Major Firms Set to Increase Reliance on Shared Services

Over the next two years, about 72% of major enterprises will increase their outsourcing services investments while 61% will increase their reliance on global shared services, according to a new joint study from KPMG and HfS Research.

One in four firms are making significant investments in shared services, a marked increase after several years of tepid investment. Moreover, the study found there has been a marked increase in the use of offshore services – both with outsourcing service providers and internal shared service centers across IT and business processes: namely finance, procurement, HR and customer support.

The study noted that an increasing number of buyers are seeing huge benefits from “As-a-Service” delivery rather than “on-premise” delivery; with several viewing BPaaS (Business Process as a Service) as an alternative to conventional outsourcing.

Thanks to the rising trend of shifting higher-value work into offshore shared services, enterprises are expected to increase their offshoring activities by 20% to 30% over the next year.

“Outsourcing is at a crucial juncture between providing genuine value and low-cost staff augmentation,” said Dave Brown of KPMG.

Providers, Brown said, need to prove they can do more than basic operations, otherwise outsourcing runs the risk of becoming a staff augmentation model for flexing operations as opposed to a strategic partnership between provider and buyer that can provide clients with greater skills, technology, and analytical capabilities.

Nearly 60% of enterprises see operational analytics as an extremely important outsourcing outcome. A similar majority, the report says, are already expecting their providers to provide savvy talent and better technology within two years.

The report also notes that outsourcing buyers are rapidly losing patience with services providers because they think outsourcing firms aren’t working proactively with them to provide more value than the basic terms of the original contract.

Integrated global services models that incorporate both shared services and outsourcing are becoming the core focus for most enterprises, with about 56% of outsourcing buyers being found to increase investments in their centralized hybrid governance function in order to manage their mix of service delivery models.

“We are entering into a period of genuine secular change for the services and outsourcing industry—things will never be the same and those who are only just realizing this may already be too late,” warned Phil Fersht of HfS Research.