Defining an Advantaged Offshore Delivery Strategy:  Location, Location, Location!

Executive Summary

Everest Group assisted a top-10 IT and business process outsourcing (BPO) service provider identify the best-fit locations for expansion of its IT infrastructure delivery operations. Services in-scope included command center, service desk, and server and database support. Faced with a myriad of conflicting issues and emotionally charged options regarding which new locations would best buoy the global footprint component of its go-to-market strategy, the client turned to Everest Group’s Location Optimization practice for assistance. Per the output from Everest Group’s rigorous, fact-based evaluation, the provider has opened new delivery centers in cities that meet its near- and long-term business, cost, risk, and scale objectives.

The Client’s Challenge

The service provider had identified nearly 20 candidate cities in Latin America and Southeast Asia for expanding its global delivery footprint. However, decision makers faced challenges not only in determining the availability, scale, costs, and sustainability of needed IT infrastructure skill-sets in these cities, but also in responding in a balanced manner to issues raised by business leaders in multiple units. Requisite skills included database management, middleware support, mainframe operations support, and bi-lingual fluency for service desk operations, but the provider was limited in its ability to determine the extent to which these skills were available in the candidate cities.

Insight to Action

Everest Group customized its location selection process to approach the assessment in two phases. The first phase involved eliminating cities lacking an adequate pool of experienced talent with the necessary domain and bi-lingual skills. This led to a prioritized list of eight cities – five in Latin America and three in Southeast Asia.

In the second phase, Everest Group conducted a detailed assessment of each finalist city across the following dimensions:

• Size of employable graduate pool: Everest Group analyzed the annual turnout from relevant education programs (e.g., IT systems graduates) and applied filters for employability (e.g., bi-lingual skills, analytical aptitude) and size of the relevant entry-level talent pool. Everest Group leveraged a combination of statistical data from universities and interviews with recruiters and market players to establish an outlook for the gross talent pool.
• Size of the experienced talent pool: Everest Group conducted a comprehensive assessment of the service delivery landscape in each finalist city to identify providers and captive centers supporting in-scope services and estimate the size of the relevant talent pool across all delivery centers. Everest Group leveraged its proprietary databases, supplemented by targeted research, to determine the extent to which each location met the required and experienced talent pool threshold for the anticipated services.
• Operating costs: Everest Group developed a like-to-like comparison of the cost of running an IT infrastructure services center in each finalist city. For this analysis, Everest Group customized its proprietary cost model encompassing salary levels, benefits, real estate rates, telecommunications charges, and other operating expenses to arrive at a loaded operating cost for each potential location.
• Risk analysis: Everest Group assessed risks across five dimensions – labor pool availability, infrastructure quality, safety and security environment, investment climate, and real estate availability, to develop an overall view of the operating risks in each city.

Based on all the above criteria, Everest Group synthesized a comprehensive view of cost versus risk to highlight the key trade-offs the provider needed to weigh in selection of the best-fit cities in Latin America and Southeast Asia. 

Impact

The two companies jointly determined that Sao Paulo, Brazil and Manila, Philippines would best meet the service provider’s cost, risk and scale objectives for its new delivery centers.