Tommy Fagerlund is managing director of Thule, a shared services centre (SSC) based in Lithuania and mainly doing back office for financial services of Skandia, one of Sweden’s largest insurance companies. Fagerlund has a 30-year career in insurance and finance banking in leading roles. He will be a speaker at the Baltic Strategic Shared Services Conference in Vilnius, Lithuania, in October.
Could you tell us about the corporate relations between Skandia and Thule? We indeed know that corporate governance models applied to shared services can bring a few communication challenges…
There is a very tight co-operation between Thule and our parent company Skandia because implementing an SSC has never been experienced in Skandia before and they are not so well versed in this kind of outsourcing. Of course they have been outsourcing IT and some other financial services but it was some time ago. When dealing with outsourcing more critical finance services like those we have on site, they have embarked on a broad co-operation during the transition process from Sweden to Lithuania. We have to take all this with carefulness and consider whether we should do this or we should do that, and so on. The co-operation is much needed and it is good.
What is your vision of the evolution of the SSC industry in the middle/long run?
In the long term, even if it is a challenge to define long term, if we are looking into East European countries, I think we very much have to think about how to make the processes more efficient. Because I think there is an overall possibility to make most of them more automated, without necessarily changing those very big and heavy IT systems that have been running for years, which are very difficult to change. However, you can add on some kind of automation, and that way you try to reduce the cost you put in to try to achieve those kinds of tasks while making them more agile. I think you have to look more into it as an industry, not thinking so much about the cost. In many ways investment and cost look similar, even though the results perhaps can be different. But once smart automation is implemented, it could be much easier to train another person to learn, when as of now it could take six or seven months.
Business process automation directly relates to your session at the conference. Let’s hear about your personal experience.
Even if it might be a little bit different than what I used to do, I have some good experience and ideas on how to deal with process optimisation because I saw many times how mistakes can be made. So I have taken this experience directly from the start and tried to apply it into Thule. Actually when we started building up the company here, we of course had to learn all the tasks transferred from Sweden to Lithuania, and we did it by waves which somehow made it totally hopeless to be efficient. So at the same time, we had to have in mind how we can start a process to make things more standardised. And we are still doing it now. For instance, we keep monitoring the quality level of our services, not only the timing of each task but also the level of productivity and how we can improve it, how to develop some kinds of tools and achieve a result that makes it easier and more secure to make things right.
Because Lithuania and the whole Eastern Europe can’t think that it will be forever like this with lower salaries, lower overall costs… It can’t, because the region is running very fast compared to Western Europe, and at some point salaries will start to equalise. If you sum up all these extra costs a company has when outsourcing to another country, you will always have some overhead costs that you can’t get rid of just because you are abroad. In my opinion it won’t take so long to have close to equal costs of operations with Western Europe. We have so many educated and smart people, and with all the motivation of change and learning new things that they can hear, they feel they can make a difference in how to do things.
Do you have any advice based on your experience for companies looking into setting up an SSC in the region?
Even within the boundaries of the EU you have to consider there are some differences that still remain, particularly legal aspects. I also think you always have to consider having a good partner in the country where you are setting up. This is a key thing. Starting from scratch is subject to many possible mistakes and you have to be prepared that it can be very costly. European diversity also has to be considered as cultural differences represent a big aspect in site selection. But compared to some more “radical” offshoring countries, I think it is not a big problem.
The Baltic Strategic Shared Services Conference will be in Vilnius on October 12-14. See www.sscbaltic.com