UAE businesses need to be giving ‘shared services’ some serious thought
UAE entities could free up costs by opening themselves to shared IT or BPO services
Due to its strategic location and business-friendly environment, the UAE has long been a hub for trade and commerce, as envisioned by the Founding Father, Sheikh Zayed Bin Sultan Al Nahyan.
Efforts to further cement the UAE as a business hub were intensified under the late Sheikh Khalifa bin Zayed Al Nahyan. Today, the UAE is at an inflection point as it undertakes economic diversification efforts. To achieve this, the country is capitalizing on future growth prospects based on advanced technologies in vital sectors such as space, agriculture, medicine, and engineering.
The ‘shared services’ sector can play a role in helping to achieve this goal by optimizing costs, improving efficiency, and enabling innovation. Shared services are essentially centralized support functions used by multiple business units or organizations within a company or industry. They can include finance and accounting, human resources, IT, procurement, and other back-office functions. By pooling resources and expertise, shared services can provide economies of scale and improve the quality.
The shared services market is dominated by two sub-industries - IT and business process outsourcing (BPO). IT includes cloud computing, web hosting, cybersecurity, and data backups, while BPO functions include payroll, HR services, marketing, customer service, finance, and logistics.
Sector-wise, financial services represents 36 per cent of shared services spend, followed by the public sector and other government entities at 16 per cent. By function, IT and customer support make up 62 per cent and 21 per cent of spend respectively, representing 83 per cent of the total market spend.
The implementation of shared services can add value to economic diversification efforts in several ways.
• Firstly, shared services helps reduce the costs of doing business. By optimizing costs, businesses automatically appear more attractive to investors.
• Secondly, shared services improve business operations. By centralizing support functions and standardizing processes, a localized shared services sector can eliminate inefficiencies and improve service quality.
• Thirdly, shared services enable growth and innovation by allowing businesses to focus on their core competencies. This provides the flexibility needed to respond to changing market conditions and emerging opportunities. This is especially important for industries undergoing significant disruption, such as technology and healthcare.
Additionally, by enabling a high-quality, cost-effective business environment, shared services help make the UAE more attractive to multinationals and skilled professionals. This creates a cycle of investment, innovation, and economic growth.
The UAE’s time zone in relation to European countries, plus easy visa processing and tax-free policies, also make it a prime destination for shared services.
Finally, shared services can support Emiratization efforts. There is a disconnect in the job market where organizations seek foreign expertise to meet short-term work requirements. Alongside this, the country has a growing list of new graduates.
A chance to upskill
Shared services can allow UAE Nationals to upskill, thus providing them with broad opportunities. Their proximity to the companies that need these services is another added advantage.
There are challenges and risks associated with shared services. These can include issues related to culture, language, and regulatory compliance, alongside concerns about data security and privacy. However, these challenges can be addressed through careful planning, effective communication, and robust governance structures.
With economic growth expected to be less than last year, the need to develop knowledge-based sectors of the economy is more critical than ever before. Key shared services pillars that can support building a knowledge-based economy are cloud computing and AI.
The public’s adoption of cloud technology is expected to add $181 billion in economic value to the UAE over the next decade. That is equal to 2.5 per cent of the economy. A near 1 per cent increase in cloud adoption by UAE-based organisations will result in a 0.21 per cent - or $854.7 million - average addition to GDP growth.
AI in the financial sector alone is expected to inject AED 103 billion into the UAE’s economy by 2035. As evidenced, shared services are an important tool for supporting economic diversification.
More businesses and policymakers will seek to realize the potential benefits of this model as they navigate an increasingly complex and competitive global economy.