Offshoring relates to moving a business process by a company from one country to another. Examples of such business processes include human resources, manufacturing, software development or accounting. Outsourcing, on the other hand, relates to the movement of internal business processes to an external company within the same country. As such, a company moving a business unit to a different company in another country would be both outsourcing and offshoring.
Examples include a bank with a check clearing unit having it outsourced to India from United States and a garment manufacturer with a manufacturing facility in United States having it outsourced to China. One type of outshoots of outsourcing business models is the Shared Service Center (SSC), or rather “insourcing.”
What is a Shared Services Center?
A Shared Service Center (SSC) is a type of offshoot of outsourcing business models, where various business processes throughout a company are supplied to one or more business units from a central corporate shared services center. One purpose of shared services is the convergence and streamlining of a company’s business functions and cost effective cost centers to add real value to the company. Shared services are typically used and applied in finance shared services, human resources shared services, and procurement.
Business Drivers for Implementing a Shared Services Center
- To address Key Performance Indicators (KPIs) and enhance the accuracy of performance management reporting
- Basic transaction processing can be done by a separate “customer focused” entity
- Strategic business process analysis and decision making can be made easier within the company
- Business process automation and standardization can be achieved through shared services
Advantages of Implementing the SSC
- Standardization. Shared services rely on business process standardization, business process automation and streamlining of employees’ roles within the company. It also makes business performance management easier to report performance and implement change across the company.
- Reduced costs. Economies of scale through shared services result from the elimination of redundant business processes, leveraging of purchasing power, and reduction of headcount and transaction costs. Common categorization of costs in business operations across geographic borders can enable better sourcing of materials in different countries, and ultimately a lower overhead cost base.
- Improved focus on strategic decision making. A Shared Service Center can allow management to focus on strategic initiatives, easing up time and resources for better decision making.
- Improved business performance. Increased efficiency of business processes through the pooling of know-how, business process automation and establishment of best practices. A shared infrastructure through shared services will also enable business integration to run more efficiently.
- Improved customer satisfaction. The SSC can be made responsive to the needs of internal and external stakeholders, providing standardized services through a single frame.
Jo Bilson - Jo Bilson is a management consultant with interests including venture capital and entrepreneurial finance.
