The other verticals covered include transportation and logistics (U.S. $113 billion), energy (U.S. $84 billion), fast-moving consumer goods (FMCG - U.S. $59 billion), and media and entertainment (U.S. $39 billion). The key drivers for SSO continue to be cost benefits through
standardization, leveraging benefits of scale and cost arbitrage. The study also observes that SSO operations, which is an integral part of business architecture, needs to adapt to vertical specialization models for businesses to achieve higher productivity and profitability.
Verticals such as transportation and logistics, energy, FMCG, and media and entertainment, for example, have developed effective SSO operating models for non-core functions such as IT services, finance and accounting, HR services, procurement, customer support and call centers. Sectors like healthcare, today, even outsource core research and development (R&D)
functions, and this is likely to continue for a few years as healthcare companies try to find new drugs and reduce operating costs. Telecom companies in countries like India have outsourced network management, a function considered core for telecom operators.
While the captive model and the third party models have become dominant, increasing instances of hybrid models involving equity participation, joint ventures and project funding, are noted to be on the rise. Nitin Bhat, Asia-Pacific vice president for the ICT Practice at Frost & Sullivan, says, "SSO is no longer just about cost arbitrage; instead SSO operations are adding value by making available access to skill sets and competencies wherever they are located. Service providers are gaining domain specific capabilities to move-up the value chain and compete effectively in the marketplace. This trend is expected to boost further consequence to decreasing cost arbitrage, increased competition, and the relentless search for value."
The global SSO study reveals that India remains the top destination for SSO operations across these seven verticals, followed by China, Ireland, Singapore, Malaysia, Mexico, Czech Republic, Poland, the Philippines and Canada. Emerging destinations for specialized functions are also developing, such as Russia for high-end software development, and Dubai for BFSI services.
A stable country coupled with excellent infrastructure and low attrition rates, Malaysia makes for an ideal SSO hub that is still not leveraged by many. A strong player in the BFSI, transportation and logistics, and energy verticals, Malaysia is also developing into a hub for technology companies with recent SSO investments by the likes of Dell, Satyam and IBM.
The Philippines, which is another preferred location for SSO activity, specializes in back-office operations for IT and IT services. The country is home to over 60 BPO service providers with an estimated 22,500 full-time employees involved in back-office services, raking-in revenues of U.S. $180 million in 2005 from this segment alone. Several notable SSO centers in the Philippines include HSBC's BPO delivery center, Citigroup's Shared Services Center (SSC), Dell's SSC, Safeway's SSC and Global eXchange SSC. Several companies like IBM and Sykes have moved their SSO operations out of India to the Philippines.
