— Lessons from Mexico and the Importance of PoC Validation
Many companies consider Shared Service Centers (SSCs) as a way to reduce costs and improve efficiency.
Mexico, in particular, is often seen as an attractive destination due to its labor cost advantages, proximity to the U.S., and growing talent pool.
However, despite careful planning, many SSC initiatives struggle or fail before they even reach full execution.
Based on observations from Mexico-based operations, the reasons are often not technical — but structural and organizational.
1. SSC Plans Are Often Built on Assumptions, Not Reality
At the planning stage, SSC strategies are usually designed at HQ level, relying on:
• Benchmark data
• Cost simulations
• Organizational charts
• Theoretical process flows
While these inputs are necessary, they often fail to reflect how operations actually function on the ground in Mexico.
Key assumptions — such as productivity levels, management capacity, or speed of ramp-up — tend to be optimistic.
As a result, risks only surface after resources have already been committed.
2. The Management and Governance Burden Is Underestimated
One of the most common reasons SSC plans fail is the underestimation of management effort.
Even when labor costs are lower, SSC success depends heavily on:
• Clear role definitions
• Training and documentation
• Performance management
• Continuous supervision and governance
In many Mexico-based cases, especially where the number of expatriates is limited, senior management is already stretched across multiple responsibilities.
Adding SSC oversight without adjusting governance structures often leads to operational bottlenecks.
3. Cost Advantages Erode Without Operational Readiness
While Mexico can offer cost advantages, these benefits are not automatic.
Without sufficient preparation, companies may experience:
• Higher-than-expected training costs
• Productivity gaps during ramp-up
• Increased turnover and re-hiring costs
• Delays caused by unclear processes
In such cases, the perceived cost advantage of the SSC model diminishes quickly, raising questions about the original business case.
4. Why PoC Matters Before Full SSC Implementation
Many of these issues can be identified early — if companies validate their plans before full implementation.
A Proof of Concept (PoC), or partial SSC-style operation, allows companies to:
• Test selected functions under real operating conditions
• Experience the actual management and training workload
• Understand realistic cost structures and efficiency levels
• Identify gaps between planned design and real execution
Importantly, this validation is most effective when companies operate the processes themselves, rather than outsourcing execution from the start.
5. The Value of Local, Decision-Focused Support
During such validation phases, decision-makers should be able to focus on evaluating feasibility, not navigating unfamiliar local complexities.
In Mexico, this often includes:
• Labor and employment practices
• Legal and compliance considerations
• Local business norms and organizational behavior
• Operational risks specific to the Mexican context
Having local advisory support helps ensure that lessons learned from a PoC are grounded in reality — and translated into clear decision points for leadership teams.
6. From Validation to Confident Decision-Making
SSC initiatives do not fail because the concept is flawed.
They fail because key questions are answered too late.
Validating assumptions through a limited, controlled PoC enables companies to:
• Decide whether an SSC model truly fits their organization
• Adjust scope, governance, or expectations early
• Move forward — or step back — with confidence
Conclusion
Before committing to a full SSC rollout, companies should ask:
Does our plan work in practice — under real conditions in Mexico?
Testing part of the operation first, while incorporating local operational insight, often provides the clarity needed to make that decision.
If you are currently evaluating an SSC strategy for Mexico, consider validating your assumptions before committing significant resources.
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