Shared Services Centers and Global In-House Centers (GIC) have risen in importance and relevance over the last decade and have become widespread among large global corporations. Establishing an SSC-GIC is usually an effort to consolidate multiple processes, centralize activities within a group to reduce redundancies. The Shared Services approach was first introduced as part of a strategy to reduce operating costs and bring in service improvements. Today majority of Fortune 500 companies are running SSCs as a measure to consolidate back-office work for different markets and improve the efficiency of operations. It delivers services to internal customers and is a separate operating unit within the parent entity. And, SSCs get evaluated frequently against outsourcing parameters. Offering centralized control over processes and utilizing the benefits of economies of scale are prime objectives while setting up an SSC. It also helps organizations to minimize the dependence on Outsourcing vendors for key business functions and providing higher quality services at the same time. The technical expertise and key domain knowledge about the business remain in-house with no risks.
The SSC often serves multiple customers in different geographies and individual business units are required to use its services, sometimes with an option to choose between the service providers & the company’s own SSC. Going for the SSC route is a major decision for stakeholders as it needs to have a long term vision and strategic approach over continuing with existing Outsourcing methods. It certainly involves more overhead than typically managing outsourcing service providers, whereas the payback period on the investments made is between 3-4 years and depends on various factors like location, operating models & sourcing strategies.
From Cost to Value
The numbers of technology centers are growing each year and India already has more than 60% of the global SSC workforce. In terms of achieving growth & scale, cost arbitrage continues to be an important driver for SSCs. Indian SSCs are now looking to move past the cost arbitrage stage with a focus on value addition by building sustainable business functions. With the emergence of paradigm changes in the IT industry & related ecosystem, SSCs in India need to maintain the cost competitive advantage that they have enjoyed for a while. Although the focus is now shifting towards value addition and developing innovation capabilities so as to contribute to the business outcomes of the parent organization.