Shared, Services, Location, Marc, Neirinck

Location and renewal: in conversation with Andersen's Marc Neirinckx

01 Sep 2003 | (Interview)

Marc Neirinckx is a Senior Manager in the Business Location Services group of Andersen. Based in Brussels, Belgium, he specializes in location advice for Europe, the Middle East, India and Africa. In this capacity, he consults regularly with multinational companies on strategies to enhance competitive advantage by optimizing the location of their investments in this area.

sharedxpertise.org: Many organizations say that they prefer a “greenfield” shared services operation where they can introduce a new culture and make a fresh start. What is the Andersen experience and perspective on the renewal of operations and locations?

Marc Neirinckx: We’re seeing both “greenfield” and “brownfield” approaches. We’ve dealt with companies where maintaining some level of internal knowledge was an issue, while others realized that their existing workforce would not allow them to reach the service levels that they envisioned. It also depends on the functions that are being considered. For some companies, proximity to their regional headquarters and/or their Enterprise Resource Planning (ERP) application team was important. In other cases, companies had strong views about not locating their shared services centre next to, for example, one of their regional headquarters, because of fears that these headquarters would use the capabilities of the centre for non-related functions. Generally speaking, although there might be a preference to build a “greenfield” operation, so far many companies have actually opted for a “brownfield” location.

“Some companies have strong views about not locating their shared services centre next to, for example, one of their regional headquarters, because of fears that these headquarters would use the capabilities of the centre for non-related functions”.

sharedxpertise.org: When organizations implement shared services, cost reduction is a primary driver. How important are local government initiatives like the creation of favourable infrastructures and tax incentives when organizations decide to locate their shared services centres?

Marc Neirinckx: I would say that Human Resources are by far the most important factor. When we speak about the drivers of a shared services initiative, service levels and a platform for future growth and change are critical drivers (beyond cost reduction). Government incentives are usually perceived as secondary considerations by companies once they have established the exact Human Resource and other operating requirements for their shared services centre.

sharedxpertise.org: Selecting the right location in Europe for a shared services centre is proving to be increasingly challenging for organizations, despite the variety of suitable sites available. Some commentators say that many of the most interesting locations, like Dublin for example, have been over-exploited. What are the new European locations that we should be looking at?

Marc Neirinckx: It depends primarily on the number of employees that will ultimately work in the shared services centre, as well as the language requirements. For companies with large headcount requirements (several hundred employees), the number of possible locations in Europe is momentarily decreasing quite rapidly. Traditional locations like Dublin and Amsterdam are indeed gradually overheating.

The locations that would be interesting to look at are the Northwest region of the UK and the North and Southeast of the Netherlands. In Belgium, we’re also starting to see interest in centres located in Wallonia, close to the German border. In France, the Northwest and Northeast regions are becoming popular locations as well. In the Iberian Peninsula, beyond Lisbon (which has some of the lowest operating costs in Western Europe for shared services centres), Barcelona and Madrid are also attractive locations.

Companies are inclined to locate shared services centres where they can enjoy a stable environment for recruiting and retaining employees, while maintaining a reasonable work structure. Another factor is that they have to be well placed in order to respond to increasing requirements in terms of employee skill levels.

sharedxpertise.org: The hunt for new shared services locations outside Europe is also fierce and competitive. What are the locations that you are advising clients to look at now, and what would you say are the hot spots outside Europe?

Marc Neirinckx: In Central Europe, we’re advising clients to go primarily to Warsaw, Budapest and Prague but this also depends upon the specifications of the shared services centre in terms of functions supported and number of employees. These are interesting locations because of a combination of several factors. In addition to significantly lower labour costs compared to Western European locations, you can have a dynamic, young labour pool that is enthusiastic to work in new Western-type organizations, while pursuing studies at the same time.

sharedxpertise.org: Renewing your shared services operation by moving to a global/regional structure is increasingly appealing to many companies. How difficult do you think this will turn out to be in practice?

Marc Neirinckx: The pressure to reduce back office costs even further will probably favour very low-cost countries like India or the Philippines. In the future, as shared services centres gradually strive for excellence in process execution, the cost required to reach top performance levels might
become too high in Western European locations. This is one of the reasons why Hewlett Packard, for example, decided to locate their global shared services centre in Bangalore, India.

Some companies have learned to develop shared services centres so well that they are considering taking their expertise and using it in other arenas. We are also seeing increasing mobility in shared services centres deployment;
especially for those companies considering the development of a global shared services centre.

Shifting work from one region to another and providing support services on a 24-hour basis will represent new challenges, especially as we experience the emergence of global shared services centres. We also see the achievement
of top performance levels as a challenge that will require on-going substantial efforts, as well as investment in people.

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