Global shared service centers could either be an asset or a liability in the post-Covid era. As digital transformation is an imperative to survive, many organizations have now started questioning the rationale of their SSCC (shared service captive center) approach. The ongoing cost of operating it may be increasingly burdensome, perhaps even unrealistic.
Covid-19 is acting as a giant stress test for businesses all around the world. It rapidly changed the mood of business as the wisdom of first practices – online first, mobile first, cloud first, automated first, omnichannel first – became apparent to all.
How enterprises navigate the months ahead will likely determine their fates for decades to come. The need for digital transformation has become incontrovertible – but the question is about the optimal ways to achieve it. Two of the primary means to achieve this transformation, are via External service providers (ESPs) and shared service captive centers (SSCCs).
The primary motivation behind SSCCs is to cut operational costs via process standardization, economy of scale and leverage of offshore labor arbitrage. While SSCCs are extremely effective at maximizing efficiency, they aren’t so great at process innovation and flexibility, and thus, as many commentators and analysts suggest, ill-suited to the work ahead.
Covid-19 has now quickly led to greater interest in sourcing and developing modern, up-to-date solutions and services built on open standards, the cloud, software engineering, data and machine learning. In this period of budget freezes and reduced capital expenditures, many enterprises will be looking to ESPs to take over – catalyzed by financial pressures, but with a recognition of what is at stake far beyond labor arbitrage as the sole motivation of value. This is something we currently experience at our delivery centers in Riga and Vilnius.
What’s right for your organization then? Here’s a checklist of considerations to weigh your own specific options:
- Is your captive’s performance, and are its costs, at least at the median if not upper quartile among its peers?
- Do you truly have control of your captive and the ability to support the business?
- Do you need aggressive cost savings due to COVID-19 impacts or other business priorities?
- Have failures in service due to COVID-19 exposed the need to consider a provider that can help transform to a more resilient business continuity model, including extended and secure WFH?
- Have you made recent C-level changes with a transformation imperative for the captive?
- Are you open to extending the E2E value-chain business outcomes delivered via the captive?
- Are you rethinking core vs. context and need to offload captive functions to create the freedom to focus on other priorities?
- Do you need to conserve CapEx by leveraging a partner for investments in digital transformation?
- Are you open to exploring sole source captive deals to maximize speed-to-value in monetizing the captive?
SSCCs will undoubtedly play a role on this journey to the future, but with the proven track record of ESPs the argument to maintain an internal capability at great expense (of time, money, management overhead and opportunity cost) is weaker than it was a decade or a generation ago.
Learn more in this whitepaper, where analysts from Cognizant’s Center for the Future of Work (both ex-Gartner sourcing analysts) and executives from our Strategic Engagement Team outline a brief past, present and future of SSCCs.