Companies are hastening back-office consolidation: the global shared services market is booming, with projections indicating it will grow by high double digits (CAGR of about 22-24 per cent as of the mid-2020s) as a result of automation, cloud-based services, and the need to deliver standardised services. According to the survey of Global Business Services (GBS), approximately half of GBS/SSC organisations intend to expand their footprint as they widen their functionality and digital capacity.
What Is a Shared Services Center (SSC)?
A shared services center is a centralised operation centre that provides universal support in finance, human resources, IT service desk, procurement, payroll and compliance to various business units or geographical locations. Rather than splitting business line teams, organisations direct transaction-level work to one SSC which focuses on standard processes, unitary systems, measurable SLAs and continuous improvement.
Five Benefits of Adoption of SSCs in Organisations.
- Economy of cost and size of scale – Centralisation minimises duplication and opens up purchasing powers and unit cost reduction. Many businesses reduce their operating costs by double digits as a result of automation and optimisation.
- Standardisation and Compliance – One control environment enhances the auditability, the risk control and the regulatory compliance and markets.
- Better Service Quality – Specialised SSC teams provide consistent SLAs and develop subject-matter expertise (such as payroll, benefits and employee case handling by HR shared service center teams).
- Accelerated digital transformation – SSCs centralise data and are becoming natural destinations to implement RPA, cloud ERPs and GenAI to perform routine tasks and generate insights.
- Business Strategic Focus – Through the outsourcing of transactional work to SSCs (or shared service center outsourcing partners), top managers are able to focus on product, markets and growth.
From Cost Centre to Strategic Business Partner.
The initial SSCs were more about headcount and cost management. Modern SSCs, also known as Global Business Services (GBS), have more automation, analytics, and a deeper level of functionality to help guide business decisions. Surveys of the industry leaders indicate that they focus on automation and fixing the basics besides investing in people and experience in order to handle more complex enquiries.
Economic Benefits
- Direct operating cost savings through automation and consolidation.
- Centralisation of expenditures (procurement leverage and working capital efficiency) through shared services procurement eliminates unconventional spending and enhances terms with suppliers.
- Rapid expansion of new markets with reduced incremental cost compared to the local functions duplication.
- There is improved productivity due to the redirection of capacity by SSCs into more valuable analytics and advisory activities.
Traditional vs Shared Services Center model
Element | Traditional Model | Shared Services Center Model |
HR operations | Multiple small HR teams per BU | HR outsourcing service central payroll and case management. |
Finance | Local country-wise accounting. | Standard ERP centralised finance and AP/AR. |
Procurement | Decentralised purchasing | Consolidated contract procurement of shared services. |
Cost profile | Higher duplication | Lower unit cost, higher control |
Innovation | Limited analytics | Embedded analytics and automation |
Build vs Buy
Shared service center outsourcing is still appealing in cases when either rapid scaling or expertise of the provider is required. Mixed models are typical: strategic control is maintained by organisations, but transactional volumes of work are outsourced to third-party SSC providers, which allows transforming the organisation quickly whilst controlling the cost and risk. Outsourcing shared services incurs high costs due to the need to integrate the receiving firm’s IT systems within current organisational frameworks.
HR Shared Services
The convergence of automation and employee experience is in HR shared service centers. According to surveys, leaders are more interested in automation (71% mention automation as essential) and also invest in making the experience of employees who deal with HR services better. The use of AI in HR is gaining pace, and significant shares of HR departments are intending specific AI implementations in the nearest future.
Moving Forward
The evolution of SSCs will be intelligence centers: automated implementation with predictive analytics and advisory services, which impact the business strategy. Nearshoring, cloud ERPs and GenAI will repackage location decisions and enable SSCs to shift the focus onto growth enablers instead of cost centres.
Conclusion
An appropriately planned shared services center not only reduces the costs but also ensures uniform scaling and operation, gives leaders time to grow, and becomes a platform of data-driven decisions. Organisations which are making a calculated step forward in investing in technology, people and a clear model of a shared service center will win now and strategic value later.
To get more detailed advice on how to design or transform your SSC, whether it be the design of an HR shared service center or the design of a shared services procurement strategy, consult Inductus Group to plot the opportunities within your size and industry.
