The decision making process of where to locate your Shared Service Center is not straightforward. The optimum answer is very much dependent on your business and should not be made on the basis of wage arbitrage or tax incentives alone. In gaining buy in a commitment to a location for a shared service center, an organization can face conflicting internal objectives and differing priorities. Chazey Partners experience suggests that to make the right location decision, an organization needs to follow a robust evaluation based on a set of criteria tailored to the specific circumstances of the organization and the market that the organization operates within. A robust approach facilitates internal buy in and ensures that the organization makes the right decision that delivers the best long term solution with the right level of risk.
The four dimensions we typically consider are: Human Resource, Business, Infrastructure and Political Environment.
The Human Resources Dimension
It is people that deliver the services from the Shared Service Center. As such there are a number of human resource considerations in the high level requirements and an assessment needs to answer the following questions:
- Does the location have resources with the necessary skills available to deliver the services and any future anticipated services?
- What is the cost of resources and how will the costs change in the near term?
- What is the availability of the resources with the right skills in the market place and how challenging will it be to retain the right resources or expand if necessary?
- What are the language skills of the location and are they relevant to the types of service being provided?
- What is the culture of the people in the location and is that aligned to the delivery of the service?
The Business Dimension
Businesses have specific ways of working, and cultures in place, that any SSC would need to complement. The business dimension considers these requirements and looks to assess the case for the following:
- Does the location make sense for delivering the services and engaging with the customer?
- How aligned is the culture of the proposed SSC likely to be to the existing culture of the business and does it make a viable fit?
- Is the location a viable place for managing the implementation project and an ongoing service improvement program?
The Infrastructure Dimension
The infrastructure of a location needs to be in place and sufficiently robust to ensure that the service meets the expected quality. The infrastructure dimension considers the requirements for an SSC location and should consider the following:
- Is there the right real estate to support the desired operation and scale to support any anticipated changes?
- Is supporting infrastructure such as transport and hotels readily available at the right price?
- Is the telecoms infrastructure readily available and robust enough to deliver the right level of service?
- What are the costs of the infrastructure and how is that forecast to change?
The Political and Economic Dimension
The political and economic elements of the country of the location can play a pivotal role in the selection. There may be government incentives to set up SSC and these need to be considered along with the general political environment.
- Is the risk profile of the country acceptable for establishing an SSC?
- Is the country stable enough to host an operation?·
- Is the regulatory environment acceptable for the operation that is planned?
- What are the tax implications and benefits of establishing an operation in a location?
Selecting the optimal location for setting up or expanding an SSC is a challenging process. Chazey Partners believe it is important to take a structured approach to this process using rigorous analysis based on HR, business context, infrastructure and political dimensions. Any evaluation is then able to balance the trade-offs presented by the selection criteria and requirements.
In running through this process, there is also the opportunity to gain buy in for any decision and also ensure that there is a clear and robust business case that has support of senior leadership within the organization.
This result of this approach will be a well-supported project which aligns leadership of an organization and minimizes the potential risk of the implementation. This in turn leads to an SSC that will be able to operate effectively and provide the expected service to the organization and deliver the long term benefits.
Location Selection in Practice
In Chazey, we have delivered successful solutions over the past 10 years in companies such as 3COM, Reuters, Oracle and Travelport. Indeed, the operating models established in these organizations have been instrumental in setting the benchmark and template of leading practice not only within a shared services environment but also with the professional outsourcers and firms who are actively involved in providing third party services in Statutory and Tax Compliance.
The example table shows the results of a typical decision making process. Each of the set criteria within the dimensions has been assessed and rated in a range of 1 to 5 where 5 is best. By then applying the agreed weightings to the scores, it has been possible to rank the locations in order of preference.
In order to have a robust selection process, it is necessary to identify the right weightings for an organization’s business and to develop an assessment mechanism for each criteria that allows the assessment team to effectively evaluate the options in an objective manner. For example factors to consider in skills would incorporate an assessment of the countries education system and a countries regulatory environment would consider the corruption perception index.
The following two examples summarize how Chazey Partners helped two companies to decide on the location for their SSC based on how the weightings were decided and the output of the assessment.
What does this mean for YOU?
Selecting a location for a Shared Service Center is not straightforward and the expense of having to recover from the wrong location once the SSC is in operation may be prohibitive.
By identifying locations effectively in the first place and then evaluating them against clearly articulated requirements categorized into the core dimensions of human resources, business engagement, infrastructure and political environment, you can ensure that you are evaluating the right things and selecting the result location for the right reasons.
Learn more about Chazey Partners Location Analysis service