The UK and Ireland – Still a Key Location for Shared Services
While North America remains the largest global market for shared services, in Europe, the UK and Ireland have long held the lead position. 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 this 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 (SSCs). 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.
Dublin ranks first as the top UK & Ireland shared services city, with 19% of all SSCs, far ahead of Manchester and Greater London in joint second place, with only 6% each. It’s interesting to look at the spread of the top cities from each country: Ireland only has 2 cities, Dublin and Cork, which together account for just under a quarter of all SSCs in the UK & Ireland, demonstrating a very concentrated shared services cluster in the country. On the other hand, English locations account for 10 of the top 19 shared services cities, with 31% of all UK & Ireland SSCs in these 10 locations, demonstrating a much thinner spread of SSCs across a greater number of locations.
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 centres 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.
View the full interactive report from SSON Analytics:
Evolution of UK & Ireland Shared Service Centres from 2000-2015