Asian firms opt for shared services

Businesses in the region can become more competitive by moving toward shared services and outsourcing, and at the same time Asia is an attractive location for the industry.
Written by Vivian Yeo, Contributor

SINGAPORE--More companies in Asia are moving to a shared services and outsourcing model to gain an advantage over their competition, according to consulting firm Frost & Sullivan.

Siew Kam Soon, Frost & Sullivan's director for ICT consulting in Malaysia, told ZDNet Asia on the sidelines of the Global Shared Services and Offshoring Summit that the move by businesses toward shared services and outsourcing (SSO) reduces costs and brings about faster response time, contributing to a more efficient operating model.

Shared services is defined by sourcing consultancy TPI as "the provision of leverageable services to meet customer requirements". It typically refers to the notion of having a dedicated unit to provide specialized services for internal customers, and like outsourcing, can be on-shore or offshore.

Referring to a TPI study about 18 months back, Gerry Clark, partner and regional director for Southeast Asia at TPI Singapore, pointed out that frequently cited reasons for setting up shared services organizations include improving service quality, focusing on core businesses, gaining access to skills and controlling operating costs.

Clark pointed out that shared services should not be seen as the traditional concept of centralization, and instead is "a step beyond centralizing".

Frost & Sullivan's Siew said the maturity of SSO adoption varies from industry to industry. Certain verticals such as banks and airlines, noted Siew, have been "more progressive" in this area, while technology companies are in a limited extent.

Hong Kong-based telco PCCW is "very strong"--it provides network support and expertise to countries such as Morocco, said Siew.

He noted that some of the biggest companies in Asia, especially Japanese ones, have for a long time been "laggards" in adopting the SSO approach, but are "recently picking up".

Top SSO locations in Asia
According to a Frost & Sullivan whitepaper dated May 2008, five Asian countries emerged among the top 10 shared SSO locations in a study of 50 SSO decision makers in technology companies.

India, China, Singapore, Philippines and Malaysia were ranked first, third, fourth, seventh and eighth respectively. Others in the top 10 included Ireland, Czech Republic, Poland, Mexico and the United States.

Speaking at the summit, P. Ramakrishna, director for industry development at Singapore's Infocomm Development Authority, said Singapore's value proposition is that of a "trusted hub" for shared services and business process outsourcing operations.

The trust, he added, comes from various factors--from having low crime rates and lack of natural disasters, to a strong talent pool and its own standard for business continuity and disaster recovery, the SS507.

Ramakrishna noted that Singapore is perceived to be expensive, but it is not necessarily so as very often businesses are not faced with hidden costs. "What you see is what you get," he said, adding that the city-state has been ranked as the most cost-competitive out of 128 cities in a KPMG report two years ago.

Despite the rising inflation and appreciation of the Singapore dollar against the greenback, Ramakrishna said he was confident that the "right policies" will be made to assure investors that inflation is controlled. In addition, he pointed out that wage increases in the country have always been predictable and that is an important consideration for shared services here.

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