Sunday, November 18, 2012

Outsourcing and SSC's used by global businesses as ...

Shared Service Centers (SSC) started to come into view in Europe and USA some decades ago. They are designed to consolidate and streamline administrative functions in such areas as accounting, payroll, HR management, IT support, client and supplier operations, and other. Shared Centers allow bringing all operations to single standards, reducing risks and costs for back office operations.

Presently Shared Centers are actively used by the leading multinational companies ? Shell,?Hewlett-Packard,?Coca-Cola,?McDonald?s, Citigroup and many others. Most of them prefer the ?hybrid model?, creating the SSC ?under their own wing?, and using services of outsourcing providers on a selective basis.

However, there are also more complex and multi-layer models. For example, financial functions of Daimler are managed by the SSC in Berlin which allows performing specific high-level functions requiring knowledge of German language. Daimler also has a Shared Center in Barcelona, and transactions are processed on Philippines.

Most often Shared Service Centers bear provisioning and procurement functions and cutting down costs by volume. SSC model is common in logistical chains, legal support, client servicing. For instance, Boeing which transferred a support service to the SSC, reduced its expenses by US$ 1.4 billion since 1998. Findings of studies show that company expenses on accounting can be reduced by 30-40% for three to five years of using the SSC. The Standard Chartered?Bank saved US$8 million by transferring the HR-function to the Shared Service Centers.

Six years ago NASA managed to introduce the SSC, consolidating such service functions as HR and finance management, supplier operations and IT services. In the 1990s, these functions have been hit hard by budget cuts, the quality of their implementation has declined. At that time creation of the SSC solved the issue of increase of their efficiency. Obama?s Administration also assigns high priority to reduction of government spending, and NASA?s using of the SSC managed to cut the budget by 5-10%. According to estimates of the NASA?s Shared Services Center Director Kenneth Newton, the Shared Service Centers permit the Agency to save US$15-20 million a year.

There are two key points for calculation of benefits of the SSC ? consolidation and value creation chain. The main benefit of use of the SSC for companies lies in increase of the ?response speed?. Savings from the SSC model can be small, but it provides more flexibility, compatibility for the business, increase process management in affiliates. Nowadays companies admit that SSC model provides better control of performance of functions, faster creation and introduction of new business processes. SONY is using the SSC model of the corporate level to keep knowledge and know-how in the company.

Currently SSC market in the world grows quickly. According to the research HR Service Delivery and Technology Survey Executive Summary Report, held this year by Towers Watson agency, 630 organizations from North America, Europe, Middle East and Asia. On basis of this report about 44% of companies are planning to change their HR structure in this or the next year. Key reasons for the changes are business reorganization, change of business strategy, realization of synergy, quality improvements, cost savings, global initiative.

It is significant that almost 40% of companies planning to revise their principles in HR management functions are going to use the SSC environment to support the HR processes, about one third of them ? to move additional HR functions to the existing SSC environment, 26% ? to outsource (some/more) HR functions. None of those respondents who use Shared Centers already were planning to abandon this model.

By the way, the BPO market grows together with the SSC market. Authors of the research consider that this happens due to transfer of niche, dedicated functions requiring special experience to external providers. Successfully outsourced tasks include corporate retirement benefits, payroll preparation, medical insurance, relocation of specialists.

It should be noted that in addition to the in-sourcing Shared Service Centers (as a single in-house service provider within organization) the companies use the SSC managed by third-party providers. For instance, after announcing of a course to win the Indian market, PepsiCo started to use the outsourcing model of SSC. Kim Narishman, Financial Director of PepsiCo, considers this step as a correct decision from the perspective of balancing the labor effort, processes and performance ratio.

Source: http://blog.ucmsgroup.com/outsourcing-and-sscs-used-by-global-businesses-as-complementary-sourcing-strategies/

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