I have been asked often in the recent times from clients and prospects, what would be the best way to deliver HR services through a shared service centre model, either internally or externally. Would it be an offshoring or an in-region delivery model?

Let’s start with the primary ‘customers’ of an HR service centre, the employee. The valid expectation of an employee of any given company would be that if the company is changing from a personal, face-to-face HR support model to a service centre model, the service centre support would be in the language of the employee. Also the service should be provided by service centre specialists, who knows the local HR environment, incl. the company specifics. Given the complexity of the country rules and regulations in the 100+ EMEA countries with hundreds of different languages and a variety of cultures, it is hard to believe that you will find a significant number of HR experienced talents with the needed language and cultural skills, outside the EMEA region. This is the main reason why a regional service delivery model suppose to be the most promising way for a successful HR service centre deployment.

But what should this regional model look like?

From my perspective, a combination of three components is a key for an HR service centre delivery, especially in the Europe, Middle-East and Africa (EMEA) region:

1. Regional service centres to support the regional workforce
2. In-country expertise for certain areas and required depth of knowledge as a virtual extension to the service centre
3. Offshore centres in a low cost area for heavily transaction oriented work, e.g., mass updates

The regional service centres should be establish to obtain some cost savings through economies of scale and lower cost of labour in certain EMEA areas. The service centre should focused primarily to deliver inquiry support with a high level of first touch resolution. So first you should allocate one or more locations which would give you the best balance of talent availability and labour costs. This could be Budapest, the Ukraine, Prague or other Eastern European countries. But also areas like the triangle between Germany, Switzerland and France, the locations close to the Belgium/Netherlands border or parts of Spain should be considered. Even if labour cost might be higher, the talent pool for experienced HR specialists with language capabilities might be better. Also the inflation in the Eastern European countries is higher than in the Western European countries and the market experts are predicting that the cost of labour in the Eastern European countries, e.g., Czech Republic, will hit the average cost in the Western European market in the next years.

For certain expertise (e.g., payroll) and language capabilities (e.g., Finish, Dutch or Flemish) as well as legal requirements (e.g., Russia) or cultural reasons, there even would be no other place for a good talent pool, except in the country for which the service needs to be delivered. For those countries the model should contain in-country support from people who are living and working in the country and act as an extension of the service centre. Especially for the real process experts, it is very likely to find those specialists only in the countries.

For a very limited number of highly transactional oriented work, like mass updates or report generation, it might make sense to utilize an offshore centre. But be careful that a low labour cost area of today, might not be that inexpensive in the near future anymore. There have been some articles in the press that, even in India, based on the inflation labour cost will raise to the average of US labour costs in the next years.

I think a good, ‘balanced’ model would be to deliver 60-70% of the work out of regional shared service centres, 20-30% through in-country experts and roughly 10%, using offshore capabilities.