VideoInvensys, a £2.6 billion (€3.3 billion) UK industrial automation, transport and controls company, launched a four-year hybrid project in 2006 to centralise finance, HR and other support functions. According to Sujit Mukherjee, the firm's director of global business services, the aim is not only to "look into the fat" to see where costs can be cut, but also find out which processes throughout the group's "highly fragmented" finance function can be consolidated into SSCs and which can be outsourced to Genpact under a global "master service agreement." Like other major outsourcers, Genpact operates centres in a number of locations, including several sites in India, not far from Mukherjee's base in Hyderabad.
A cornerstone of Invensys' project is turning its existing SSCs — in Massachusetts and Brussels — into "centres of excellence." In addition to managing the outsourcing relationships, these centres will offer consulting services to business units to help decide whether it's more efficient for processes to stay in-house or be outsourced. Having already led two multinational SSC projects — at Honeywell and Bechtel — Mukherjee reckons that "selective outsourcing" is a good route for a decentralised company such as Invensys to take, but concedes that because of the complexity of the project, he's treading carefully. "I can see how companies start off with an idea of an SSC, and it backfires," says the shared-services veteran.
Waging War
Yet whether a CFO is considering a captive or hybrid model, the factor that almost always tips the scales in favour of one location over another is cost. Consider wages, which can account for more than half of an SSC's overheads. A study by Mercer Human Resource Consulting shows that white-collar professionals in Belgium, for example, earned around €35,000 on average in 2007; their equivalents in the Czech Republic, Romania and Poland earned about one-third less. While annual wage inflation is running as high as 12% in some parts of central and eastern Europe, compared with around 4% in the West, the gap between the two regions will still take years to narrow significantly. (See "Head Counts" at the end of this article.)
Of course, it's not all about pay when it comes to wooing local workers. Ambitious graduates, in particular, are concerned about career prospects and building their CVs, says Glaudemans of Buck Consultants. (See "Service with a Smile" at the end of this article.) It's for this reason that a company with a well-known name in a particular location will find it easier to recruit more qualified staff. "The attractiveness and awareness of a brand can be a big differentiator," she says. Her firm recently provided site advice for a finance SSC to SpecSavers, a Guernsey-based, privately owned optician with more than 1,000 stores in Europe and a budding business in Australia. Low-cost locations in central and eastern Europe beckoned, but the tough labour market was a big consideration for CFO Karen Dicks and her team. It helped influenced their decision to stay closer to SpecSavers' main market in the UK, where the brand is well known, and set up an SSC later this year in Nottingham.
SSCs that are concerned about brand awareness, says Glaudemans, need "to create some noise." Building relationships with local universities and participating in local job fairs are good ways, as are using local press or awards programmes. Each showcases the SSC as an attractive employer that provides enticing career opportunities beyond the dead-end, manual-intensive processing of many shared-service jobs.
Making noise is what SAP, a €10.2 billion German software house, has been doing in Prague since Claus Heinrich, its executive board member in charge of HR, and Martin Jahn, the Czech Republic's deputy prime minister, cut the ribbon for its new SSC in the city's Avenir Business Park three years ago.
Before placing its HR and finance SSC in the Czech capital, SAP undertook "a very long and detailed" site search, which whittled down a list of 16 locations to two finalists — Prague and Budapest. While the two cities had similar labour markets and infrastructure, Tamara Braun, SAP's global SSC head, says the deciding factor was convenience — namely the physical proximity of Prague to SAP's headquarters in Germany. This made onsite visits easier for senior management, something that was particularly important during the critical 12-month start-up phase when they wanted to spend time at the site.
Nearly doubling in size to 230 full-time employees since the launch, SAP's centre now handles 90% of all document volume for EMEA and 55% worldwide. As the local labour market tightens, Braun says that SAP's reputation is key to the success of the SSC, with word-of-mouth recruiting becoming more important. "We can't simply say SAP is the best employer," she says. "It's a story that we have to live, by showing employees that we have a flexible working model, providing a real variety of ways to let them align their private lives with work and really showing them that they have a future. That's pretty unusual in the Czech Republic."
As job prospects improve in popular SSC locations, Glaudemans of Buck Consultants predicts that SSCs will benefit from reverse migration as young nationals return home after working abroad.
Carlsberg is already benefitting from this trend, says CFO Jensen. The company's former UK finance director, who is Polish, returned to his home country to run the Poznan SSC. More may follow, especially if the SSC evolves, as Jensen envisions, to include more analytical services along with the current controlling work. But first things first. As Jensen says, for Carlsberg and other SSC adopters, "it's still early days."
Reader Comments» Post a comment