SSCs provide the perfect controllable environment in which to analyze and revamp business processes while a company implements the most sophisticated automation solutions available. As a result, in many companies SSCs are evolving into centers of excellence, particularly when it comes to leading edge technologies. "All the pieces are there now. The forward-thinkers are finding ways to put them together to make their SSCs more efficient and more valuable," Lindsey observes.

While better technology is bringing more visible information and more control over processes, Treasury Strategies' Lindsey contends that improved controls through automation also mean that more tasks can be moved to the SSC. One obvious example is the recent migration at a few companies of hedging and FX transaction execution, she points out.

An even larger role is coming. Revolutionary changes in technology like service-oriented architecture could extend the reach and the value of SSCs, predicts Ken Dummitt, CEO of SunGard AvantGard, based in Calabasas, Calif., as companies are better able to integrate multiple information streams and apply embedded business rules automatically to decision making.

In the meantime, however, the emphasis for SSCs has been on transactions and efforts to relieve headquarters of what ITT's Bowker describes as the "blocking and tackling" kind of work. At ITT, this leaves the lean five-person corporate treasury operation with the value-added jobs of forecasting, decision making and priority setting. Technology that allows instantaneous and simultaneous information sharing makes all this possible. "It no longer matters whether we're 50 feet or 500 miles from corporate treasury," Bowker says. And as it has turned out, being farther away is better because the SSC has been equipped to function as a disaster recovery site for corporate treasury.

Given treasury's charges in cash flow forecasting and working capital management, treasury has long been a champion of SSCs. "The more standardized and centralized the processes and the reporting can be, the better the information treasury gets for its forecasts and its strategic decisions," notes Maria Mandler, Hong Kong-based managing director and regional head of shared service centers and business development for cash management at Citigroup.

TREASURY IS SHARING, TOO

Even so, up until now treasury tasks themselves have rarely been delegated to an SSC because they don't represent high transaction volumes and, more importantly, because treasury transactions are thought to require subject knowledge that a typical SSC worker might not have. Today that's changing, Mandler asserts, with significant overlap between activities of regional treasury centers and SSCs starting to show up at large multinationals–ITT providing a case in point.

Companies moving treasury and financial operations into an SSC usually start with cash management. They then add payments, building or using third-party payment factories. The last step is usually collections, XRT's Alarcon reports.

Such transformations are not just happening at the largest companies. Bill Eddy, vice president and corporate treasurer of Atlanta-based Turner Broadcasting System Inc., boldly split his six-person treasury five years ago. Now treasury consists of just Eddy and two others, and down the hall a lot of what treasury used to do is being done better in an SSC. "We stepped back and looked at what treasury is responsible for," he recalls. "Then, we stripped away everything that is transactional in nature and put it in the shared service center–everything involved in making or receiving payments, bank account reconciliation, setting the cash position and operating the treasury workstation." The shared service center also takes care of A/P, payroll, tax compliance, statutory reporting and associated accounting activity, he adds.

As Eddy will quickly tell you, the reorganization was not about cutting costs. In fact, he concedes that the hard-dollar savings have been rather slim. "We have a strategy for leveraging resources, not necessarily cutting costs," he insists. "The shared service center is staffed with people who have transaction and accounting skills. They do the accounting and reconciliation for payroll and A/P. They're qualified to do it for treasury as well, so we put the jobs where the skills are. We're using people better–avoiding duplicate skills and processes in different units." The result is a superior process better suited for automation and indirect cost savings, he says.

One of the big payoffs comes from redirecting the activities of the core treasury staff. "The future of treasury lies in adding value," Eddy explains. "That's what we can do now that we're freed from the routine, daily stuff. We advise our business units. We open and close bank accounts. We arrange L/Cs. We offer FX advice, point out ways to reduce risk, provide intelligence on the finance and banking environment and explore ways to improve collections." In essence, treasury is acting more as an advisor and strategist, and even many of the tasks Eddy describes are likely to eventually be shifted away in favor of forecasting, strategizing and business process analysis.

Many companies first experimented with SSCs for finance operations in Europe, where the evolution of a common market and certain tax and wage incentives caused companies to use bank-operated SSCs to handle their European transaction needs. In Asia, SSCs were sometimes an answer to the problem of the dearth of local finance professionals versed in Western accounting and treasury practices. But over the last five to 10 years, larger companies in the U.S. have started to see the advantages of using shared service centers as their primary tool for centralization of transactional activities.

AKING CENTERS WORK OVERSEAS

Shared service centers also make it easier to take advantage of some of the outsourcing services banks are now offering for such things as FX management, cross-border payments and traditional cash management services, XRT's Alarcon observes.

Some SSCs evolved from call centers, which were often located in areas where wages and/or taxes were low and where required skills were abundant. However, research has shown that shared service centers owe only 10% of their benefits to location, XRT's Alarcon reports. Still, no company is likely to locate an SSC in Manhattan. eBay chose Utah. India has grown in popularity for SSCs based in Asia, partly because of the high cost of operating in Singapore and Hong Kong, he notes. Other recently popular locations include China, Eastern Europe and Australia.

Yet, even with the powerful new technology, a single global SSC for a multinational is still some time off, Citigroup's Mandler cautions. "You can standardize the processes and link the technology," she notes, "but you still need local language speakers and familiarity with local commercial practices when you get into activities like A/R collections."