The Hackett Group: Shared offshoring can save billions

23 December 2011 2 min. read

Europe's top 500 companies could potentially generate up to €14.4 billion in annual savings by increasing their offshoring of their financial function. When opportunities in other key back office areas such as IT, HR, and Procurement are taken into account, the potential savings can total €48.0 billion annually, concludes the research "Globalization: The New Horizon for European Finance Shared Services" by The Hackett Group.

Majority has a finance SSOs

The benchmark reveals that nearly three quarters of all European companies have established finance SSOs, and most are generating significant benefits as a result. Eighty four percent of all European companies using finance SSOs saw cost savings of over 10%, and just over half experienced savings of over 20%. Most have also been able to generate improvements of between 10% and 40% in quality, productivity, and customer service as a result of their SSO efforts, according to Hackett.

The Hackett Group - Shared offshoring

Multi-country finance SSOs

European companies are beginning the process of globalization, with Hackett's research showing that 78% of all finance SSOs are now regional or global, supporting multiple countries. Two years ago, 60% of all finance SSOs were national, serving one country only. But most European companies still locate their SSOs in their headquarters country, even if they are based in Western Europe, where labour is expensive. So most European companies are still ignoring the labor arbitrage opportunities available through finance SSOs.

Trend: increase in offshore finance SSOs

While 7% of all European companies' finance SSOs are today offshore, nearly 40% of all study participants said they are investigating offshore options, evaluating which processes and activities to take offshore, and/or considering countries to base their SSOs. These European findings mirror those of Hackett's U.S. research, which found that the use of offshore SSOs by U.S. companies is expected to nearly double by 2009, from 7% today to approximately 13%. The rapid growth in offshoring is part of the larger challenge of selecting sourcing options that deliver service excellence to business units at the lowest possible price.