Shared Service Centres in Scotland

Shared Service Centres in Scotland A Presentation by Scottish Development International January 2011

Contents Shared Services in Scotland 4 Introduction 4 Crtical Mass 5 Case Studies 6 Qualified and Talented Workforce 8 Demographics 8 Scottish Workforce 8 Education in Scotland 9 Salary Rates 10 Language Research 11 Skills Availability 13 Incentives 14 Scotland s Competitive Advantage 15 2

Scotland...... the preferred location for shared service centres

Shared Services in Scotland Introduction Scotland s dynamic business environment is the ideal shared service centre location, demonstrated by the number of corporations who have already taken advantage of our innovative and highly educated workforce and wealth of expertise in this field. Scotland s shared service centres have delivered continuous cost benefits, increased service levels and allow companies to compete globally in terms of finance and quality. These centres combine administrative, communication and financial expertise to create nerve centres for organisations whose operations span not just the rest of the UK, but Europe and worldwide. Global companies such as: Shell Finance Operations (Scotland) Ltd, Eaton, Nacco, Iron Mountain and IBM are among some of the companies which have chosen to locate their Shared Service Centres in Scotland. Global and Pan European SSC s are ideally suited to Scotland s wealth of finance, IT and multilingual capability Key Facts Financial services is a major employer in Scotland, employing nearly 96,000 people directly and over 70,000 in support companies. More generally, financial and business services accounted for just under 359,000 employee jobs, or 15% of all employment in Scotland in 2008 Proven track record in pan-european Shared Service Centres with first market entry by Eaton Corporation in 1997 Diversity of markets serviced - main European Countries, Central and South America and Asia Pacific Shared Service Centres cover an extensive range of activities covering front and back office including: accounts payable; accounts receivable; general ledger; cash management; credit control; payroll, customer service and HR Ideal location for access to the European market Over 190,000 foreign nationals living in Scotland In 2007-08 there were more than 270,000 students in higher education institutions and further education colleges, one of the UK s highest student concentrations Business Administration and languages accounts for over 18,700 graduates annually Over 26,000 qualified and part qualified accountants in Scotland Scotland s Competitive Advantage Return on Investment without a reduction in Quality Low risk option Internationally recognised as a shared services centre location Critical mass and expertise World Class reference sites One of the lowest tax rates in the European Union Cost competitive, high quality staff & property Proven model of language recruitment Excellent Quality of life Ideal platform to serve European & US markets 4

Critical Mass Below is a cross section of our Shared Service community demonstrating the breadth of companies operating within Scotland. GLASGOW Cigna (Insurance/Healthcare) Shell Finance Operations (Scotland) Ltd (Finance) Eaton Corporation (Finance & IT) BAA (Finance & HR) National Australia Group (IT Support) Morgan Stanley (Institutional Securities) JP Morgan (IT Support & Development) Tennent Caledonian Breweries (Finance) GREENOCK IBM (Multilingual Customer Service, Technical Support) Cigna (Insurance/Healthcare) British Polythene Industries plc (Finance) PAISLEY British Red Cross (Finance) Greenock M8 Irvine Prestwick Ayr STIRLING HSBC (Operations Support) M73 Glasgow Paisley Hillington Hamilton Kilmarnock East Kilbride M80 Cumbernauld M74 Stirling Newhouse Falkirk M8 PERTH AVIVA (Finance) M9 M90 Dunfermline Perth Glenrothes Livingston Dundee Edinburgh DUNDEE AVIVA (Finance) BNP Paribas (Finance) DWP (Finance) St. Andrews DUNFERMLINE Nationwide Building Society (HR/Finance/Support Services) EDINBURGH Diageo (HR) RBS (Finance) Standard Life (Finance) Tesco Bank (IT Support/Finance/HR) BSkyB (Customer Support/Technical Support/Telesales Engineering) Sykes (Multilingual pan European Customer Support/Technical Support) BRAEHEAD, HILLINGTON Ceridian (HR/Finance) NEWHOUSE NCR (Multilingual Technical Support Centre) LIVINGSTON BSkyB (Customer Support/Technical Support/Telesales Engineering) Heineken (Finance) Iron Mountain (Finance) 5

Case Studies Ceridian Corporation US owned Ceridian Corporation was formed in 1992 and is engaged in the provision of information services, principally in the human resources, transportation and retail markets. The Group employs over 9,400 people in three divisions and 7,750 people are employed in its Human Resource Solutions division, primarily in the USA, Canada and the UK. Ceridian currently employs around 280 people at its Scottish facility in Hillington Park, Renfrewshire where it provides outsourced human resource business process services including payroll processing, benefits administration, advisory services and other HR related activities. On 1st April 2010 Ceridian announced plans to create a further 200 high quality jobs in Scotland. The expansion includes relocating from its current base at Hillington to new purpose built accommodation at Braehead, where all staff will be based when the new facility opens in 2011. The Scottish operation provides a range of HR services to clients including Asda, Lloyds Banking Group, RBS and AXA. The new jobs will be in areas including HR administration, payroll processing, employee assistance programme support, finance and expense management. The new jobs will bring total employment up to 590 by 2014. We are delighted with the progress of our Scottish operation over the last three years, which is now our largest UK centre of excellence. The success has been such that we now plan to expand from this excellent base, and in response to customer and market demand, grow our presence still further. 6 We are finding that our business solutions are compelling in that they are adding real value to our client companies, and therefore we anticipate further growth over the next few years. The naturally strong customer service ethic together with the drive and passion displayed by our colleagues based in Glasgow, has helped drive this positive prospect and makes it an obvious choice to invest further in the West of Scotland with the support of SDI and Scottish Enterprise. Doug Sawers, Managing Director, Ceridian, UK Tesco Bank Tesco is Scotland s largest private sector employer, employing over 26,000 staff across a number of operations including retail, banking, distribution, corporate and customer service functions. In addition to Tesco s 134 stores in Scotland and its customer support centre in Dundee, Tesco established Tesco Bank in June 2009. Tesco Bank is set to employ over 1,800 people in Scotland by 2012, in areas such as IT, finance, marketing, HR and customer service to support the roll out of the companies financial products; all of which are managed from its head office in Edinburgh. Making the decision to locate the company s HQ in Edinburgh, Tesco has made an important step by committing to expanding its Financial Services business from Scotland. Edinburgh is the ideal place from which to move what is already a successful business into the next stage of its development. Benny Higgins Chief Executive of Tesco Bank Eaton Corporation Eaton s Shared Service Centre in Glasgow servesall of the company s European operations. Eaton manufactures a large range of highly engineered products, from fluid power systems to engine management systems, employing some 55,000 people, with sales in 73 countries. The Glasgow shared service centre provides financial, IT and administration support to 43 operations throughout Europe and Asia Pacific. The centre was opened in 1997, just eight months after the decision to locate to Glasgow. Last year Eaton celebrated 10 years of success in Glasgow. It now houses approximately 110 staff, predominantly in roles combining financial and language skills. Languages used include Czechoslovakian, Polish and Romanian - not to mention French, German, Dutch, Spanish and Italian. Jim Ward, Finance Director, Eaton Shared Services Centre commented: Ten years ago we selected Glasgow because of its growing reputation as a financial services centre with a skilled and multilingual workforce, plus the quality of life available to employees in the area. We are delighted with the quality and calibre of staff. The work ethic in the office is second-to-none. The Scots are hard workers and they take a passionate pride in all they do. The local people are strongly service-orientated and are very anxious to provide a quality service to our manufacturing plants. Glasgow has exceeded our expectations. One of the advantages of a shared service centre is that we are able to use technology to greater effect. The city s abundance of talented IT professionals has enabled us to recruit twice the number of IT staff than we had originally planned. We are committed to the concept of shared service in Scotland and our business results confirm we have chosen well.

Shell Finance Operation (Scotland) Ltd Shell Finance Operations, formerly TASCO, established its shared service centre in Glasgow in 1998. The company s staff grew to 300 in the first few years of locating to Glasgow and currently employs nearly 500 people with the announcement in August last year of a further expansion with the creation of 150 new accountancy jobs. The centre covers 12 European countries handling finance and accounting for Shell s European companies. 15% of the workforce is multi-lingual in languages such as French, German, Spanish, Italian, Nowegian, Swedish and Finnish. For over 40 years we have invested billions of pounds in our North Sea operations centre in Aberdeen. We are delighted that we are able to announce this investment in Glasgow. This expansion is in line with Shell s strategy of increasing the work and profile of its shared service centres. The centre continues to demonstrate its world class capabilities and continuously attracts new work. Scottish Enterprise and the Scottish Executive have provided encouragement and assistance during this time and this has been a major factor in making the further creation of new jobs in Glasgow possible Alistair MacWilliam, General Manager, Shell Shared Service Centre. Iron Mountain US owned Iron Mountain, an outsourced records and information management services company, opened its UK Financial HQ in Livingston in 2004. The company currently employs 55 people at its Livingston facility which handles all invoicing and ledgers for its UK operation. The opening represents the company s biggest European business processing investment and takes the total number of Iron Mountain employees based in Scotland to 320. The organisation s second largest European Record Centre was opened in Livingston in 2001. Iron Mountain Inc services 44 markets within 15 countries across Europe. The raft of new corporate compliance regulations plus the need for companies to manage their records economically and securely, has led to impressive growth over the last few years within the data storage industry, which in turn has increased the need for administrative support. Following an acquisition last year, Iron Mountain decided to consolidate its finance, purchasing and IT Helpdesk departments into a single site, and, Livingston is well located near our major record management centres while giving us access to a pool of multi-lingual talent and a very high quality staff base in and around Livingston. Kenneth Radtke, President, Iron Mountain Europe Morgan Stanley Morgan Stanley is one of the world s largest financial services companies with over 60,000 employees worldwide operating from 600 offices in more than 33 countries. In early 2000, the European Institutional Securities Services Division (ISS) underwent a review of its operations and a decision was taken to transfer certain functions from Canary Wharf to alternative sites outside of London. Competition was between Dublin, other UK centres and Scotland. In the summer of 2001 Glasgow was chosen as the location for the ISS shared service facility. Scotland s stable workforce and good work-life balance were key factors in the location choice. Since then the workforce has grown by about 100 a year and currently Morgan Stanley s office in Glasgow is the second largest in Europe. The primary focus in Glasgow is on Operations and Finance functions which support Morgan Stanley Sales and Trading activities as well as IT functions. The company presently employs more than 1,000 people at the Glasgow operation due to continuing success. Glasgow is one of the great financial centres of the UK, with a vibrant, dynamic population and economy. We are very pleased to beexpanding our established presence there, further underlining our strong commitment to Scotland David Nicol, Chief Administrative Officer of Morgan Stanley in Europe 7

Qualified and Talented Workforce Scottish Workforce Within Scotland s central belt, the working population is approximately 2.6 million people, as illustrated. The quality of Scotland s workforce is internationally recognised. The people of Scotland make up one of the best trained, most reliable and cost-competitive labour forces in the world. With a world-renowned educational system and its ratio of graduates per capita, Scotland surpasses most countries of comparable size in Europe. Labour market regulations in the UK, including working hours, are the most flexible in Europe, and staffing costs are highly competitive. Scottish salary costs, including indirect social wage costs such as employer national insurance are among the lowest in Europe. Source: General Register Office (Scotland), 2008 Mid Year Estimates Within 30 minute drive time of Glasgow c. 1.5 million Within 60 minute drive time of Glasgow c. 2 million Dumfries & Galloway Working Age Population 93,491 Dunbartonshire Working Age Population 129,021 Inverclyde Working Age Population 53,341 Renfrewshire Working Age Population 113,454 Glasgow City Working Age Population 392,000 Highlands & Islands Working Age Population 292,000 Grampian Working Age Population 289,000 Greenock M8 Irvine Paisley Prestwick Ayr Kilmarnock Ayrshire Working Age Population 159,480 M73 Glasgow East Kilbride Forth Valley Working Age Population 179,000 M80 M74 Stirling 55 MINUTES Cumbernauld M8 M90 Dunfermline M9 Lanarkshire Working Age Population 420,269 Perth & Kinross Working Age Population 93,050 Perth Livingston Dundee St. Andrews Glenrothes Edinburgh Angus & Tayside Working Age Population 240,000 Fife Working Age Population 239,645 Edinburgh City Working Age Population 321,000 The Lothians Working Age Population 214,000 Scottish Borders Working Age Population 71,743 Within 30 minute drive time of Edinburgh c. 1.4 million Within 60 minute drive time of Edinburgh c. 2.3 million 8

Education in Scotland Scotland is reputed internationally for its education system and high quality university graduates. Across the central belt alone, there are more than 279,600 students in higher education institutions and further education colleges, one of the UK s highest student concentrations. Many of Scotland s academic institutions are internationally renowned for their research and teaching excellence, with many institutions providing bespoke contact centre training. Key Facts There are 19 Higher Education Institutions in Scotland, including 14 universities Scotland also has 43 colleges of further and higher education In 2008-2009 the number of graduates continued to rise with over 84,000 students successfully completing a higher education course in Scotland. This was mostly due to a rise of almost 1,000 in the number of HNC/HND qualifications obtained and rise of over 500 in the number of first degree qualifications obtained The number of qualifications obtained by international students accounted for 18% of all qualifiers (15,105) in 2008-09 Scotland s skills profile has been improving faster than the rest of the UK; 18% of working age population now has a degree equivalent qualification or above Students studying for higher education qualifications 2008-09 Business Administration 44,530 Engineering & Technology 22,940 Maths 3,605 IT 12,625 Languages 11,340 Graduates with higher education qualifications 2008-09 Business Administration 18,845 Engineering & Technology 7,255 Mathematical Sciences 890 IT 4,470 Languages 2,935 Scotland s education institutions offer a range of courses spanning finance, accounting, computing, technologies and business subjects. Examples of some courses include: Financial Services Accountancy with Finance Finance with legal Studies Business Studies Risk Management IT and Financial Services Business/Law Business Economics, plus many combined courses incorporating finance with languages (Source: Attainment in higher education and destination of leavers 2008-09, The Scottish Government, September 2010) 9

Salary Rates Typical Shared Service Centre Salary Rates JOB TITLE SALARY BOUNDARY TECHNICAL/IT ROLES The following table provides an indication of typical salary FINANCE ROLES rates within a shared service centre operation. If required, we would be pleased to provide more specific rates, should job descriptions be available. Clerical Level 15-16.5k (entry/junior level Ledger Professional/Specialist 16-19k Credit Control 18-22k General Ledger 18-23k Fixed Assets 23-28k Payroll Specialists (Process only) 16-18k Payroll Specialists 18-23k Data Input Assistant 12-14k Payroll Assistant 14-16k Payroll Team Leader 20-25k Payroll Process/Department Manager 25-45k Ledger Team Leader 25-35k (depending on remit and team size) Reporting Analyst 25-40k Business Support Analyst 30-45k Management Accountant 30-45k Reporting Team Leader 35-50k Reporting Accountant 35-50k Financial Reporting Manager 45-60k Director Level 80-100k Test Analyst Senior Test Analyst J2EE Developer Service Desk Analyst Core Java Developer Test Lead J2EE Developer Technical Lead Net Developer Wintel Support Engineer Windows System Engineer Unix Apps C++ Developer Embedded C Developer Test Automation-QTP Test Engineer Network Support Engineer Portals and Commerce Developer Project Manager 1 Application Packaging Engineer COBOL-DB2-CICS Developer Service Desk Analyst Network Support Engineer Telecom Support Engineer 25-28k 28-35k 28-35k 18-21k 28-35k 37-45k 28-35k 28-35k 25-28k 35-40k 28-35k 35-40k 32-40k 28-35k 32-40k 40-45k 32-37k 25-30k 18-22k 22-28k 22-28k ORACLE Developer 28-35k SQL Database Administrator 35-45k (Source: Search Consultancy December 2009) Scotland has a substantial pool of candidates and trans portation links within Scotland are generally very reliable ensuring access to a skilled working population within the central belt. In particular, Glasgow has been integral in the advent of Shared Service Centre s, with over 13 years since Eaton first established an operation. This established community continues to prosper and companies work together with the likes of the Scottish Shared Services Forum. This forum provides the opportu nity for companies to meet to discuss operational issues and best practices. The event is hosted by Scottish Devel opment International but is very much industry driven by current topical issues. 10

Language Research Scottish Development International recently commissioned research on language capability on Scotland through Oxford Intelligence. The key findings are detailed below: Scotland s Strengths A pool of 109,000 fluent language speakers. xx 18,000 who speak 2+ languages fluently. A highly skilled resource the best in the UK. xx 74% of fluent speakers in Scotland educated to degree level or above. xx Compared with 57% across the UK as a whole. Available and willing to work with a company that needs language skills. xx Only 19% currently use their languages in their job. xx 65,000 fluent language speakers would be interested in a job where they can use their languages. Number of fluent linguists in selected languages Western European Languages No.Fluent Speakers French 32,000 German 22,000 Spanish 10,000 Italian 10,000 Dutch 5,000 Greek 2,000 Portuguese 1,000 Eastern European Languages No.Fluent Speakers Polish 9,000 Russian 6,000 Czech/Slovak 2,000 Hungarian 1,000 Asian Languages No.Fluent Speakers Urdu 8,000 Hindi 5,000 Punjabi 4,000 Mandarin 3,000 Cantonese 3,000 Malay 3,000 Bengali 2,000 Japanese 1,000 Gujarat 1,000 In Summary Scotland has a significant talent pool of 109,000 fluent language speakers. xx 81% of fluent speakers 88,000 people are not currently using their languages at work. xx Yet 60% of all competent linguists would be very interested in a job where they could use these languages. xx Fluent linguists in Scotland tend to be both younger and better educated than those in the rest of the UK as a whole. Hence, inward investors and exporting companies have access to a highly skilled talent pool. Scotland offers ample resources in the four key Western European business languages French, German, Italian and Spanish. xx Eastern European and Asian languages are also significantly represented and of growing relevance as these regions develop. Should you require any further information on the above research, we will be happy to help. Source: Oxford Intelligence, 2008 11

Foreign Nationals There are some 190,000 Foreign Nationals in Scotland, many of them students, and many attracted by the high quality of life, particularly in the culturally exciting and thriving cities of Glasgow and Edinburgh. Migrant Workers Scotland is an ideal location to live and work attracting thousands of people from around the world. The following provides examples of nationalities & quantitiies of foreign nationals living and working in Scotland. Between 2004 and 2006, 63,000 overseas nationals registered for work in Scotland with 50% possessing service skills competencies. 44% of these immigrants came from the 8 Accession countries---czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia and Slovakia. Of the 63,000, nearly 50% have settled in either Edinburgh or Glasgow. As well as bringing their own indigenous language skills, these immigrants will also have swelled the ranks of German and Russian language speakers. (Source, Slims, June 2007) Recent surveys show that over 400,000 Polish immigrants entered the UK in 2007, with over 40,000 entering Scotland. (Source, Home Office, DWP, August 2007) Language Graduates Scotland produces over 3,000 language graduates each year. This is comprised of a combination of language only qualifications and courses where a language is combined with other subjects. Combining full and part-time study, approximately 13,700 individuals in Scotland are studying for degree level or above qualifications in languages in any given year. Foreign Graduates Qualifications obtained by international students accounted for 18.0% of all qualifiers (15,105) in 2008-2009. Foreign Students In 2008-09 there were 39,085 overseas students enrolled in higher education courses in Scotland. The growth in students domiciled outwith the UK was greater than for those domiciled within the UK. The number of EU (excluding the UK) domiciled students doing higher education in Scotland increased by 1,180 (or 9.3%) from 12,670 in 2007-08 to 13,850 in 2008-09. The number of non-european domiciled students increased by 2,570 (or 12.1%) from 21,250 to 23,820. China is the largest foreign contributor to HE student numbers in Scotland at 5,130. Top Ten Overseas Countries 1. China, Peoples Republic of (includes Hong Kong, 5,130 Taiwan and Macao) 2. India (Also Sikkim) 3,975 3. United States of America 3,230 4. Republic of Ireland 2,830 5. Nigeria 2,505 6. Germany 1,920 7. France 1,745 8. Poland 1,700 9. Malaysia 1,120 10. Greece 1,075 (Sources: Higher Education Statistics Agency (HESA) and Scottish Funding Council (SFC). 12

Skills Availability Scotland has over 26,000 accountants full and part qualified whose qualifications cover a range of disciplines including: management accounting, chartered accounting and applied accounting. For further information on the awarding bodies and websites, see below. Nearly 1,000 accountants graduate annually with either this or ACCA and CIMA qualification in Scotland. Body Qualified Part-Qualified TOTAL ICAS 8,581 1,350 9,931 CIMA 2,630 3,070 5,700 ACCA 3,500 4,000 7,500 ICAEW 1,424 93 1,517 ICAI 90 0 90 CIPFA 1,204 264 1,468 TOTALS 17,429 8,777 26,206 Source: Professional Bodies, July 2010 ICAS Institute of Chartered Accountants in Scotland www.icas.org CIMA The Chartered Institute of Management Accountants www.cimaglobal.com ACCA The Association of Chartered Certified Accountants www.accaglobal.com ICAEW Institute of Chartered Accountants in England & Wales www.icaew.co.uk ICAI Institute of Chartered Accountants in Ireland www.icai.ie CIPFA The Chartered Institute of Public Finance & Accountancy www.cipfa.org.uk 13

Incentives Scottish Development International (SDI) works with both Scottish-based and overseas companies and organisations. Its objective is to benefit the Scottish economy both by encouraging inward investment into Scotland and by helping Scottish-based companies to develop international business opportunities. SDI provides a wide range of support services, including advice, access to specialist expertise, selective business mentoring and development, market information, financial assistance, business location information, investor aftercare and specific services covering each phase of international trade activity. Regional Selective Assistance (RSA) Regional Selective Assistance (RSA) is a national grant scheme, aimed at encouraging investment and job creation in the areas of Scotland designated for regional aid under European Community (EC) law (the Assisted Areas). Grants are awarded on a contribution of capital expenditure for the project and/or, the number of new jobs created by the project. Many service related projects tend to receive grant based on the number of jobs created and the salaries of those jobs. Shared service centre companies are eligible for grant assistance. Job Creation Assistance Most projects require a substantial amount of capital investment. However for projects involving relatively low levels of capital expenditure but which involve the creation of new jobs, RSA can make a meaningful contribution to project funding. For this type of project, we would calculate limits on potential grant by applying the appropriate aid intensity limit (based on the assisted area status) to the first 2 years salary costs of the projected jobs. This will generally mean that we can offer more grant for highly paid jobs. Multiple Grants RSA is not limited to a single grant, it can be awarded several times provided the qualifying criteria are satisfied. Training and Employment Grants In addition to RSA, Scotland also offers incentives to companies to help fund training and retraining of employees. Assistance is negotiated on a case by case basis and is dependent on the type and nature of the training required. We will be delighted to work with clients in determining their location needs. Continued Support Also once established in Scotland, Scottish Development International continues to offer close support. A Senior Executive will be available to assist in the settling in process. In partnership with other organisations in Scotland, we shall ensure that our client continues to prosper and grow in Scotland, receiving ongoing assistance and advice. www.sdi.co.uk Grant Limits Grant limits vary across the Assisted Areas - a map can be found at www.rsascotland.gov.uk. However, for Tier 2 areas in Scotland the grant limit is 15%. Tier 1 areas which include Highlands and Islands would be 30%. 14

Scotland s Competitive Advantage Why should you choose Scotland as the preferred location for your Shared Service operation? In Summary: Internationally recognised as a Shared Service Centre location Critical mass and expertise Low risk option World class reference sites One of the lowest tax rates in the European Union High quality of staff at lower cost Lower staff turnover High quality property at lower cost Lower overheads Extensive broadband telecommunications Excellent quality of life 15 15

For further information please contact; Mark McMullen International Senior Manager SDI Financial Services Team Atlantic Quay 150 Broomielaw Glasgow G2 8LU Tel: +44 (0)141 228 2899 mark.mcmullen@scotent.co.uk www.sdi.co.uk