Shared Service Centers: World trends for 2017


Shared Service Centers are business units within a holding structure specially set up to consolidate staff management functions (accounting, HR, purchasing, IT) thereby improving the entire organization’s performance.

Liya Peklenkova
Chief Operating Officer Russia and CIS
The first Shared Service Centers (SSC) appeared in the United States over 20 years ago and in Russia over 10 years ago. Now there are thousands of SSC in the world, whether multinational or regional. This way of optimizing business processes uses the best practices and passes them on to all subdivisions.

It has proved to be so effective that it is rapidly developing on all continents.

SSON, the largest community of global shared services and outsourcing professionals, has surveyed over 500 companies with SSC and found that 22% of SSCs are located in North America, 15% in Southeast Asia, 13% in Australia and New Zealand, 10% in India, 10% in the UK, 10% in Western Europe, 8% in Central and Eastern Europe, 5% in Africa, 4% in Latin America and 4% in China. Most of these centers (39%) have been successfully operating for more than 10 years.

58% of SSCs perform all functions on their own, 12% collaborate with outsourcing providers and 30% use a hybrid model.

We set up our first Shared Service Center in 2008, and today our SSC serves over 800 clients. We have noted over the years that most companies in Russia and the CIS still prefer the outsourcing model, which entails transferring some of their business processes to an external SSC, but they are getting more and more interested in setting up their own SSC.
  



Models of cooperation with Intercomp

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Processes transferred to SSC

Most studies agree that the functions most commonly transferred to SSCs are, as listed by SSON, financial functions (27%), HR (15%) and IT (5%). E&Y and Deloitte, the world’s largest auditors, have confirmed that 36% of SSCs worldwide are multifunctional centers supporting various business processes.

Processes within core functions most commonly transferred to SSCs:

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SSC advantages

SSCs traditionally offer the following main advantages:

  • Cost reduction
  • Better quality
  • Better manageability
  • Business scalability
  • Establishment of profit center
  • Other
Although, according to SSON, 79% of entities with SSC confirm that their SSC contributes to dramatically reducing costs, the main trend in recent years has been for companies to see SSCs not only as a way to cut costs, but also as a source of additional advantages.

75% of respondents mention added value as a key benefit for using SSC.

Company performance and objectives depend on SSC development level. Companies focusing on value added have gone through all stages from transfer of transactions to SSC to setup of an Integrated Business Service focused on the development of business partnership with clients through an innovative and creative approach to providing services.

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In 2016, over 500 companies with SSC were asked about the trends that most affect the provision of value added by SSC, and the top answers were continuous improvements in business processes, data analytics and operational flexibility.

One of the important aspects of achieving organizational goals is the ability to unite and coordinate the various parties involved as a fragmented command of process helps no one. Being able to continuously improve, raise performance and upgrade standardization are the key advantages for any organization that has centralized its accounting and administrative functions. As a result, regional offices know more and more about the activities performed by their colleagues, while headquarters promptly receive feedback from the regions. In addition, when a Group Policy Object is in place, the ability to cooperate is greatly increased.

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Today, cost reduction is not the main goal set by the best companies for their SSC. Only 6% of companies set as KPI reduction of Full -Time Employee (FTE) through process automation and centralization. Instead, they value SSC/Integrated Business Service because they improve performance indicators, create added value and allow offering more services without increasing costs.

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Change drivers

The key drivers for SSC development are as follows:

Driver No. 1: People

The original SSC model depended on the centralization and automation of many services, and as a result, some operations over time were either outsourced or ended, while the remaining work required a more client-oriented knowledge-based approach. As SCCs develop, we see that soft skills, such as problem solving and leadership, are increasingly in demand.

The development of centers of excellence (COE) and staff development became main priorities in 2017 as it is necessary and possible to teach additional skills to existing staff.

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Driver No. 2: Data analytics

Data analytics have become the real star of the year with only 10% of companies with SSC which do not use data analytics to the full. Although this figure is much better than last year, data analytics are still used primarily to control costs rather than generate revenues.

Driver No. 3: Automation and introduction of modern technologies

The digital market has taken over the world, and what was at first called technological has now become automated. Technology is the future, and people, processes and technologies are the main drivers of productivity.

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Driver No.4: Revision of the concept of “value”

Many companies have revised their understanding of “SSC value”. Traditionally, the main value and purpose for setting up SSCs used to be cost reduction and performance improvement.

But, given the new opportunities for collecting analytics, many companies have begun recognizing that the role of SSCs in supporting the development of ancillary services upon entry in new markets is no less important that processing essential analytics. The concept of “value” has thus shifted from “ruble” to a broader and more intangible notion of “service”.

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Driver No. 5: New SSC model – Integrated Business Service (IBS)

SSC models are inexorably changing. The previous models were implemented to achieve two purposes, namely centralization and standardization. But given today’s rapid changes and technology developments, SSC models are changing.

The new SSC model is more technological and client-oriented. It focuses on knowledge and methodology as well as on final results. This year, almost a quarter of respondents described their SCC model as an integrated business service (IBS). IBS ensures a high level of customer satisfaction, as well as allows offering new services and creates added value for businesses. IBS is also characterized by a clear division between expert and transactional operations.

Russia is keeping up with the times. Interest in setting up and developing SSCs in Russia and the CIS is growing every year, and well-established methodology has been successfully replicated. According to a survey conducted by E&Y in 2016, over a third of the 100 largest companies in Russia have already set up SSC.

Russian companies mainly set up multifunctional service centers combining functions such as accounting, treasury, HR management, IT and purchasing, while the SSCs of international companies in Russia are also mainly represented as multifunctional centers.