Shared Services: Should You Stay or Should You Go?Deloitte Debates |
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The factors that helped you locate your current shared services centers may not matter as much anymore. And opportunities for savings, consolidation, or process improvement may tempt you to relocate them even farther from home. When is it time to make a change?
The use of shared services centers is winning widespread acceptance because of the opportunities it provides for economies of scale, consolidation and labor arbitrage. Having taken that first step outside the home office, many companies are now considering bolder departures. Maturing geographic regions offer new sites and workforces, technology offers new forms of remote control and wider acceptance of the shared services model is lowering barriers. Should you consider a move that puts more of your functions farther away?
Here’s the debate:
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| Improve your labor outlook. Just because your services are currently sited in a region with low labor costs, don’t assume you’re getting good labor value. The skilled labor pools are diminishing in some countries where training new ones is difficult – which makes the preferred people more expensive. |
Distance equals risk. Moving shared services to a remote location can make all the sense in the world on paper – until you find you can’t step around the corner and put your own eye on things. A new setup commits your critical processes to resources that are unproven, at least to you. At its worst, the old location was the devil you knew. |
| Fewer roofs, fewer back-office dollars. Even if a collection of support functions aren’t suited to being combined operationally, they may still benefit from economies of scale around infrastructure, governance and management. |
The world isn’t that flat. Fiberoptic cable is wonderful, but time and distance still matter. Talking face to face has a psychological effect. Talking when both parties are awake in the same time zone has an efficiency effect. And you don’t have to be in a bad sitcom to find that language, culture and even dialect can influence the ways people understand one another. |
| Change begets change. It’s easier to improve or automate processes as part of a relocation than to do so on-site. The result of that change imperative can be improved reliability that makes reliance on a faraway center more comfortable. |
More reliance on more technology. When services aren’t close by, process becomes a surrogate for direct control. That raises the ante on automation, reporting databases, data warehousing and audit ability. This will involve more than adding phone lines. |
My Take
Jessica Golden
Principal, Deloitte Consulting LLP
Don’t be the last one on the train.
The prospect of broadening your geographic footprint can be scary. It felt like a bold move five years ago when you set up a shared services center in a neighboring state and now they’re talking about Latin America? In my work with clients, I’ve seen both the risks and the rewards first-hand. My advice: Take the plunge.
When you combine reduced input costs, economies of scale and the efficiency that comes from consolidation, the prospect of a bigger, more distant shared services structure carries tremendous potential value. This isn’t all about technology, but technology lies at the root of what’s different today. In addition to data, culture also flows more easily around the world. We’re less foreign to each other than ever before and people in every part of the world have something to contribute to getting business done.
A recent Deloitte survey revealed that 38 percent of organizations across a variety of sectors are already planning to relocate their shared services centers. What used to be a decentralized delivery model, with locations organized by function, is increasingly becoming regional and even global, as companies move to a hub-and-spoke approach. And it’s becoming more common to see Asian and Latin American centers serving companies in North America and Western Europe.
In my opinion, the strangeness of overseas services will fade quickly, just as the strangeness of shared services themselves already has. You don’t have to move now. But if you move three years from now, you may find yourself late to the party.
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