Shared Services Survey Ireland 2016

Transcription

1 Shared Services Survey Ireland 2016

2 Introduction Our inaugural research on the Shared Services sector in Ireland aims to provide a high level synopsis of the current landscape for this important market. This study is based on a recent survey of 26 Shared Services operations based here in Ireland with a range of models, sizes and services, coupled with our insights and experiences from working directly with Shared Services clients here in Ireland and abroad. Although experiencing challenges from low-cost alternatives (notably East European and Asian destinations), the Shared Services market in Ireland continues to thrive and evolve beyond pure transactional activity. Evidence of this can be seen in the growing number of Irish shared services centres which operate as European and Global Centres of Excellence, providing value-added activities on a centralised basis. The objective of this survey is to profile the sector in Ireland in terms of the maturity of its operations, the geographic reach and range of activities supported, and in addition the current trends, challenges and opportunities encountered. We also review how Corporate HQs assess the performance of the Irish operations. Finally, we highlight the key factors that have made Ireland a successful location for Shared Services unveiling its real value proposition. We hope that you find this study to be of value and interest. Kind regards Garrett Cronin Therese Cregg Cora McLoughlin Partner, Advisory Consulting Partner, Assurance Senior Manager, Advisory Consulting 2

3 Organisation Profiles Shared Services Operations in Ireland come in all Shapes & Sizes Ireland is fortunate to have a Shared Services sector with operations at all stages of the developmental life cycle. From small start-up s establishing their European / International footprint, to mid-size well established Centers of Excellence and finally very large multi-functional Global Business Service operations. The profile of the organisations includes both multinational and indigenous Irish operations from a broad range of industry sectors. In our experience all stages of the Shared Services life cycle bring different opportunities and challenges e.g. establishing efficient processes and controls, driving cost reductions by leveraging low cost locations, enhancing the value add proposition etc. A notable feature of the Shared Services sector in Ireland has been the level of collaboration amongst SSC management teams across organisations in exchanging ideas and sharing learnings which has contributed to the development of the sector as a whole in Ireland. Survey respondents Industry sector ICT - Software Other 11% Pharmaceuticals 11% Medical Technologies 11% Internet 11% ICT - Hardware 8% Industrial Products & 8% Financial Services 8% Transportation 4% Consumer Goods 4% 24% 3

4 Maturity of the Irish Market Ireland s Shared Services sector is well established with a good stream of new entrants Length of time SSCs surveyed have been in Ireland Established > 3 yrs Established > 5 yrs Established > 10 yrs 77% 50% 31% 23% of SSC s surveyed have been established within the past 3 years reflecting on-going investment in the SSC sector in Ireland 4

5 Operations Size Most SSCs employ staff and plan on increasing headcount in the coming year SSC Size Number of Employees 31% 35% 22% 12% < >250 66% of SSC s surveyed are small / medium size operations with <100 employees. These typically fall into two categories: 1. Mature operations who have evolved into Centres of Excellence, having off-shored and/or outsourced transactional activity; and 2. New start-ups establishing European / Internatonal operations in Ireland. % increase in Headcount expected 34% of SSCs surveyed have operations with >100 employees. They typically fall into: 1. Operations which have evolved and expanded their scope as Global Business Centres of Excellence, or 27% 35% 15% 26% 2. Operations which continue with transactional processing. 0% < 5% 5-10% 10-20% 76% of SSCs surveyed expect some expansion in headcount over the coming 12 months. However, increases are expected to be modest 50% of SSCs predicting up to 10% growth. 5

6 Geographic Footprint The most advanced centres operate across multiple regions 96% of respondents support operations within the European region. However the reach of Irish SSCs extends beyond the boundaries of Europe as reflected in the table below. 46% of SSCs surveyed provide support in more than 10 languages. The range and proficiency of linguistic skills reflects the international global nature of Irish SSC operations. Languages spoken 80% 70% 60% 23% % 40% 30% 20% 10% 0% 69% Middle East 50% Africa 31% Asia Pacific 15% 15% 12% North South India America America 46% 4% 27% >10 Ireland remains an attractive destination for young highly educated foreign nationals to come work and live. These multi-lingual operations are staffed predominately with native speakers. 6

7 Leveraging Low Cost Locations 50% of the SSCs surveyed have off shored elements of their activities to either a captive (in-house) SSC or external outsource providers in one or more low cost locations. Top Low Cost Destinations from our survey 69% India 62% Eastern Europe Off-shoring and Outsourcing activities to low cost locations has generally been viewed as a threat to SSC operations in Ireland. However, it has also been used as an opportunity by successful SSCs to free themselves up from low-end transactional processing and transform their operation into high value add Centres of Excellence and Global Business Services operations. 23% 15% Asia Pacific South America There are generally two reasons why Irish SSCs may not have off-shored / outsourced activities including: 1. New start-ups. 23% of SSCs surveyed had only been set-up within the past 3 years, their business and operating models may still be evolving 2. In other cases, it may be that they lack critical mass of transactional activity to make it economic to offshore / outsource. 7

8 Transformation Advanced Shared Service Operations in Ireland have transformed into Multi-Functional and/or Global Business Services Finance remains top of the list with 85% of the SSC s surveyed providing these services. Tax, IT and HR are also well established service offerings, provided in a single or multi-function environment. Other functions are emerging and increasing in importance as Irish SSCs transform into strategic multifunctional Global Business Services operations Respondents noted that they currently provide one or more of the following services: 85% 42% 42% 38% 31% Finance Tax IT HR Customer Service 23% 23% 19% 15% 15% Sales & Marketing Procurement Supply chain Data Analytics R&D 8

9 Outlook The trend towards Global Business Services is set to continue as survey respondents project future expansion across multiple functions Finance Customer Service Sales/Marketing Data Analytics HR Tax IT R&D Supply Chain Treasury 27% 23% 19% 19% 19% 15% 12% 8% 8% 46% Finance appears to be the primary area for future expansion. However it is encouraging to see expected expansion in other strategic areas key to the success of international operations in particular, Customer Service, Sales and Marketing, Data Analytics and HR. 0% 10% 20% 30% 40% 50% 9

10 Measuring Success Respondents to our survey were asked to select the top 5 measurements used by Corporate HQ to assess the success of the SSC operations in Ireland. I m p o r t a n c e Enhance Internal Controls 1 Support growth & scalability Process quality & efficiency Cost Reduction Compliance with regulatory requirements Service levels & response times 88% of respondents rated Enhanced Internal Controls as the key success measurement. 77% of respondents rated Support growth & scalability and Process quality & efficiency joint 2 nd 58% of respondents selected Cost Reduction as a key success measurement. 50% Compliance with regulatory requirements and Service levels & responses times were ranked joint 5 th by 50% of respondents 10

11 Why Ireland? Key factors that have made Ireland a successful SSC location. Top 3 factors selected by respondents 1 Access to highly skilled workforce 89% 3 Competitive tax regime 31% 2 Language capabilities 50% Access to a highly skilled workforce in Ireland is viewed as the most important success factor, followed by language capabilities. Ireland s tax regime comes in as the 3 rd most important factor but significantly below the top 2. Other contributing factors included: Cost Competitiveness 27% Easy access to EU, US and Asian markets 23% State financial assistance for new foreign investment 12% 11

12 Challenges encountered Attracting and retaining key talent is the main challenge Irish SSCs are grappling with. Top 5 challenges reported by respondents 1 Attracting & retaining key talent 46% of respondents are experiencing challenges attracting and retaining key talent 2 Escalating salary costs 31% of respondents are struggling to manage their salary costs 2 Competition from low cost locations 31% of respondents see competition from lower cost locations as the key challenge for them 4 Uncertainty around the global tax landscape 23% of respondents see uncertainty around the global tax landscape as an issue. It should be noted that this survey was conducted before the US Presidential election. Given the proposed changes in US fiscal policy by President Elect Trump, if asked again the rating on this challenge might be different. 5 More commitment or support from Corporate Mgt 19% of respondents see more commitment from Corporate Management as the key challenge. 12

13 A majority of respondents will be affected by BEPS country-by-country reporting Will your SSC have a role in preparing country-by-country info? 58% 42% No Yes If yes, have you begun to assess your obligations and how required info will be collated? 50% 50% No Yes 13

14 Contacts Garrett Cronin Partner Cora McLoughlin Senior Manager Tel.: Mobile: garrett.cronin@ie.pwc.com Tel.: Mobile: cora.mcloughlin@ie.pwc.com Thérèse Cregg Partner Tel.: Mobile: Therese.cregg@ie.pwc.com This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. firms help organisations and individuals create the value they re looking for. We re a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at PricewaterhouseCoopers. All rights reserved. refers to the Irish member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see for further details 14