Shared service centres are hitting the hiring headlines as their numbers begin to rise in the UK. The US has also seen healthy uptake. Deloitte estimates that 80% of US-based Fortune 500 companies use some form of shared services in their operations.
Now that this type of outsourcing is becoming part of long-term strategy, what are the implications for businesses across the UK and how are hiring, projects and the economy going to be affected?
What is a shared service model?
The shared services model refers to a centre for shared services where the entity is responsible for specific orgnisational functions. These are often often corporate functions, such as accounting, human resources, payroll, IT, legal, compliance, purchasing, security. They can service businesses operations across the UK or further afield and offer the ability to develop centres of excellence where effeciencies of process can develop.
The shared services model is not a new concept. Organisations have been implementing shared service centres (SSCs) since the mid-90s. Deloitte believes that the interest in the concept continues to show promise as organisations continue to recognise the strategic value of implementing SSCs as well as reducing their cost base, improving controls and enhacing service levels.
What are the benefits of using shared service centres?
Outsourcing and transforming back-office functions can help improve cost efficiencies, responsiveness to the fast pace of the market and improve service levels. They are also capable of handling high volumes of work efficiently.
More cost effective
A survey by PwC showed that businesses claimed cost reduction was the main reason they chose to move towards a shared services model. This was down to a reduction of in-house head count (24%), better efficiency (21%) and the low-cost locations (18%) of SSCs.
Consolidate outsourced back-office requirements
Those that rely on outsourced services to complete their back-office functions can often find themselves juggling various providers, each with different quality levels, payment processes and procedures. Shared service centres provide an easy way to consolidate these function into one location that guarantees a consistent, high service standard.
They are considered centres of excellence
Shared service centres are often responsible for running cor office functions for businesses across the globe. As the operational and job tasks will be centralised, learning can be more easily shared to ensure best-practice can be maintained.
Which areas in the UK are seeing the most growth in SSCs?
The UK is seeing exponential growth of shared service centres in the north. There are several reasons for this:
The development of high-speed rail is helping to bridge the north-south divide and could potentially boost the UK economy. It will connect an area of 6.7 million people, creating a possible 3 million jobs.
Cheaper land, lower rent
Businesses within cities—especially those in London—are subject to higher rent, which makes team expansion far more costly. The lower cost of land in the north of England means large shared service centres can operate more cheaply, therefore providing the resource at a much more affordable cost than city desk space.
How is it affecting hiring trends in the UK?
Our latest Robert Half 2018 Salary Guide has shown that the nation-wide skills shortage is set to continue, with 40% of UK businesses stating that they find it challenging to search for candidates with the right skills.
Research for the guide has also revealed that the digital transformation of the workplace is ongoing, prompting many businesses to search for skilled outsourced individuals to help automate processes and launch transformative projects.
Although larger businesses are starting to consolidate roles, re-train staff and create new teams, many companies are also starting to consider hiring interim professionals as an option for 2018. Similarly, the Office for National Statistics has seen a 3.1% increase in employment in the north west and a 2.6% increase in the north east year on year, substantiating economic growth.