Coming home: the UK expands its shared services industry

When it comes to outsourcing business functions, what do companies look for?

Local access to key markets, a willing workforce, a strong skills base?

The answer is all three, and this explains why, despite offshore competition, UK shared services centres are growing.

The appeal of the UK shared services sector for many overseas investors is its proximity to continental Europe.

In May this year, for example, Coca-Cola announced that it would locate pan-European human resources functions in the UK.

UK sector adding value

But the UK’s strength is also in focusing on value-added activities – for example, enabling in-house treasury functions to focus on liquidity, risk and regulatory compliance.

Despite competition from low-cost offshore operations, the UK’s shared services sector is thriving on providing more complex services further up the value chain.

The trend towards in-country outsourcing is growing as businesses centralise more of their functions.

Here in Wales we have built a solid 20 years experience in the contact-centre industry.

Mike Minahan

Chair

Welsh Contact Centre Forum

British Polythene Industries, for example, concentrated its financial and administrative operations in a Greenock-based shared services centre in May 2007, with forecast annual savings of £500,000.

Operational control

In fact, a survey of 141 companies conducted by PA Consulting found that most would not consider locating shared services centres in low-cost countries such as India. The main reason was because cost was not their only concern, and the report cited companies’ desire for “greater operational control”.

Mike Minahan, chair of the Welsh Contact Centre Forum, an employers’ organisation representing the interests of Wales’ £400 million-a-year industry, says that centres in Wales offer low overall operating costs for employers and a highly skilled workforce. He adds, “Here in Wales we have built a solid 20 years experience in the contact-centre industry, which stands us in good stead in terms of attracting the new shared services business to the country.”

Public-sector evolution

The UK shared services industry spans both the public and private sectors.

In the public sector, the 2004 Gershon reforms drove key shared services contracts, including the Prison Service pooling its human resources, financial and procurement functions in a centre in Newport, South Wales.

Business services investors flock to UK

In 2006/07 business services investment in the UK increased by 182 per cent on the previous year. Find full details and statistics for investment in other sectors in our annual investment report.

The UK Government is still working on reducing 1,300 diverse public-sector IT, finance and human resources functions.

Ian Watmore, head of the project in the Cabinet Office, says, “The priority of shared services is customer first and efficiencies second.”

Paul Bentham, partner in the technology and outsourcing group at legal firm Addleshaw Goddard, says that “the public sector is now looking to play catch-up” with private-sector shared services.

“The drivers are the greater efficiencies required to achieve costs savings and a drive towards customer-centric services.”

Well-established infrastructure

For both public and private sector organisations, the aim is to maximise efficiency with minimal risk via a strong skills base (a highly skilled, service-orientated and willing workforce) and a well-established infrastructure.

“In the early days, the primary focus was on minimising headcount, costs and the payback period,” says PA Consulting’s report.

“Now companies set out to achieve a good balance between cost reduction and quality improvement.”