Shared Services and Outsourcing
A Frost and Sullivan Study

(Excerpt)
In the past decade, there has been a phenomenal growth in the business transformation and re-engineering activities. In order to alleviate the pressure from falling marging and fend off intense competition as a consequence of globalization. Shared Services and Outsourcing (SSO) was embraced dramatically, albeit amidst much controversy, as one of the solutions to transform organizations’ costs and revenue structures.

In 2004, the SSO market as a whole was estimated to be worth $647 billion. Though SSO offshoring currently accounts for merely 6.01 percent of the total SSO market, it is expected to generate impressive growth between 20 to 30 percent within the next three to four years. The offshore SSO, which currently accounts for the bulk of SSO activities, will also increase in parallel with the overall industry growth and moderated by macroeconomic fundamentals estmated at 12.34 percent CAGR (2004-2007).

While the primary driving factor for SSO adoption has always been cost benefits, Global Fortune 500 companies are also using SSO as a catalyst for unprecedented business transformation. It manifests globalization and borderless collaboration in a scale that have not been witnessed in history before. To stay focused and competitive in their own industries, global companies are maturing fast in their SSO operations. They are increasingly emphasizing the need to integrate front, middle, and back-end operations virtually and seamlessly. Although the most popular business process for SSO is IT Services & Support followed by Back Office Processing, Human Resource and Customer Service and Call Center, more emphasis is placed on locating the SSO ‘Center for Excellence’ in specific industries or verticals.

There are several models of SSO that are adopted currently: (1) Integrate Domestic Capability-SSO is located onshore and services are provided by controlled units, either fully or partially owned; (2) Source Domestic Capability-SSO is located onshore and services are provided by external service providers; (3) Integrate Foreign Capability-SSO is located offshore and services are provided by controlled units, either fully or partially owned; and (4) Source Foreign Capability-SSO is located offshore and services are provided by external service providers.

The more likely trend in the next few years are:
1. More SSO activities across industries with Asia Pacific and Eastern Europe are expected to become the main beneficiaries of offshoring
2. Increasing maturity of the SSO operating model that has a constant need for continuous improvement and higher requirements for responsiveness & integration between client and service provider
3. Convergence in SSO needs from functional to vertical or industry focus