Shared services centers preferred to traditional outsourcing: KPMG Global Survey

Shared services centre deals have outnumbered traditional outsourcing deals across the globe as per the latest KPMG global survey. The survey reported the views of respondents across Asia, UK, North America and Europe.  According to the survey, 52% of respondents viewed shared service to be the strongest area of growth while 37% anticipated a growth in demand for information outsourcing and 27% voted for traditional business process outsourcing.

Shared service can be referred to as the centralized unit of an organization that provides various services to the business units or functions in a consistent and standardized manner. The concept was introduced in 1980s when companies were looking for ways to cut administrative costs, improve the process efficiency and generate profits.

The key benefits of shared service units are:

  • Centralization of resources to reduce their duplication across the enterprise.
  • Standardizes the enterprise-wide process.
  • Improvement in the process and increased efficiency.

Shared services are more or less similar to outsourcing despite the fact that they were introduced as an alternative to outsourcing. The majority of outsourcing deals are associated with shared service centers. Either service providers set up a shared service centre for their clients or client outsource the existing shares service units to service providers as part of these deals.

According to the findings of the survey, the relatively low performance of the BPO sector is because of the low demand for traditional outsourcing deals in IT outsourcing, finance and accounting outsourcing and HR outsourcing when compared to high demand for specialized business process outsourcing. The report suggests that even though traditional outsourcing is necessary to reduce the cost for the business, its growth is on the decline.

The KPMG survey highlighted that the demand for specialized outsourcing and shared service centers is due to the expansion in the depth of outsourcing services provided, ability of service providers to deliver services from nearshoring markets and availability of domain experience and high skill sets.

The report highlights the fact that firms outsourcing their services are opting for offshore locations other than India. They are also reworking the business models to outsource the business process to domestic service providers.

The usage of Cloud services are also increasing as per the survey report. This is also a reason for the relatively low growth of the traditional Business process outsourcing space. 50% of the respondents use one or more cloud services, and the survey report anticipate that this percentage will reach up to more than 90% in next 12 months.

From the findings of the report, it can be concluded that service providers can take advantage of the increasing demand of shared services by playing a key role in implementing the shared service for clients by leveraging their capabilities.

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