Shared services: should we go hybrid?

Posted on: 05/06/2019

Shared services: should we go hybrid?

I get lots of questions about the difference between BPO and SSC, so I’ve put together a simplified answer to help you out. Could the hybrid model be the way to go?

When large organisations grow, relocate, merge, acquire, or even consolidate different entities, typically there are two options on how they manage their operational processes.

The most popular option is a Shared Service Centre (SSC), however more and more organisations are now exploring the Business Process Outsourcing (BPO) model.

The difference between Shared Service Centre’s and Business Process Outsourcing is that an SSC is an internal function of an organisation, and a BPO is typically an outsourced provider based offshore, and an external solution.

Business process outsourcing

BPOs tend to offer greater productivity due to technology, process and advanced systems and AI. With labour costs in these locations offering a more cost-effective solution in the long run, however the initial set up of an outsourced model can be costly initially, but over time will see a ROI.

This can be setup quickly and effectively, however, as long as your process isn’t completely unique, as BPOs tend to offer a more ‘one size fits all’ model.

The most popular locations for a BPO is India, Philippines and Central-Eastern Europe and SSCs most popular locations such as Europe and USA. With lower labour costs, and huge talent pools, it is an effective and more cost-effective solution when done right. With a BPO, you wouldn’t need to hire, train and retain your staff, but simply move into this model, and become operational in a short period of time.

BPO offers organisations scalability and opportunity for growth, as most tend to offer a 10-20% cost reduction to an SSC model.

Whilst, outsourcing can be implemented more quickly, not all vendors can offer the same quality service as an SSC. For example, if the vendor is based in Eastern Europe or Asia, Language barriers could also affect the quality of the deliverables.

Shared service centres

The SSC model offers a more bespoke solution and tend to give a company the ability to run systems like an internal service provider, allowing it flexibility. Companies make efficiencies through process standardisation, technology improvements and centralisation of services.

The SSC model offers more control over decisions, enabling a better service to the customers, suppliers and internal users.

A Shared Service Centre can closely monitor the performance and quality of the work done, which gives more control over the service being offered, however, having to install and maintain a new infrastructure can be costly, let alone having to train the employees.

The hybrid model

The big one – the hybrid model – is when organisations may opt in for both solutions and use a combination of both. Combing different models to ensure you are working towards the organisation’s goals, with lower risk activities such as Cash Allocation, Accounts Payable Processing and Reconciliations tend to be offshored. There is less room for error with these tasks and involve more processing than communication.

Typically, their more administrative functions and processing work would be outsourced, and the more strategic responsibilities are kept in house. This has many benefits – you’re getting the best of both worlds and in house and outsourced teams are a partnership and therefore work together for better results.

It’s a new buzz in the industry, but could the hybrid model be the future?

If you would like to discuss further, email me at sam@refind.co.uk.

You can view more about Sam Perry our Shared Services Executive Search expert here.

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