Choosing a site for a shared service center - Part 1

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Once the decision to move to a shared service model is made, one of the early challenges is finding the right location.  Since there are a number of factors that go into it, I'll be covering this decision in multiple posts.

In this post, I'd like to address a very fundamental choice.  Will your company locate a shared service center (SSC) in a location where you already do business, or will you choose a completely new location?  Choosing an existing location is considered a brownfield while a new location is considered a greenfield.

There are a number of good reasons to choose an existing location, and in fact this is the most common choice for companies.  Why is it so popular?

  1. Ability to leverage existing facilities.  Companies can lower the capital cost of setting up an SSC if there is room in an existing building.  It can also facilitate a faster transition if facilities don't need to be located or built.
  2. Ability to leverage an existing location.  Even if an existing building doesn't have available space, it could still make sense to build a facility on an existing site.  The company already operates in that state/province/country and is knowledgeable about all the rules and regulations.  And it may still be possible to leverage other existing infrastructure, such as a parking lot or a cafeteria.
  3. Leverage existing management oversight.  The site manager can oversee construction and development of the center until permanent management can be put in place.  They can also help negotiate the permitting and licensing process for that location.
  4. Leverage an existing operation that demonstrates best-in-class metrics.  It is entirely reasonable to perform a benchmark study to determine how multiple sites compare to each other and to external benchmarks.  Say your company has multiple accounts payable locations due to acquisitions.  It would be prudent to compare each site to best-in-class metrics and to each other.  If one site has the management and processes in place to perform at a high level, it may make sense to consolidate all operations into that center.
  5. Maintain a competitive cost structure.  If an existing facility is in a relatively low cost state/province/country, it may make sense to build on an existing facility.
  6. Leverage available labor pool.  An existing facility may already be situated in an area with a large labor pool with the process skills required to set up the center.
  7. Leverage available language skills.  All of the required language skills may be available in an existing location.
  8. Minimize time to completion.  Using an existing facility or location will minimize the time required to get up and running, and to begin achieving a return on your investment.
  9. Maximize your tax advantage.  Your company may already have an existing facility in a very favorable tax environment.
  10. Maximize contributions from state/province/country governments.  Similar to tax benefits, an existing location may have a government that is very eager to provide economic incentives such as road and other infrastructure build-out.

These are some of the big reasons why many companies choose a brownfield location for a new shared service center.  In my next post I'll discuss why it sometimes makes sense to choose an entirely new, greenfield location.