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While outsourcing might still be a step too far companies in the Gulf Cooperation Council (GCC) countries, many are exploring the potential of establishing internal shared service centres for operations across the region.
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Internal shared services, rather than outsourced ones, deliver the happy medium for these companies, which have not outsourced like their counterparts in the west.
These shared services will include centres for finance, human resources (HR) and IT.
The favoured approach in the GCC, which comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, is likely to entail setting up a centre focused on a particular service within an existing operation, closing the equivalent in the other companies of the same group. This is seen as a better option than outsourcing the new delivery centres completely.
“Local companies in the region are thinking how they can consolidate internally,” said John Kilmartin, head of ICT at the Bahrain Economic Development Board.
He said traditionally large multinationals, including big IT suppliers such as Microsoft and Oracle, have had operations in different GCC countries that have shared services through a single regional captive centre.
But he said local companies in the GCC region are now looking at sharing services across their operations. “These local family conglomerates don’t traditionally outsource but are starting to consider consolidation.”
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A company that has multiple operations in the region will consolidate services such as finance to just one of the operations, which will then provide services to other companies in the group.
GCC companies are probably a decade behind western organisations in terms of outsourcing and shared services. “They have done a lot of it themselves and have not taken the next step to outsource,” said Kilmartin.
The advantages of having single operations to deliver group services include savings on software licensing, opportunities to improve service levels and efficiencies through the introduction of robotics and automation. “There will inevitably be some headcount reduction, but this is generally not their aim,” he said.