement. Over time, mature GBS organizations moved far beyond transaction processing and increasingly acted as transformation partners and providers of process excellence. A predominantly outsourced model follows a different path. The internal organization becomes significantly smaller. Its mission shifts from execution to orchestration. The Head of GBS becomes less of an operational leader and more of a strategic integrator. Process owners no longer manage teams performing activities. Instead, they govern service providers, measure performance, define standards and ensure accountability. The focus moves from "doing" to "designing and controlling." This is where the advantages and disadvantages begin to converge.
On the positive side, the model often creates a high degree of management focus. Internal resources are not distracted by transactional activities. Process owners can concentrate on global standards, governance and performance management. Providers deliver execution while internal leadership concentrates on outcomes. In an ideal scenario, this creates a lean organization with clear accountability and lower structural costs. However, there is another side to the equation. Capabilities and capacity are not the same thing. Capacity can be purchased. Capabilities are developed. A company can buy thousands of hours of accounting, reporting or compliance support. What is more difficult to buy is institutional knowledge. Process expertise, business understanding and transformation capability often emerge from years of operating processes rather than merely overseeing them.
This becomes particularly relevant during and after an SAP S/4HANA implementation. The implementation itself usually requires deep process decisions. Standardization choices must be made. Data structures must be designed. Controls must be redefined. Governance models must be established. Once the project is completed, the organization enters a long period of stabilization and optimization. New business requirements emerge. Acquisitions need integration. Additional automation opportunities become visible. Data quality issues appear. Processes continue to evolve. The question is whether a very lean internal GBS organization possesses sufficient capability to drive these changes or whether it becomes increasingly dependent on external partners to tell the company how its own processes should evolve.
For some organizations, this may be perfectly acceptable. After all, if cost reduction remains the overriding objective, dependency may be an acceptable trade-off. The company consciously decides not to own operational capabilities. Instead, it purchases them from the market. The internal organization remains small, efficient and focused on governance. For others, the trade-off may feel uncomfortable. The challenge is not loss of control in a traditional sense. Modern outsourcing arrangements can be governed effectively. Service levels can be monitored. Contracts can be structured carefully. Performance can be measured rigorously.
The real question is whether strategic process intelligence gradually migrates outside the company. At that point, the discussion is no longer about outsourcing. It becomes a question of organizational identity. Is the company building a GBS organization, or is it building a vendor management organization supported by a small group of process architects? There is no universally correct answer. For a company whose primary objective is cost reduction, particularly during an SAP S/4HANA transformation, a highly outsourced GBS model may be entirely appropriate. It can accelerate change, reduce investment and create a lean operating structure. The important thing is to acknowledge what is being optimized. The organization is optimizing for efficiency, speed and cost. It is not necessarily optimizing for capability accumulation, internal expertise or long-term transformation ownership.
Whether that trade-off is acceptable depends less on the outsourcing provider and more on the company's strategic intent. Because ultimately, the success of a GBS model is not determined by where the work is performed. It is determined by which capabilities the organization chooses to own, and which capabilities it is comfortable renting from others. And in the age of SAP S/4HANA, that may be the most important design decision of all.
Governance: The Capability That Cannot Be Outsourced (continued)
Perhaps the most overlooked aspect of a highly outsourced GBS model is governance. When organizations discuss outsourcing, the conversation often focuses on service delivery. Which activities should be transferred? Which locations should be selected? Which provider offers the best economics? Yet the longer-term success of the model often depends far less on the provider and far more on the governance framework surrounding it. This becomes even more relevant in an SAP S/4HANA environment.
A standardized ERP platform creates standardized processes, but it does not create accountability. Someone still needs to decide how processes evolve, how exceptions are managed, how controls are maintained and how future improvements are prioritized. If execution resides primarily with external partners, governance becomes the mechanism through which the company retains strategic control. In many respects, governance becomes the most important capability left inside the organization.
The first best practice is maintaining strong end-to-end process ownership. Global Process Owners cannot merely approve service levels and review monthly dashboards. They must own process design, process performance and process transformation across organizational boundaries. Their accountability should extend beyond provider performance and encompass business outcomes, control effectiveness, process efficiency and continuous improvement.
The second requirement is establishing a clear separation between process ownership and service delivery. Service providers execute activities, but they should not become the ultimate authority on how processes are designed. Organizations that blur this distinction often find themselves increasingly dependent on external expertise. Over time, strategic decisions gradually migrate outside the company, creating a level of dependency that may not have been intended when the outsourcing journey began.
Another critical governance dimension is performance management. Leading organizations increasingly move beyond traditional service level agreements focused on speed and volume. Processing times and ticket closure rates remain important, but they provide only a partial picture. Mature governance frameworks also measure process quality, automation adoption, user experience, business outcomes and transformation achievements. The conversation shifts from whether activities were completed to whether value was created.
Vendor management itself also requires greater sophistication than many initially anticipate. In traditional outsourcing arrangements, contract management often focuses on compliance and issue resolution. In modern GBS environments, the relationship increasingly resembles a strategic partnership. Governance structures facilitate regular discussions around innovation opportunities, technology enhancements, process redesign and future roadmaps. The objective is not merely to manage performance but to continuously improve it.
Data ownership deserves particular attention. SAP S/4HANA creates unprecedented transparency across processes and organizational boundaries. This data becomes one of the most valuable assets within the target operating model. Regardless of how much process execution is outsourced, ownership of process data, performance metrics and analytical capabilities should remain firmly within the company. Once data ownership migrates externally, leadership gradually loses visibility into the drivers of performance and transformation opportunities.
Perhaps most importantly, organizations should think carefully about organizational capability. If execution is outsourced and transactional expertise gradually migrates to service providers, the internal GBS organization must deliberately invest in maintaining sufficient knowledge to challenge, direct and improve the operating model. Governance is effective only when the individuals performing it possess enough expertise to make informed decisions. This observation leads to an interesting conclusion.
In a highly outsourced GBS model, the primary asset is no longer scale. The provider supplies scale. It is no longer operational capacity. The provider supplies capacity. The company's most valuable asset becomes governance capability.
The Head of GBS, Global Process Owners, service managers and transformation leaders become the custodians of process knowledge, business requirements and strategic intent. Their role is not to execute transactions but to ensure that the operating model continuously delivers the outcomes the business expects. As a result, the question facing many organizations is not whether they can outsource execution. Most certainly can. The more important question is whether they are willing to invest sufficiently in governance.
Because a highly outsourced GBS model without strong governance will eventually behave like a collection of vendor contracts. A highly outsourced GBS model with strong governance, clear process ownership and a robust SAP S/4HANA foundation can become something quite different: a lean enterprise platform capable of delivering both efficiency and sustained transformation. And perhaps that is the real lesson.
In an outsourced GBS environment, governance is not an administrative necessity. It is the operating model itself.
