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Defining a Captive or BPO Sourcing Strategy for Shared Services

Introduction

Outsourcing back-office processes that are often found in a Shared Services center continues to be popular as external service providers improve the quality of their services and methods for how to best transfer and manage work processes becomes routine.  Outsourcing isn’t a “one size fits all” approach, nor is it possible to flip responsibility for entire processes to a third party. 

For companies that outsource there is always a mix between captive and BPO, with varying degrees of process level and higher process ownership rights either shifted to BPO or retained, depending on each company’s circumstances and risk thresholds.  It is important that Shared Services leaders develop a strategy related to outsourcing so that they clearly understand how outsourcing alternatives fit into the overall strategy.

iPollingTM Results Review

A recent Peeriosity iPollingTM question asked about the overall strategy related to outsourcing Shared Services processes.  The results suggest that 54% of member companies follow either a captive, or a captive with selective outsourcing approach, with 12% indicating that BPO was the primary approach followed.  34% of responses indicate an even mix between a hybrid approach that was trending to more captive, and a hybrid approach that was trending to include more BPO.  Here are the details:

Regarding the primary location of service centers for member companies, 42% are in North America, 21% are in India, 8% are in Eastern Europe, and 4% are in Europe, with 25% having a broad mix across geographic regions.  This isn’t surprising, since the profile for many of Peeriosity’s member companies, where over 50% have revenue greater than $10B per year, is to have headquarters in North America with global operations for manufacturing and sales. 

Here are a few of the comments from responding companies regarding Shared Services center location:

  • A mix between US, Western Europe, Latin America and India.
  • We have four regional centers, two of which are supported out of India.
  • USA, Canada, LATAM.
  • Mix between India & Malaysia, with more than 70% in India.
  • Shared service centers in Mexico, Ohio, Czech Republic, and Malaysia.
  • We use a spoke and hub model. 70% of our resources are divided between two hubs, 40% Hungary, 30% Brazil and the remainder split between our spokes in the US, Canada, and Australia.
  • We have 3 similarly sized captive shared service centers located in the US, Latin America, and Russia. The majority of our BPO shared service resources are in India.

Closing Summary

Business Process Outsourcing is an accepted and common part of the landscape for the design and delivery of Shared Services processes, and one of the many tools available as members work to delivery high quality and cost-effective solutions for their companies.  The mix can vary between what work is captive and what is BPO, with process ownership always a retained responsibility.  Where the line splits between the ultimate process owner and front-line processing varies depending on the capabilities of both the BPO provider and the company who decides to outsource.

What is the mix of captive and BPO for Shared Services at your company?  What is your mix for onshore or offshore processing, and do you follow a regional or a global design for work process location?

Who are your peers and how are you collaborating with them?

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