Shared services outperform traditional outsourcing

Nowadays the companies are facing a serious challenge of managing multiple business units and the various processes which gets duplicated. The companies world over are trying to constantly mitigate the risk associated with growing unemployment, rising foreign exchange risk, interest rates and inflation. The experts are under tremendous pressure to reduce cost too.

The companies are nowadays adopting the shared service model to overcome these challenges. The main advantages of the shared service model are:

  1. Quick scale up of business over time
  2. Acts as a differentiator while offering services
  3. Gives flexibility in adding capacity when needed
  4. Enhances the productivity of distribution
  5. Improves customer experience &
  6. Helps in achieving a faster product development cycle

According to a latest report of KPMG, although the traditional BPO remains a critical component of business services, the growth of this sector has declined over the last 2 years. The demand for transaction oriented, generic arrangements in the area of accounting and finance has come down and the businesses are focussing on more specialised BPO says Stan Lepeak, Global Director, Research of KPMG Shared Services and Outsourcing Advisory. According to him, this trend towards specialised services is growing because the customers want BPO firms to add more value to the services they offer. They are now looking for organisations which can offer more holistic solutions. 68% of the service providers who were surveyed by KPMG have reported growth in the first quarter which is more than 7% rise over the previous year.

The adaption of shared services has been increasing in India and that has been corroborated by the study done by Zinnov Management Consulting. According to them, India has 115 of the top Global 2000 companies which have got captive centers for sourcing IT and ITES services making it a leader in shared service centers. The MNC companies who have set up R&D centers in India to support parent companies are expanding their services and coming up with enhanced business and delivery models.

The sectors which are contributing heavily to the growth of India’s shared service space are:

  • Automobile
  • BFSI
  • Insurance
  • Oil & Gas
  • Retail
  • Drugs/ Bio-Tech/ Pharma
  • Defence & Aerospace

The captive centers which are offering shared services are helping in differentiating India with other countries like Philippines, Malaysia & China. Apart from Labour and Cost arbitrage these centers have positioned themselves as offering unique “Value Propositions”. India is now considered as a favourable destination for creating shared services based on e-commerce and m- commerce. Some of the examples are 4 of the 5 world’s largest retailers have set up captive centres in India for e-commerce and m-commerce services and solutions. There are 6 shared service centers for Defence & Aerospace in the Delhi NCR region itself.

There are many other countries as well which are providing unique value propositions like India. The other locations which are attracting companies to establish the facility are countries like Lithuania and places in Central & Eastern Europe.

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