SHARED SERVICES MARKET ANALYSIS

Market Challenges And Opportunities

Global Shared Services Market- Restraint

• Challenges regarding data security and threat of leakage of sensitive data: Shared service providers handle an organization's sensitive and private information, including complex data. They have strict rules and controls in place to limit access to this confidential data, ensuring only authorized personnel can view and manage it within the shared service system. However, despite these precautions, the confidential information is always at risk of being targeted by cybercriminals who attempt to carry out cyber-attacks to steal or compromise the data. Protecting such sensitive and personal data of the clients becomes increasingly important to drive the demand for the use of shared services among the companies. For instance, in October 2022, SBI (State Bank of India), an India based multinational public sector bank, reported that the data of 9 million card users of the bank was leaked due to unauthorized access. The financial data of the users is highly sensitive and leakage of this data might cause the users to refrain from availing the services from the organizations. This threat of data security might lead to the contraction of global shared services market during the forecast period.
• Emergence of alternative technologies like artificial intelligence (AI) and machine learning (ML): The primary objective of adopting shared services in an organization is to make the optimum utilisation of available resources to reduce overall cost and increase efficiency of different functional units within an organization. Technologies like AI and ML can prove to be an alternative for shared services. AI and ML backed programs can develop smart systems that automate various administrative activities and lead to significant cost reduction for the organizations. The adoption of such AI programs can improve the efficiency of businesses by up to 40% and lead to reduction in operational cost up to 30%. For instance, in July 2023, AT&T, a U.S. based multinational telecommunications company, announced that it would invest additional US$ 2,000 million to develop AI programs to transform various processes within the organization with a view to achieve the target of cost reduction up to US$ 8,000 million. If this trend continues the demand for shared services would decrease significantly as the organizations would be inclined to adopt AI alternatives instead leading to the contraction of the global shared services market during the forecast period.

Global Shared Services Market- Opportunity

Growing demand for shared services in the developing economies: Developing economies are experiencing rapid economic growth, industrialization, and technological advancements, creating a favorable environment for businesses and organizations to expand their operations. Several factors contribute to the increasing demand for shared services in these regions, making it an attractive opportunity for service providers. Developing economies often offer a cost-effective business environment, including lower labor costs and operational expenses. Shared services allow organizations to leverage these cost advantages by centralizing and streamlining their back-office operations, resulting in cost savings and improved operational efficiency. Many developing economies have a large and diverse pool of skilled professionals with expertise in various fields. Shared service centers can tap into this talent pool, providing access to a wide range of skills and capabilities at competitive rates. For instance, on June 30, 2023, EagleBurgmann, a German based sustainable solutions provider, announced the inauguration of a new shared service center in Chennai, India. The new shared service center would provide standardized transactional processes across the companies of EagleBurgmann Group situated in the western hemisphere.