The Middle East consists of 17 countries and we aren’t even talking of North Africa. In this, the Gulf Cooperation Council consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. From an external perspective, several service providers make the error of perceiving these 6 countries are exactly similar – far from it and if anything, they vary considerably in terms of size of economy, maturity of business practices, availability of local talent, acceptability of technology to drive efficienicies and openness to transformation initiatives. For instance, while seeing through the prism of Ease of Doing Business, Saudi Arabia is ranked 13th (globally) whereas Oman is much lower at #65.
The Shared Services Model (SSM) has been prevalent since the mid-90s, particularly in the US and Western Europe. It later expanded to Asia – especially to India - but in the Middle East, the idea is still relatively new. To give you some context, according to an Shared Services Outsourcing Network (SSON) Study of the Middle East, a whopping 27% of the companies surveyed admitted to being in the Planning Stage only, followed by another 22% which have Shared Services Organizations (SSOs) less than 3 years old. That’s nearly 50% of the population which posits tremendous growth opportunities for the future. In the GCC nations, Saudi Arab and the Emirates (Dubai in particular) are more progressive in business practices than the rest of the pack, so the overall percentage there is more favorable. While empirical data for locally owned mid-corproates is hard to find, Practus’ view is that SSM remains a distant but desriable objective for a significant majority of CFOs in this category.
Increasingly, given slowdown in several Middle East economies, increasing number of local companies are now giving a serious consideration to the SSM. The SSON Study mentioned earlier also builds a strong case for consistent and aggressive commitment to productivity improvement – 60% of the respondents have claimed a target of 7% improvement. Practus’ own experience with SSMs has been a ~20% to ~45% cost reduction for its clients, with significantly higher savings for clients that were on relatively less mature and poorly organized processes. Middle East CFOs are beginning to look at SSMs not just for cost savings but also for drawing business insights, by layering Advanced Analytics on underlying data in the SSMs. SSMs thus provide both bird’s and a worm’s eye view of business, relieving the Corporate Head Office of a major responsibility and providing them with bandwidth for strategy-setting and governance.
Reasons why companies in Middle East adopt SSM are no different from anywhere else in the world. Middle East CFOs typically look for the these benefits from SSM:
Trends emerging from the region are that functional services in HR, IT, Procurement & Data Analytics are the ones most prominent (in this model). The other significant observation is the emergence of Centres of Excellence (CoEs) which look at optimized delivery through intelligent automation thus moving a major step forward from the traditional realm of transactional improvement.
In summary, while there are significant implementation challenges in implementing SSMs, there is a strong business case for it in several companies of a certain scale. The size of potential cost savings and more importantly the process maturity that SSM can bring in the short to medium term and the transformative impact in terms of decision making and governance that SSMs can deliver in the medium to long term, should encourage decision makers in Middle East to embrace the SSM more aggressively.