While North America remains the largest global market for shared services, in Europe, the UK and Ireland have long held the lead position.
Posted by Barbara Hodge on 4th May, 2016
With the global appetite for shared services showing no signs of slowing down, we can expect to see more interest from global organisations in how the UK and Ireland can support their shared services strategies. In fact, according to our recent research into the region, the UK and Ireland experienced its largest cumulative growth of 23% year-on-year in 2010 and is still growing strongly, supported perhaps by renewed interest in near- or onshore sourcing as new technology makes offshore FTE driven models less attractive.
Within the UK and Ireland, England still accounts for nearly half of all the shared services centres. Considering individual industries some significant shifts emerge, however: Within banking, finance, and insurance, England's lead narrows significantly with Scotland and Ireland tied in second place; within government shared services, England and Scotland by far outrank other countries, with England only minutely ahead of Scotland; and when it comes to pharmaceuticals, England and Ireland together account for more than 90% of shared services, in nearly equal proportion. Ireland shows its true advantage within the technology industry, however, where it hosts nearly 80% of shared services across the region.
However, given today's focus on process expertise and value add, the more interesting denominator may be functional expertise. Of all the HR shared services in this region, for example, England hosts half, with Ireland carrying the largest part of the remaining segment. Switching to Finance services puts Ireland in a far stronger position vis-à-vis England, although the latter still leads. And if we look at Procurement, Scotland has the advantage over Ireland.
The interactive format of this report allows drilling down into specific regions/counties to identify which cities are the most popular. And although Dublin is home to nearly 20% of all shared services across the region, England provides far more opportunities in the form of different regions or cities. The same applies to Scotland, albeit at lower levels. So, within the top 19 most popular cities, England is represented 10 times, Scotland six times, Ireland twice and Northern Ireland once.
Although it is difficult to draw absolute conclusions on the basis of this data, regional strengths and opportunities clearly emerge. England carries a strong advantage in HR shared services, more than twice that of Ireland. Ireland has the most IT shared services, however, and Northern Ireland also makes its strongest showing in this area.
Despite the trend towards multifunctional shared services, 57% of shared services in the UK and Ireland are still operating within a silo (i.e. servicing a single function only). In England, two out of three centres are siloed vs multifunctional.
Where there is growth in the services supplied (apart from Finance, HR, IT and Procurement), this growth is being driven mainly by multifunctional SSCs, with domain specific, customer experience, and sales & marketing services taking the lead. In England specifically we also see payroll emerging as a shared service, while in Ireland we see sales & marketing as the biggest growth sector.
The recent shift towards value-adding as opposed to transactional services is most notable in Ireland, where the ratio between value adding to transactional is 3:1. Northern Ireland also has a significant lead in high-value services, but most other countries in the region are fairly evenly balanced.
One of the attractions of the UK and Ireland as an SSC location is that English is still a global business language. However, other language skills are a key factor for shared services and we see excellent and multiple language services in Ireland and Scotland in particular. These language skills also give Ireland the leading edge in servicing the EMEA region (more than 83% of its SSCs service EMEA compared to England's 50%). Interestingly, Northern Ireland has the largest percentage of SSCs servicing global customers compared to other regions (14% compared to England’s 10%).
While the shared services model is still being adopted by organisations worldwide and expanded on by those who have already embarked on this journey, we expect to witness continued growth across the UK and Ireland in terms of SSO centres. Given the different skillsets that Scotland, England, Ireland and Wales offer, there is plenty of choice for organisations seeking to optimise their locational footprint.