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Wednesday, May 08, 2002

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Driving a smart bargain

Chitra Phadnis

Your company's growing and so are the expenses. The `shared services' concept — centralising varied transactions under one roof — offers a cost-effective solution.

HP has one. So does Siemens. The latest announcement came from Ernst & Young. After call centres and business process outsourcing (BPO), it seems to be the turn of "shared service'' locations to move to India.

"Shared services'', a cost-cutting measure which half the Fortune 500 companies have already implemented, is essentially centralisation of processes such as financial transactions, HR, maintenance and so on, in one place. It is possible to bring down costs by as much as 30 per cent if functions are moved from the various regional offices of a global corporation to a single centre, say analysts.

And moving it offshore to India would result in a double whammy, with more cost cuts. According to HP, costs in India are one-sixth of that in the US. Siemens did not put a figure to it, but said that the differentials were very "attractive''. The company concludes that it is "better, faster and cheaper'' to do it out of India. The cost advantage, together with a good telecom and IT infrastructure which makes it possible for the shared service centre to be located anywhere in the world, makes India a highly desirable destination. Bangalore alone has at least three companies — HP, Siemens and Ernst & Young — setting up shared service centres.

Language skills win

IT has moved from its esoteric status to becoming a tool that is driving business for the country and creating employment opportunities. But this time, it's not for engineers and computer whiz kids but ordinary graduates, commerce and accounting graduates and those with language skills. HP's eGlobal Services in Bangalore is already in an expansion mode, as more countries are moving their operations to India. The 530-strong team, made up mainly of commerce and accounting graduates, does the entire transaction processing for HP companies worldwide out of Bangalore.

As the company adds European arms of HP to its list of customers, it also has started to hire French, Spanish, German and Italian graduates. "It is easier to teach language graduates accounting than commerce graduates languages,'' is the company's observation. By the end of the year, eGlobal Services plans to have 850 employees.

Ernst & Young has 80 professionals in its newly set up shared services location, with plans to increase the number to 200 by June 2002. The centre, which supports the company's US-based tax compliance practice, will work with international tax professionals throughout the world in the preparation of results for the firm's clients around the globe, according to the company.

Siemens, the typically conservative and publicity-shy German company, is taking the cautious route. In the last one year since the setting up of Siemens Shared Services Pvt Ltd (SSSPL), the company has taken up a number of pilot projects. The ramp-up is expected to start in the next few weeks and the company expects to see growth over the next one to one-and-a-half years.

Siemens is also looking at a much wider variety of functions, including accounting, HR, freight, and travel to be moved to India. The company, which outsources functions such as travel to companies in the West, is trying to get those partners to move to India. The net effect is to bring down the costs of products and services for Siemens, explains M.N. Rao, Managing Director, SSSPL.

Technology is opening up possibilities for non-IT fields.

With a rich knowledge base, who knows what other service could be sold electronically?

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