Finance & Accounting Shared Services & Outsourcing

Newsletter – 26th September

UK based firm Vertex forms JV with Delhi’s

BPO firm Shell Transource
UK based BPO company Vertex announced its joint venture with Delhi-based BPO firm
Shell Transource to tap the multi-billion dollar business opportunity in the Indian market. The
JV, which is yet to be named, is eyeing revenues worth $100 million and plans to have a
headcount of 20,000 over the next three years.
"We have inked a deal with Shell Transsource and the JV will allow us to strengthen our
presence in the domestic market here and serve the Indian companies. In fact we hope to
grow our business at the same phenomenal pace at which the Indian IT industry is growing
at and hope to earn revenues of around $100 million in the next three years from this JV,"
Vertex Group CEO Paul Sweeny said.

Proservartner Point of View: Given the growth of the economy in India (GDP of 7.4% in
2009), there is an increasing trend of India companies (TCS, Infosys, Wipro, Genpact etc)
acquiring US and Western companies, and a decreasing trend of US and Western
companies acquiring India companies due to them being too expensive. The domestic BPO
market in India is reported to reach $6 billion by 2012 (as per E&Y research), and that prize
is attractive enough to obtain the attention of the globe – expect further companies to enter
partnership models with India based companies to deliver superior growth.

Nestle set up shared services in Ukraine

Swiss firm Nestlé S.A., the world leader for foodstuffs production, announced today about
setting up the United Business Service Center in Lviv. Nestlé announced it was spending
SFr25m setting up a back office services operation in the Ukrainian city of Lviv to look after
more than 20 countries in the region, over the next 3 years. The center where approximately
350 qualified workers will work in the sphere of finances and personnel management will

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 service over 20 countries of the region, such as Russia, Poland, Romania, Hungary,
Bulgaria, etc.
The Lviv center will become the third in the world internal business service center that within
the international subdivision of Nestle Business Service (NBS) will ensure execution of
certain financial operations, in particular, payroll accounting and payment. Lviv has been
chosen based on its location, the local transport infrastructure, potential of talented workers
and availability of real estate objects.

Proservartner Point of View: The Ukrainian centre is one of a series of investments Nestlé
has made in Eastern Europe in recent years, and the development of a shared service centre
in the region will certainly receive attention for those looking at Eastern Europe as a host for
a shared services centre.
It was stated by Nestle that Lviv has been chosen based on its location, the local transport
infrastructure, potential of talented workers and availability of real estate objects. However, it
is also important to add the cost advantages of the Ukraine against other Eastern European
cities, and the language capability that exists in the region. With the right level of government
support, Ukraine could fast compete with Poland, Czech, Slovakia, Romania and Hungary as
a BPO and Shared Services destination of choice in Eastern Europe!

US stops BPO training in Lanka

The US Agency for International Development (USAID) that provides humanitarian and
economic aid worldwide has suspended the training of 3,000 youth from war-ravaged
northern Lankan districts in outsourcing skills, to ensure that the new jobs created in Sri
Lanka will not take away employment opportunities from Americans.
“The programme has been suspended and is being reviewed,” stated Glen Davis, US
embassy spokesperson in Columbo. Although Davis did not say why the programme was
suspended, US Republican Tim Bishop, announced that “it had suspended a job skills
development project in Sri Lanka while we conduct a review to ensure the project will not
take any jobs away from Americans.”

Proservartner Point of View: The announcement comes within days of the US state of Ohio
imposing a ban on offshore outsourcing, and illustrates an increasingly growing discontent in

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 the US of jobs moving offshore. The discontent has been well documented, but under the
current administration there is more focus than ever before on keeping jobs in the US.
What does this mean for the world of shared services and outsourcing? Well, it is becoming
clear that protectionist policies will lead to an increasing amount of onshore outsourcing and
shared services rather than offshoring across global locations, and this is likely to span the
US and Western Europe. Providers are already adjusting to this trend by acquiring capability
onshore to compliment their existing offshore delivery centres, and this move will put
pressure on high levels of efficiency and automation that lead to elimination of activities
(rather than mere transfer of activity) to deliver cost and service improvement.

Final Thought: Shared Services in Ireland

According to recent research released by the Ireland Development Agency (IDA) there are
currently 140 shared service centres (providing technical support, finance and accounting,
human resources and payroll functions) that exist in the country, and employing 35,000 staff.
The Chief Executive of IDA in Ireland (Barry O’Leary) stated that the sophistication of the
centres had increased significantly in the last 20 years.
Shared Services is a mature initiative in Ireland, with a number of multinational organisations
migrating to Ireland from the mid 90s onward. With its maturity, and given that much of the
shared services have already performed the transactional activities in the relevant function, it
is natural that over time organisations have the comfort to transfer more value add activities
to the shared service centre, with the transactional activities migrating offshore. This
continues as a trend in Ireland.
However, let’s be honest, what will continue to make Ireland attractive to new entrants and
existing entrants are the European tax advantages of locating in the country – this represents
one of the most (if not the most) attractive company taxation conditions in Europe and the tax
savings from being headquartered in Ireland offset the lost opportunity of migrating work to
lower cost locations!

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