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The Changing Landscape of Outsourcing

...it is no longer only about cutting costs, the challenge is to leverage the SSC and create value by finding smart ways to drive their organizations forward globally.”

Andrew Majlath

...it is no longer only about cutting costs, the challenge is to leverage the SSC and create value by finding smart ways to drive their organizations forward globally.”

The basic instincts of business have remained unchanged over time. The ultimate objective to create value for shareholders triggers the urge to maximize operational cash flow, which in turn drives the quest for maximizing profitability.

A combination of healthy top line growth together with careful cost control has served most companies well over the years. However, the ever changing environment and the need to forge a competitive edge in the market means that all companies must continuously work smarter just to stand still. Developments in work practices together with advances in technology have enabled companies to better organize and align their noncore internal processes. Reducing internal complexity and implementing best practices have been common place for most international businesses.

The vast majority of larger corporations have completed or are close to completing the implementation of one or another integrated IT solution (e.g. SAP, Oracle, MS Dynamics AX) at most of their major business operational sites around the world. As a result of this they are able to manage more efficiently and more effectively the administration of their internal processes.
Once on a common IT platform, many corporations realize further efficiencies by relocating part of their internal administrative processing and support functions into a small number of centralized locations, often to just one single location i.e. the Shared Service Center or SSC, usually located in a “low-cost” country with a well educated and highly productive workforce.

During the past 10 years or so, the number of SSCs being established in CEE has been accelerating incredibly. The region now has approximately 300 SSCs, roughly the same as in Western Europe. More than 95% of these SSCs are located in 5 countries; Hungary, Poland, Czech Republic, Slovakia & Romania. It’s not far short of a revolution. We at Process Solutions operate a Business Process Outsourcing business focused on providing hands-on accounting and tax compliance solutions for
more than 300 international clients. Established in 1999, we have close to 300 people in five offices located specifically in the above countries. We specialize in providing full support to CEE SSCs. Not only do we provide internal accounting and payroll for the SSC itself, but also training for the SSC personnel, qualified loan staff, as well as statutory accounting and tax services with global coverage.

A typical multinational company which has its SSC located in CEE countries will serve somewhere between 10 and 50 countries. Therefore the demand for competent personnel with strong language skills is high.

Those SSCs that are at a more advanced stage in their development have started to outsource certain parts of their SSC activities. Typically they are outsourcing the lower complexity transaction processing tasks to the large Business Process Outsourcing (BPO) service providers, who are then relocating these simple, well defined, low risk tasks to lower cost locations in CEE and Asia. This “hybrid” solution where part of the activities are outsourced effectively segments the SSC into layers – outsourced transactional BPO SSCs/in-house Centers of Scale for simple transaction processing, leaving the more complex tasks to be handled by the SSC Centers of Excellence.

The SSCs in CEE are therefore tending to develop into Centers of Excellence over time and taking on ever more complex tasks. Some more mature SSCs are now taking over the Compliance Management function, handling the statutory accounting and tax function which has typically remained in-house at each local country.

Since the financial crisis the business environment has become even more difficult for most corporations and they can no longer rely on guaranteed growth either in domestic and or international markets, there is no apparent slow-down in the trend towards SSCs. Organizations
are still looking to establish SSCs if only to catch up with their competitors. But it doesn’t stop there. For existing SSCs it is no longer only about only cutting costs, the challenge is to leverage
the SSC and create value by finding smart ways to drive their organisations forward globally.

Process Solutions s.r.o.
Grösslingova 4
811 09 Bratislava
www.ps-bpo.com
info-sk@ps-bpo.com

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