Shared services are not a new business trend, however in increasingly competitive markets, we are seeing more companies looking to implement shared service centers in Saudi Arabia as a way of reducing costs and improving service quality.
Shared services allow companies to have one department deal with administrative tasks, such as finance, HR or marketing, this can either be an internal department or outsourced to a shared service provider.
What are shared services?
Shared services are the consolidation of departments that are used by multiple areas or office locations. They are efficient as they centralize departments and lead to streamlined processes, a reduction in staff, costs and software. Most often, shared services are finance, HR, marketing, purchasing, inventory, payroll, hiring, or IT management.
How do they work?
Shared services require companies to centralize their support services into one location, whether that’s in-house or outsourced to a shared service provider. The site is responsible for performing the all the department functions required to successfully run the entire company across multiple locations.
According to a PwC survey, there are 3 main models that companies adopt for shared services;
- The centralized approach: this approach has a single centre that provides all business support services to the company’s operations. This is the most cost-effective model, however, it is the most challenging to execute because it requires extensive operational restructuring.
- The centres-of-excellence approach: in this approach, specific business processes are located in different locations, based on the branch’s best performing department. For example, in the MENA region, accounts payable may be delivered throughout the region from UAE, while sales functions through Saudi Arabia.
- The regional clusters approach: in this approach, shared services are provided per region. Many companies view this as a step towards a fully centralized approach. For example, one shared service centre will be responsible for the MENA region, whilst another is responsible for Europe.
Shared services improve cost efficiency, service levels and market competitiveness of companies. As the country looks to grow the private sector, we have seen an increased interest in shared service centers in Saudi Arabia and expect this to continue.
For consulting on shared services or to discuss outsourcing your services, contact Proven on +966 11 411 1127 or email@example.com.