You come across the term Shared Services Center (SSC) or Business Services Center (BSC) ever more often now. Large multi-unit enterprises have been setting up centers for shared services since the mid-1980s, first in the United States, and then increasingly around the globe since the early 1990s.
Hungary is one of the most popular shared services hubs for multinational firms and other organizations in Europe, with more than 100 SSCs employing moe than 40,000 people. Budapest remains by far the most popular location, but SSCs are also popping up in cities such as Debrecen, Miskolc, Szeged, Veszprém and Székesfehérvár.
So what do SSCs actually do? In a large multi-unit enterprise, specialized services are consolidated into a single unit, which then supplies the services to the organization’s other business units, based on Service Level Agreements (SLA) and charged to the receiving business units based on some system of transfer pricing.
There are several advantages to centralizing services into SSCs, with the two key benefits being cost reduction, which comes from labor arbitrage and resource consolidation, and an increase in efficiency, which comes from the standardization, reengineering and automation of processes and systems.
SSCs in Hungary have undergone a major transformation and become increasing sophisticated over the last decade. Once the service delivery model has been successfully established, companies often continue to centralize more operational activities, and in the process move away from basic roles towards enhanced services and high value activities such as reporting, modelling and even technological innovation.
The sector provides excellent career opportunities for young graduates speaking multiple languages. Compensation packages and prospects for career development and mobility are among the most attractive in the country. Big brand SSCs are attractive and stable workplaces with clear hierarchical structures, multicultural teams, flexible working hours, team-building activities, sports events and cool offices. They are not everyone’s cup of tea though, with often process-based jobs, technology-based administration and an obsession with KPIs. Attrition rates hover around 30%.
SSCs have been a great success story for Hungary overall, turning Budapest into one of Europe’s fastest rising financial services and technology hubs. Research shows that this trend can continue for years to come, generating hundreds if not thousands of new jobs every year.
That said, this trend could easily be stopped in its tracks by a very tight Hungarian labor market and a growing shortage of competitive local talent. At CEU, we have been working closely with SSCs to attract and train both Hungarian and international students in finance, data analytics, technology skills and other areas, thereby contributing to deepening of the talent pool. We have also been helping SSCs draw attention to their Budapest operations through our global university network. As a university, we have a great responsibility to create attractive career options for our students and alumni. We can only succeed if we work with key employers and constantly innovate to make sure that we deliver skills that are actually needed – and not just now, but ten years from now and beyond.
The most common fields in SSCs are the following:
• Customer service
• Data management
• Business administration and support
This column is part of a series of opinion pieces from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the BBJ.