U.S. companies with overseas operations established regional SSCs across the Atlantic Ocean, convinced of their benefits.

But SSCs have changed dramatically during the past decade. While in the mid-1990s companies mostly focused on a financial SSC, these days more functions are being combined. A recent IBM study indicated that, next to finance, today’s European SSCs also provide IT services (in 23 percent of the cases), human resource services (21 percent), customer support (17 percent) and logistics services (7 percent).

Companies, for example, are combining the accounts receivable department with customer support to eliminate delays in responding to billing questions.

Rockwell Automation placed its SSC close to its logistics hub near Rotterdam, the Netherlands, to create synergies by leveraging logistics activities and relationships it had developed with customs authorities.

And as companies have experimented with the concept, they have found new ways to squeeze value from their SSCs.

So attention has shifted to finding the right tools to enable companies to swiftly and securely implement new SSCs.

Project managers are looking for best practices, proven concepts and business cases to guide them.

Many issues have to be addressed — the scope of the SSC, the possibility of outsourcing all or part of the functions, and, of course, the choice of location.

Consider the Critical Factors

In today's global economy, the SSC site selection process is not easy, and few, if any, companies take that decision lightly. This is illustrated by the fact that Eastman Chemical Co. in Rotterdam, one of the first companies to establish an SSC in Europe, has hosted more than 50 visits from other companies wanting to learn more about its success.

The most important factors to consider in an SSC strategy include costs, and the quality and experience of the local labor force, particularly in terms of their business and service skills.

These skills are vital to establishing a successful SSC operation.

Next to locations such as Ireland, the UK and the Netherlands, other European countries have come forward with interesting value propositions, including Spain and Hungary.

And SSC project managers presenting their business cases to their company’s boards of directors will most likely include countries such as India and the Philippines in the analysis.

Countries like Hungary and India have developed the required skill sets and infrastructure at an impressive speed.

For many U.S. companies, these countries offer the optimal solution for their shared services operation.

New locations offer interesting propositions and currently have lower labor costs, but this may not be an option for everyone.

Sometimes, choosing a location where other SSC operations already exist may be more important for a successful implementation.

Having an experienced labor pool that has already dealt with a startup environment provides vital experience that can make an SSC implementation go smoothly.

The advantage of SSCs is undeniable. Implemented correctly in the right location, they will pay dividends for years to come.

Tjeerd Monasch and Patrick Slavenburg are area directors in New York and San Mateo, Calif., respectively, for the Netherlands Foreign Investment Agency.