PwC: Global business centres in Ireland are booming

03 August 2015

Shared Service Centres are booming in Ireland, with 78% of their executives expecting expansion in the coming years, research by PwC shows. This expansion will involve hiring more talent as well as investing in technology. However, 80% of executives remain unsatisfied with the deployment of technology within their organisation and 67% highlight that the proliferation of the Centre model means the demand for talent may become more difficult to source in the future.

In a survey among 120 Shared Service Centre (SSC) professionals, professional services firm PwC and the ACCA (the Association of Chartered Certified Accountants) explore the SSC landscape in Ireland. SSCs have grown in popularity over the years, and are predominantly operated by multi-national organisations creating centralised units around specific functional groups, like HR, treasury, payroll, supply chain management, procurement and tax.

The survey results highlight the optimism of respondents for the future of Ireland’s SSCs, with 78% of professionals indicating that their centre will be expanding in the coming years. As part of the expansion the centres “are set to create more jobs” for which 64% seek to increase their headcount.

Global business centres in Ireland are booming

However, while there is good news in terms of expansion aims, the role of technology in the future of centres is found to be problematic. Eight in ten (80%) are not satisfied with the use of technology within their organisation. In addition, 50% disclose that they find that there is room for improvement regarding the measurement of the performance of their SSC. Furthermore, while companies are looking to expand their SSC, many (67%) continue to be concerned about talent bottlenecks.

According to the survey, respondents remain wary that the future success of SSCs is tied to technological integration and specific talent. Respondent cite future demand expected in cloud computing and robotics, as well as the use of data analytics, business intelligence and predictive behaviour techniques as critical not only for performance measurement but also to ensure that SSCs remain at the cutting edge of value delivery.

PwC ACCA Shared Services Centres Survey

Speaking about the survey, Alisa Hayden, Partner at PwC, says: “With a highly talented workforce and competitive tax regime, the survey highlights that Ireland has a huge opportunity to further develop its offering as a centre of excellence for Shared Services Centres. The key to success for these centres within their organisation is that they are innovative knowledge centres, delivering high value add, are competitive and have the ability to standardise and centralise processes while being flexible and adaptable. Continued investment in talent management will be critical for Ireland to secure our SSC growth potential.”

Jamie Lyon, Head of Corporate Sector ACCA, adds: “Interest in SSCs continues to grow yet a critical unanswered question remains, which is: what are the implications for developing sustainable talent across the corporate enterprise and within finance functions as the shared service delivery model continues to change. As ACCA research continues to demonstrate, these developments are fundamentally changing the nature of finance career paths and have huge implications for how the next generation of CFO leadership talent can be developed, and where it will be sourced from.”

Last week featured a study which highlighted Ireland's growing FinTech market.



Outsourcer Interserve's rescue plan sparks share slide

13 December 2018

Embattled government contractor Interserve has announced a plan to reduce its debt by issuing new shares. The material dilution for current Interserve shareholders has prompted a further collapse in the firm’s stock value – which fell by more than 50% following the news.

Almost a year after Carillion fell into shock administration, the shadow of the collapsed government contractor still hangs heavy over the outsourcing industry. At the time of its demise, Carillion was involved in the HS2 high-speed rail line, the management of schools and prisons, and was the supplying of maintenance services to Network Rail. Such was the extent of its influence at the Ministry of Defence – for which it maintained 50,000 homes – that news of the collapse forced Defence Secretary Gavin Williamson to trigger a meeting of the Government's Cobra emergency committee to discuss the situation.

The events of early 2018 put thousands of jobs at risk, while the outsourcer – used by the Government to theoretically save money – ultimately cost taxpayers £148 million. Following that, in a bid to safeguard public services and funds from a future collapse of an outsourcing provider, the British Government has since called on a number of professional services companies to draft IT cheat-sheets to be used in the event of their administrations. Volunteers Capita, Serco and Sopra Steria are understood to have created so-called ‘living wills’ already, with others to follow suit.

Outsourcer Interserve's rescue plan sparks share slide

That news will do little to calm the fears of observers that a second Carillion has long been on the cards, however, in the shape of beleaguered outsourer Interserve. One of the UK's largest providers of public services, the multinational support services and construction company based in the UK previously boasted a revenue of £3.2 billion in 2015, and a workforce of more than 75,000 people worldwide – 45,000 of whom are based in Britain. In October 2017, however, the firm’s shares tanked sharply in what has proven to be a protracted crisis for the company.

Thanks to increasingly competitive markets, the cleaning-to-building group has been grappling with poor trading results and climbing costs which initially provoked a stock value slide of more than 30%. This followed the embattled firm’s suggestion that it might breach its banking covenants – as operating profit in the second half of the year was set to be around 50% lower than previously expected. In February 2018, this led to the UK Government enlisting professional services giant Deloitte to keep watch over Interserve.

Since then, the firm managed to evade further negative press for the bulk of the year, but it has now emerged that share prices have once again collapsed – this time following the revelation that Interserve is seeking a ‘rescue deal’. Details of the plan are yet to be finalised, with a concrete outline expected to be announced early next year.

With the situation currently balanced on a knife’s edge, creditors are cautious about their next steps. According to the BBC, sources close to Interserve's creditors have said that they may have to write off some of the loans to ensure the company's survival, while lenders also described talks around the company's future as "extremely fluid." However, with a figurative millstone of £500 million in debts still hanging around Interserve’s neck, the firm announced that it would issue new shares as part of a long-term recovery plan endorsed by the Government.

Rescue plan

Shareholders reacted badly to the news that the value of their stake in the company was in line to be slashed, in what Interserve terms a "material dilution for current Interserve shareholders." Interserve’s shares initially fell as low as 6.5p, and while they rallied to an extent to close at 11.5p, this represented a 53% fall. One year ago Interserve's share value stood at 100p each.

While the company’s future would seem to hang in the balance, some factors point toward certain quarters thinking Interserve is too big to fail. In line with Carillion – which received multiple new contracts from the Government even after a number of profit warnings – Interserve has been boosted by a number of lucrative engagements. Following its 80% stock slide in 2017, the firm secured a five-year facilities management deal worth £227 million with the Department for Work and Pensions. In December 2018, meanwhile, Interserve was awarded a new £25 million contract for the redevelopment of Prince Charles Hospital in Merthyr, Wales.

According to a number of media outlets, Interserve is expected to imminently announce it has secured new public service contracts on top of this. Thanks in no small part to this influx of business from the public sector, Interserve claims its prospects are improving, and it will increase profits this year. At the same time, the UK’s opposition party has insisted that no new government contracts should be awarded to the company while it is in a parlous financial position. The Labour Party's position has been criticised within the industry as being detrimental to the future of a company that employs a large number of UK staff; however, the party argues it would save money and bolster standards of provision to simply move those roles back ‘in house’, rather than risk paying outsourcers with patchy financial outlooks.

Commenting on the situation, a Cabinet Office spokesperson said, "We monitor the financial health of all of our strategic suppliers, including Interserve, and have regular discussions with the company's management. The company successfully raised new debt facilities earlier this year, and we fully support them in their long term recovery plan."

Related: Growth in UK outsourcing industry nears 20%, cloud main driver.