- This presents both a challenge and opportunity for Ireland
- Shared services operations in Ireland must quickly focus on more value-added, knowledge centered activities in order to compete
The Deloitte 2007 Global Shared Services Survey of over 130 international shared services leaders, including many with Irish operations, has found that 40 per cent of all participants are considering relocating their centres 29 per cent are considering relocating within one to three years, the balance within five years. The reasons cited for these moves were to reduce costs (56 per cent) and to improve service (28 per cent).
The survey also revealed that outsourcing and off-shoring now form part of many companies' shared services strategy - a factor clearly related to the
24 per cent of respondents that identified labour costs as a critical factor in location choice.
Commenting on the report from an Irish perspective, Shane Mohan, Consulting Partner at Deloitte said: "Traditionally, Ireland was very attractive as a location for shared services centres, thanks to both the quality of labour here and a low cost base. There is no doubt that Ireland can compete in terms of labour quality, but as cost becomes an increasingly important factor, Ireland will have to compete at a more strategic level. Again the compelling argument is that shared services operations in Ireland must focus on more value added, knowledge centred activities and they must do it quickly.
"Shared services centres in mature economies such as Ireland are finding that high talent/low cost resources are becoming increasingly scarce and this is forcing many organisations to rethink their location strategy. Ultimately, this will impact on Ireland."
The survey also had a number of positive messages for Ireland. It found that on the whole companies are trying to increase their global footprint of shared services operations thanks to the benefits experienced - including reduced costs, increased controls and increased ability to achieve process improvement. Ireland has had a good success rate in attracting shared service operations, and there is scope to continue to do so as the market evolves.
The survey also found that as organisations are becoming more comfortable and successful with shared services, they are expanding the type of processes delivered via shared services. Transactional processes such as accounts payable and human resource administration, etc. dominate the scope of shared services operations; however organisations are including processes that are more strategic and higher value added in nature such as internal control, preparation of management information, and legal and regulatory compliance activities.
"Despite the challenges of rising labour and other costs there is still opportunity for Ireland," commented Shane Mohan. "Companies are adopting much more flexible strategies when deciding where to locate elements of their business internationally, be they shared services, manufacturing, supply chain and so on. These strategies often involve a number of locations, and the use of outsourcing to third parties where it can be shown to achieve a balance between costs, benefits and risks. Ireland is still competing very successfully at the higher value end of the market.
The survey found that labour quality is still the most important factor when locating shared services, and we in Ireland must make sure that we build on this."
About the Survey
Over 130 shared services leaders from around the world participated in the
2007 Global Shared Services Survey. Participants were distributed across all industry groups including Manufacturing, Telecommunications, Media & Technology, Life Sciences & Healthcare and Financial Services. In aggregate, the participant organisations have 332 shared services centres across the globe.
