What is a Shared Service Center in Mexico and how can it reduce operating costs?

Estimates are that more than 80% of the 2,000 largest companies globally have implemented this business model. Establishing a shared service center in Mexico through Intugo can also be a solution for mid-sized companies.

A Shared Service Center in Mexico is an area of people, processes, and technologies concentrated in the same place, doing the same things for different internal clients of a company that operates in several places. Shared service centers utilize standardized processes. This means that instead of having several areas of duplicate people, technology, and functions, only one is concentrated in a specific place. As a result, a shared service center in Mexico can help companies to streamline their organizations.

The Objective of a Shared Service Center in Mexico

A shared service center in Mexico enables companies to operate more efficiently, reduce costs, and improve quality and control. Additionally, such facilities help organizations maintain a high level of specialization. This is achieved by allowing companies to focus on their core business and increase their service and quality levels.

In this regard, Carlos Zegarra, Lead Partner of Management Consulting at PwC Mexico, stated in a recent interview that these models “were born mainly to manage costs adequately.” However, he added that this “is no longer the only reason” because now quality and control have also gained prominence.

Benefits for companies:

According to the 2021 Global Survey on Shared Services Centers, carried out by PwC, companies implementing these models reduce their service costs by 20 to 30% in the first years. For this result to happen, however, they need to standardize their repetitive processes. This allows for lower costs and the achievement of greater operational efficiencies.

In addition to the above, other advantages are associated with establishing a shared service center in Mexico. Among them are:

• Greater operational control.
• A better-trained staff.
• An increased focus on the core business.
• Increased efficiency and productivity.
• A better exchange of experiences and practices.
• Unification of information technology systems.
• Automated and controlled processes.
• Centralization of company operational units.

Can all organizations use them?

Carlos Zegarra emphasized that this model is not for all companies. It works most effectively for organizations “that are highly transactional” and have a sizable back office. However, it can function in medium-sized companies with significant personnel in support areas across multiple facilities.

Additionally, it must be noted that in most back office processes, some percentages can be standardized while others cannot. Whether this can be done depends on each case. For example, accounts payable is one such process.

Moreover, Carlos Zegarra highlighted that the coronavirus pandemic demonstrated the success of shared service centers. This model “generates high levels of productivity and is ready to be applied to other activities.”

How to implement a Shared Service Center in Mexico?

Figures from PwC revealed that more than 80% of the 2,000 largest companies globally have implemented some shared services scheme. Therefore, Carlos Zegarra shared three variables companies need to consider before implementing a shared service center:

Labor cost: Mexico is becoming more competitive compared to other Latin American countries. When implementing the shared service center model, companies must choose a low-cost location to achieve the most significant benefit.

Additionally, the supply of talent requires people with a certain level of preparation and a strong command of languages. In this regard, Mexico has some of the most prestigious universities in Latin America, representing an advantage for companies establishing a shared service center there.

Furthermore, technological infrastructure must be considered. Many people serve the same internal clients in different places in real-time, so an adequate connectivity scheme is needed. In this sense, companies like Intugo have made significant investments in this critical area.

fter considering the above, organizations need to define which functions will be assigned to a shared service center in Mexico and which will not. To determine this, an analysis must be carried out to ascertain available resources, processes, activities, and the company’s situation. Additionally, companies must define the objectives to be achieved.

Overall, opening a shared services center in Mexico can provide cost savings, access to a skilled workforce, and a favorable business environment. Moreover, the proximity to the US and cultural similarities make it an attractive option for companies looking to establish a presence in the region.