PARTICIPANTS:

Moderator: Courtney Fingar, editor, fDi

Advertisement

Participants:

Mervyn Newton, Fraser Thornton

David Parker, International Business Wales (part of the Wales Assembly Government)

Tony Lewis, LogicaCMG

 

Courtney Fingar: From your experiences, how are shared services evolving?

 

Mervyn Newton:

There is a trend to do as much as possible in the centres to improve the processes and make them as streamlined as possible, and to look for new technologies to maximise the effectiveness of internal centres, but at the same time to look at the geography of centres and where they are located. Then the most efficient place with an appropriate risk profile must be decided upon. There is a growing tendency not to put all your eggs in one basket in terms of one single location. Splitting locations will allow a mix between what goes on in the more distant shared service centre versus the centre that is closer to the business, with lower cost geographies taking care of some of the more straightforward transactions and processes. Also, there is a general trend towards looking at total back-office shared service operations and the possibility of combining finance, human resources, IT, procurement and facilities management under one shared service organisation in the company, with one management structure.

CF: What is Wales doing to capitalise on these developments?

David Parker: About five years ago, trends pointed towards moving operations offshore, and it was a difficult time for the UK, both in terms of holding on to what it already had and attracting new investment. But now companies recognise the benefits of also maintaining certain operations in the UK. We are trying to promote Wales as an onshore location for those transactions that are staying in the UK, where you can get a lot of the benefits of offshoring without the risk.

LogicaCMG is a perfect example of that. While Logica has put certain transactions into Bangalore, it also employs about 1000 people in Wales, working on those transactions that it believes are best delivered within the UK.

Tony Lewis:

From our Waterton service centre in Bridgend, we service more than 125 clients and about 10 of those are in Wales; the rest are spread throughout the UK. This shows that, with technology as it is, shared service centres can be anywhere.

We have a presence in 36 countries worldwide, and using technology we can mix the delivery, a blended service, from these global operations, including, for instance, the Czech Republic, Bangalore, Portugal and throughout western Europe. You can have shared service centres in Wales or you can have them in Bangalore. Sometimes offshore is not an option, whether it is for political reasons or for business risk reasons. For other clients, because of the cost effectiveness of places like India or the Czech Republic, they want all the back-office functions there. The blended service offering brings to clients a mix of services with some onshore and some offshore.

MN: Because companies are looking at this geographic and process expansion, they are examining how they can build and grow their centres. It is a choice of location as to what can best be done from where. Companies have to look at the mix of locations, bearing in mind what they are trying to do and, in particular, considering service versus cost.

Quality is key: some of the shared service centres may have experienced some issues with certain aspects of their offshored activities. So the more sensitive and important parts of the process will be done closer to home. It is all about managing service, cost and risk – and getting the balance right.

CF: How attractive is Wales as a shared service centre location?

 

MN: Shared services are often talked about in terms of technology and processes. However, a critical success factor – and one that is often neglected until too late – is the people dimension. Therefore, as long as locations have efficient technological infrastructures, which Wales certainly does, then a location that also has the appropriate number of people with the right skills and with the desired mix of language capabilities can be considered. It has to have that kind of environment in terms of availability of the workforce.

What is needed next is a place in which people will want to live and an environment that feels comfortable. What is becoming increasingly important is the work/life balance. From my own perspective, I can say that Wales is a great place and somewhere I wanted to live and work. You have to look at the differentiators, and a big differentiator is on the people side and the environment in which they have to work.

CF: How much does this issue matter to LogicaCMG in deciding where to invest?

 

TL: It matters greatly. Following the acquisition in 2001 of the Hyder IT operation in south Wales, and the experience of that over the first couple of years, the productivity factors really came into play to make that the place of choice for the outsourcing hub for western Europe.

Attrition levels and short-term sickness levels are about 3%. These are significant factors in keeping the cost of the operation down, because there is less need to carry surplus staff to make up for people who have short-term sickness, and the company will not be continually recruiting people to replace leavers. These factors do play a significant part of investment decisions. We have taken on more than 350 people in the past two years. The existing workforce in Wales is very flexible in terms of being prepared for the job; and they are prepared to think for themselves. It is a lot about personal development and there are huge opportunities there.

DP:

We should think about the main drivers behind setting up a shared service centre: first to improve efficiencies and second to drive down costs. In terms of the people perspective, the benefits of locating in Wales to improve efficiencies are highly dependent upon people. Wales is also the most cost-effective location in the UK. That was confirmed in 2005 by a study undertaken by Ernst & Young, which looked at the cost of establishing a shared service centre in Cardiff or Swansea compared with other UK locations. Taking into account staffing costs, real-estate costs, the low attrition rates, financial incentives and so forth, Wales offers better value for money than any other part of the UK. That is a fact. If the two main drivers in going down the shared service centre route are to improve efficiencies and to drive down costs, then Wales scores very highly in both.

MN:

Often the initial driver of a decision process about where to locate your shared services is based on cost. In the longer term, however, the decision to stay is based on service, because as the centre matures and grows, the cost savings are made and the company gets used to it. The decision, after costs have been saved and budgets and targets have been met, is whether expectations with regard to service are being met. The decision to stay then is based more on service.

DP:

There is now quite a well established cluster of shared services and outsourcing agencies in Wales, and it is growing all the time. Last year alone, as well as the investment by LogicaCMG, Macquarie Bank, Corus, the BBC and Her Majesty’s Prison Service all announced shared service centre projects in Wales. I am not aware of another UK region that has had as many successes in 2005.

It was on the back of this growing cluster and reputation that at this time last year we hosted Shared Services Week, the event took place this year in Amsterdam. Since then, we have hosted another conference aimed at companies setting up shared services – that took place in Cardiff – and we have also established the Wales Shared Services Outsourcing Forum.

TL:

It is worth mentioning that when we were looking at where to locate our shared service centre, we received very strong support on a project management basis from the Welsh Development Agency (as it was then – it is now part of the Welsh Assembly Government) and we received tremendous support from the Welsh government itself. There was support from what is called ‘Team Wales’: the Welsh Assembly Government, local authorities and businesses, all working together. It creates an environment that makes it very attractive for businesses to come and work in Wales.

 

 

For more information on shared services in Wales, please contact:

David Parker, International Business WalesE-mail: david.parker@wales-uk.com