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“IS COPENHAGEN A RELEVANT LOCATION FOR SHARED SERVICE CENTRES?"Currently, companies are busy consolidating their activities. Activities and jobs are offshored - they are moved from subsidiaries and gathered at one location (in a Shared Service Centre / SSC).
It is estimated that 40 % of business services will be located in low cost countries (Eastern Europe/Asia) within the next five years. Moreover, the activities that are managed from a single location by a global process owner will increase from 30 % to 70 % (The Hackett Group, 2009). A relevant question to ask is therefore: "Is Copenhagen a relevant location for the SSC's?"
In our efforts to help foreign companies in Denmark, we still come across many companies that, contrary to the overall trend, choose to establish a regional SSC in Denmark.
But why even consider a SCC in Denmark? We meet the following arguments:
The degree of standardisation
Although many services are moved to low cost countries, it is still primarily services characterised by a high degree of standardisation that move. Many companies still choose to place more services that require local adaption such as cash disbursement, revenue cycle, general accounting & external reporting and tax management in regions such as Scandinavia.
Denmark as a "pilot case"
Further to our demand for agility in Denmark, we can take pride in the fact that we have a very flexible labour market model (ranked no. 1 in the world by IMD) where hiring and firing employees is easy. As such, up-scaling or down-scaling the number of employees in a SSC can be done without any major problems or cost. That, combined with high skills and geographic proximity to many smaller markets (Scandinavia) have enticed many companies to give a SSC on Danish soil a go before taking larger steps.
Highly skilled workforce
You can talk about different stages or targets in relation to SSCs: In stage one, focus is on "complexity reduction". In stage two, the objective is to achieve "operating excellence”. Stage 3 is based on creating "strategic business opportunities”. Stage 2 (partly) and 3 require highly skilled labour; it requires that one can handle decision support, business intelligence, collaboration, capabilities, and help make the business agile, for example strengthen its ability to react quickly to changes in the market. Agility in particular is a top priority for executives in a time dominated by fierce competition and instability. In Denmark, we are known for having highly skilled labour, and therefore, many companies still choose to have functions related to stage two and three located in a SSC in Copenhagen. This trend is likely to continue. Today, focus is on transactional services (stage 1) which accounts for 71 %, and value adding services (stage 2 and stage 3) which accounts for 29 %. In just two years these figures will have changed to 62 % and 38 % respectively. (The Hackett Group)
A language challenge
A prerequisite for the success of a SSC is that it shall be able to serve other units in the local language. Scandinavia is characterized by languages that are difficult for foreigners to learn at a high level. In Copenhagen (the Oresund region), we have the highest concentration of Scandinavians and can therefore cover all Scandinavian languages.
A joint Enterprise Resource Platform (ERP) platform
In Scandinavia, we have come far in regards to a joint ERP platform. This is often a hurdle for SSCs in general, but thus not an issue in Denmark.
While there is a reasonable cultural fit between Denmark and India for example, there are still differences: Indians have a different perspective on "accuracy" and "end-to-end process view". In Denmark we have a very high demand for accuracy, whereas Indians pay less attention this issue, - it creates problems in relation to process management and reporting. Indians are world leaders in having a defined problem and solve it, but they are not very skilled in taking the whole process into consideration (end-to-end). As such, there will often be costs associated with creating a "fit", a cost which can be hard to cover in small SSCs. In a SSC project, a management group must therefore weigh specious savings on cost base against ROI.
If you have any questions regarding the above or if you would like help benchmark possible SSC destinations, please contact Morten Hjorth