Shared services market in South Africa "maturing"

18.04.2005
Von Samantha Perry

Accenture Ltd. last week released the results of a survey which it conducted into the local shared services (SS) market. According to the results, while the local market is aware of the benefits of shared services centers (SSCs), it has not followed global best practice where centers have been established.

The shared services model, in a nutshell, involves consolidating non-core, common business functions into a single entity (the shared services center). The most important characteristic of the center, Accenture says, is that it has a client/service provider relationship with the rest of the business, governed by a service level agreement (SLA).

The Accenture survey was compiled based on interviews with executives in 28 organizations, in industries ranging from consumer goods to communications, financial services, government and resources.

Most organizations surveyed view SS as a cost-saving strategy, while Accenture notes that the true benefits of SS come from aligning the center with business strategy, which very few local organizations have done to date. On the other hand, 40 percent of respondents expanded services in centers within the first two years of operation, and a further 32 percent see potential for expansion and growth.

According to the survey, local companies are adopting several models for SS, from basic consolidation of transactional and administrative work to creating a new business entity, with its own customers and profit targets.

Says Accenture associate director, government operating group, Cecil Maswanganyi: "Local companies demonstrate a reluctance to lose control of strategic functions, so, the less strategic the service, the more likely it is to be moved to an SSC."

Local companies also prefer to locate centers close to the company head office, as opposed to using greenfields/new sites as per global best practice. Greenfields sites, says Accenture, can offer infrastructural and skills cost savings, à la the global trend towards locating centers in India, for example.

Financial services organizations are leading the pack locally in terms of establishing SSCs, the survey notes. "Interest in the public sector is soaring," notes Maswanganyi, who says that government is driven to implement SCCs (eg the Gauteng Shared Services Centre) by a need for improved service delivery to citizens, rather than cost savings.

"However, political considerations and union opposition to potential headcount reductions are genuine constraints," he adds.

Overall, he says, the local market is poised for significant growth, given local realisation of the cost benefits of SSCs, and interest expressed by government and other sectors.

In a nutshell

Key findings:

SSCs are often seen as an interim step to outsourcing;

The majority of centers in SA have been established for more than three years;

Executive approval usually takes place within three months;

Technology integration can drive or inhibit migration;

80 percent of respondents source SSC staff in-house;

Payback is expected in less than three years, and targets are achieved by 30 percent of respondents;

Staff training is a significant cost factor;

Clear parameters of scope are essential;

SSC management requires strong communication, leadership and marketing skills;

Successful internal service organizations are flexible, responsive and cost-efficient.