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CFOs Find It's Nice to Share, within Limits

27 October 2009:

Large companies are getting more comfortable with using shared services centers and are considering whether to move more finance transactions into the organizations, which can be run in-house or by a service provider.

According to the consultancy The Hackett Group, a longtime proponent of the shared-services model, 93% of the largest 1,000 companies by revenue worldwide are using SSCs for at least some functions. And more than three-fourths of 200 companies surveyed by Hackett use them to handle some of the more mundane finance processes, such as accounts payable, accounting for fixed assets, and processing travel and expenses.

To be sure, a lot of back-office work is still kept close to headquarters. Only 25% of the survey participants allow SSCs to handle order entry, for example. A company's confidence in allowing transactions to be processed by a captive SSC located offshore or by an outsourcing vendor depends on whether any particular department — a sales team, for instance — is willing to give up some control, explains Bill Foley, managing director of finance transformation at Hackett.

"It depends on the culture and whether the shared-services organization can prove it can effectively handle that kind of work and take the burden off of sales, while improving the level of quality to the end customer so that the relationship is not harmed," he tells CFO.com.

Nearly two decades after a handful of companies began consolidating some finance and IT functions in offshore SSCs, there's renewed interest in expanding their use to take advantage of cost savings derived from labor arbitrage and tax incentives, according to outsourcing advisers. Popular spots include India, the Philippines, Costa Rica, Argentina, Poland, Romania, and China.

PricewaterhouseCoopers senior managing director Charlie Aird says he's receiving three to four calls a day inquiring about expanding or establishing a shared-service model, whereas only six months ago he estimates he was averaging just one such call a week.