Category: Location Strategy

Services Delivery Risk in Ukraine and the CEE Region Rises Amid Conflict with Russia | Blog

The fresh armed offensive launched by Russia at the end of February has disrupted the service delivery ecosystem almost across the whole of Ukraine. Everest Group moved Ukraine’s operating and business environment risk rating to ”High” and recommends that global services firms intensify and accelerate contingency and business continuity plans to ensure resiliency and employee safety. Read on to learn more about the Ukraine-Russia conflict and its impact on the service delivery industry in Ukraine and the broader Central and Eastern Europe (CEE) region.

Origin and evolution of the Ukraine-Russia crisis

The recent crisis between Russia and Ukraine dates back to 2014 when Russia annexed the Ukrainian peninsula, Crimea, and backed pro-Russian separatists in the eastern Donbas region. Despite a 2015 peace treaty between Kyiv and Moscow, there have been several ceasefire violations resulting in many civilian deaths in both regions. Border tensions renewed in November 2021 when Russia started to amass tens of thousands of troops at the Ukrainian border as both NATO and Ukraine refused to commit to excluding Ukraine as a NATO member in the future. On February 22, 2022, Russia recognized the breakaway regions of Ukraine (Donetsk and Luhansk) as independent states and effectively breached the Minsk Protocol, which prevents war in the Donbas region. On February 24, 2022, Russia launched an invasion of Ukraine and started attacking major cities including, Kyiv, sparking an exodus from these cities. While until now, the conflict was localized in the east of the country and service delivery was unaffected in the other parts of Ukraine, the conflict has now spread to almost the entire country. Depending on how scenarios play out (see below), this could mean a disruption of service delivery across Ukraine as well as ripple effects on the rest of the CEE region.

Current and potential impacts on the services industry in Ukraine

For years, Ukraine has been a sought-after location for companies outsourcing software development and ER&D services. The Ukrainian services sector features deep expertise, and Ukraine’s large talent pool is well-positioned to serve the chronic shortage of global engineering and technology manpower while offering attractive financial arbitrage. During the 2014-15 conflict, most companies had already diversified the risks of operating in Ukraine to a large extent. The recent escalation since November 2021 had also forced firms to activate contingency/BCP measures.

Based on the evolution of the conflict across multiple scenarios described below (or beyond these), companies will need to actively watch and flex their contingency plans further.

We foresee the following scenarios playing out on the ground:

Scenarios Long-drawn conflict,
largely limited to the Eastern regions, but not impacting Kyiv and other large cities
Long-drawn conflict extending to key cities in North/West/South Ukraine Swift brokered peace, retaining the current Ukraine administration Swift and decisive victory for Russia followed by installation of a Russia-backed government in Ukraine
Description ·         Ukraine defense forces are able to counter the Russian attack, but not entirely repel decisively

·         Conflict largely contained in the Eastern and Southern regions of Ukraine, with limited disruption in the key larger cities of Kyiv, Lviv, and Dnipropetrovsk

·         Ukraine defense forces are able to counter the Russian attack, but not entirely repel decisively

·         Pitched battles for and around key Ukrainian cities such as Kiev, Odesa, Lviv, and Dnipropetrovsk

·         Large-scale exodus from Ukraine to neighboring countries in the region – such as Poland, Slovakia, Hungary, or Romania

·         EU/US/Turkey broker a swift ceasefire and provisional agreement, potentially through concessions such as a commitment for Ukraine not to join NATO and/or threat of further crippling sanctions on Russia

·         Current Ukraine administration retains power and authority

·         Eastern regions of Donetsk and Luhansk gain independence or autonomy and are not in Ukraine control

·         Russian forces do not encounter significant armed resistance and gain a decisive victory over Ukraine OR current Ukrainian administration capitulates to limit loss of life and infrastructure

·         Kyiv and other key cities are captured by Russian forces

·         Russia installs a puppet government in Ukraine

·         Some exodus likely to neighboring countries in the region, such as Poland, Slovakia, Hungary, Romania

Probability Medium Medium-High Low-Medium Medium-High
Likely impact on global services delivery from Ukraine ·         Temporary disruption spanning a few days in the key cities in the North and West of Ukraine; significant disruption in the South and East

·         Businesses will be able to operate with minimal disruption thereafter in the larger cities, however, those in Eastern (e.g., Dnipropetrovsk) and Southern (e.g., Odesa) centers will face significant disruption

·         Movement of people and operations to centers in the North and West of the country; contingency plans will need to be on standby in case conflict spreads to other regions of the country

·         Large-scale and crippling disruption to service delivery across the country, including in larger cities

·         Companies will need to move people and operations to other centers in their portfolios, especially to the CEE region

·         Limited disruption in the larger cities, especially those in the Northern and Western regions of Ukraine

·         Businesses will operate normally post some days/weeks of uncertainty

·         Clients still likely to demand diversification as regions in the East will continue to be under some uncertainty, leading to movement of people and processes to centers in the North and West of the country

·         Temporary disruption spanning a few days to a few weeks in the key cities in the North and West of Ukraine; significant temporary disruption in the South and East

·         Post installation of a Russia-backed government, disruption should subside gradually, and businesses will be able to operate normally and with some levels of certainty. However, this scenario raises a fundamental question of whether organizations are comfortable operating in an environment heavily influenced/controlled by Russia

Likely impacts on the broader CEE region ·         Some pressure on firms to diversify as a BCP measure will lead to growth in the CEE region and broader Europe region ·         Large-scale movement of personnel and operations to CEE countries

·         Likely need to de-risk operations in countries bordering Ukraine (e.g., Poland, Slovakia, Hungary, Romania, Moldova, and the Baltic States) given potential of a westward push of Russian expansionary tactics

·         Some pressure on firms to diversify as a BCP measure will lead to growth in the CEE region and broader Europe region ·         Lower impacts on the broader region, however, some personnel may want to move out from under a Russia-backed administration and want to migrate to other countries in the region or globally

·         Likely need to de-risk operations in countries bordering Ukraine (e.g., Poland, Slovakia, Hungary, Romania, Moldova, and the Baltic States) given potential of a westward push of Russian expansionary tactics

 

Ukraine is a key global delivery location for IT and Engineering R&D (ER&D) services, which brings widespread uncertainty and significant concerns for the many companies operating there. Companies such as Wix, Vistaprint, Ciklum, and Cimpress had already begun relocating their staff from east Ukraine to relatively safer parts of the country, such as Lviv, Ternopil, and Ivano-Frankivsk, in efforts to continue uninterrupted business processes and keep employees out of harm’s way. Some are even relocating to other countries, like Poland, Turkey, and Israel.

Approaches and recommendations for firms supporting service delivery in Ukraine

Everest Group has downgraded the operating and business environment risk rating of Ukraine (previously Medium) to High as global organizations continue to face uncertainty, and the threat of disruption is very high considering likely further deterioration in the situation.

Amid these uncertainties and rising tensions, Everest Group recommends the following to global services players with operations in Ukraine:

  • Intensify/accelerate contingency plans: Global services firms should intensify and accelerate contingency and business continuity plans. These measures could include arrangements for relocations of employees and their families, backing up data to servers based in the US or other locations, developing backup options with independent internet providers, establishing emergency satellite communications, identifying alternative suppliers, and stockpiling supplies
  • Monitor cybersecurity, especially data security: Firms should strengthen their network infrastructures to insulate themselves against potential cyberattacks and/or a takeover of data infrastructure by Russia or a Russian-backed administration. The conflict raises the vulnerability of companies to cyber-attacks on Ukrainian firms and data assets – and will need to actively consider measures to protect data residing in servers in Ukraine – especially in the event of a Russia-backed administration taking over
  • Flex talent models and workforce strategy: Businesses impacted by disruption in Ukraine will need to flex talent models and workforce strategy creatively and aggressively to minimize the impact to operations – measures could include cross-training workforce in other centers, hiring contingent talent, expanding remote delivery, provisionally insourcing critical work packets, and rebalancing work across a global/regional delivery portfolio
    • Centers in the European region will be ideally suited to support work that is/was being supported in Ukraine; however, given proximity with Ukraine, some of the CEE countries may not be obvious choices. Companies may need to redistribute work to other global centers, including in Western Europe, Asia, and Latin America
    • Smaller companies and startups will be much more exposed compared to the larger global/regional players as they will struggle to rebalance work and people outside Ukraine – these contracts will require urgent attention from sourcing executives over the next few days
  • Evaluate and identify impacts on broader service delivery portfolio:
    • Countries neighboring Ukraine and Belarus will need to be reevaluated for delivery risks stemming from expanded Russian influence/control over the above two countries. Further westward expansion plans of Russia could significantly downgrade the geopolitical stability of countries such as Poland, Slovakia, Hungary, Romania, and the Baltic States
    • The crisis has the potential of destabilizing a decades-long peace in Europe for a long term. With its existing influence over Belarus and Moldova, if Russia gains control over Ukraine, its neighbors will all be NATO members, thus setting the stage for a long-drawn tussle over Western vs. Russian influence in the region
    • Further, other countries in the CEE region and broader Europe are also likely to see the impacts of migration of Ukrainians. For example, Moldova and Lithuania have already declared a state of emergency to deal with refugees that have already started arriving
    • The crisis may also create stress on other locations within the global delivery portfolios of companies – both enterprises and their service providers – as they try to ensure continuity by flexing alternative locations, providers, and even sourcing models (e.g., provisionally insourcing work with providers heavily exposed in Ukraine). Given the significant talent crunch already being witnessed by companies globally, this rebalancing may create further stress in existing systems and impact other critical initiatives
    • Finally, service delivery in Russia and Belarus is also likely to suffer significantly as a result of strong sanctions imposed by the US and Western Europe

To hear more recommendations on this topic, watch our LinkedIn Live event: How to Manage the Ukraine-Russia Impact on Service Delivery

Stay updated on the Ukraine-Russia Crisis and the impacts to the global services industry as we track this fast-moving conflict and develop further insights.

Ukraine-Russia War Impact on Engineering and IT Services Availability | Blog

Ukraine is one of the top locations for offshore and near-shore third-party services, especially for engineering and IT skills. Thus, Russia’s invasion of Ukraine this week has a significant disruptive impact on American and European companies. What is the impact, which companies are affected, what are the numbers, how will it affect prices, and how long will this disruption last?

Read more in my blog on Forbes

Stay updated as we track this fast-moving conflict and develop further insights. Watch our LinkedIn Live event: How to Manage the Ukraine-Russia Impact on Service Delivery

Decoding the Location Mystery for Technology Services Talent Delivery | Blog

The technology surge has created a talent war for digital skills, making selecting the right service delivery locations more crucial than ever. Where should enterprises look to find the human capital they need now and for the future? Read on to discover the hot spots for tech talent in the Asia-Pacific, EMEA, and Americas.

The COVID-19 pandemic has created soaring demand for emerging technologies such as cloud, Artificial Intelligence (AI), Machine Learning (ML), data science, Internet of Things (IoT), Natural Language Processing (NLP), blockchain, and 5G.

But the biggest obstacle to adopting these emerging technologies is talent.

With the huge tech demand and unmet talent supply, developing delivery portfolios that provide a continuous pool of high-quality employees that have the innovation capacity to fulfill digital growth agendas is critical to gaining a competitive edge.

Based on our latest research, here are some of the established and emerging talent tech hubs to watch:

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Top Markets for Technology Services Talent

Asia-Pacific (APAC)

Large talent availability and significant cost arbitrage over other regions continue to make Asia the location of choice for technology services. India has seen the most growth for new centers and the talent pool, followed by China and Singapore.

India:

India remains the preferred location for large-scale technology services delivery. Over the past few years, it has experienced the highest growth in new setups and existing center expansions. Several leading enterprises have set up Centers of Excellence (CoEs) and innovation centers focused on emerging technologies primarily driven by an increased focus on digital, IT, and engineering/R&D services and to support new products and services development.

While Tier 1 cities remained the most desired locations within India, Tier 2 cities also experienced an uptick due to rising demand for high-quality IT skilled talent and work from home emerging as the new delivery model. Companies and investment promotion agencies remain bullish on the growth in the technology services industry in the coming years as emerging technologies use-cases of cloud, AI, and cybersecurity will become mainstream.

China: 

China traditionally has been a strong engineering/R&D hub and continues to see heavy traction from global players setting up engineering/R&D, IT centers, and innovation CoEs. While the pandemic outbreak led leading technology firms such as Apple, Google, Facebook, and Microsoft to temporarily shut down operations in China, activity regained its momentum in the second half of 2021, experiencing significant new center setups for the technology services industry. A major part of the growth was driven by Information, Communication, and Telecom (ICT) companies, primarily focused on establishing centers for Engineering Research and Development (ER&D) such as product development and electric mobility, and digital technologies like AI, IoT, and data analytics.

Going forward, long-term tailwinds such as the growth of the Shenzhen Special Economic Zone (SEZ), government initiatives focusing on Made in China 2025 policies, growth of e-commerce, increased technology adoption, and high export demand for technology developed in China will largely drive growth in the technology services industry.

Other prominent locations: Singapore and Malaysia are other areas in APAC to consider for talent that are undergoing significant technology service industry growth.

Europe, Middle East, and Africa (EMEA)

Several countries within the EMEA region offer highly attractive value propositions to market players for global services delivery. While the majority of Western European countries have achieved a fairly mature technology ecosystem, Ireland offers a significant cost arbitrage compared to others and is highly leveraged by multiple players. Further, the Central Eastern Europe (CEE) region has experienced significant growth in the technology sector, primarily driven by the availability of high-quality technology talent and a mature startup ecosystem. Poland is often recognized as the technology hub of CEE, witnessing maximum traction from global players.

Most African and Middle Eastern countries have low delivery maturity for technology services. However, Israel has emerged as a leading location primarily due to the robust startup ecosystem and government initiatives to advance and develop a competitive edge in the technology space.

Ireland: Global companies are selecting Ireland for a mix of IT, Business Process (BP), and ER&D services, with most of the activity driven by technology firms, primarily to set up ER&D centers and digital CoEs across areas such as AI, cloud, and analytics. Going forward, AI and automation are the key focus areas for the Irish technology industry.

Poland: Poland continues to be the largest global delivery hub in nearshore Europe because of its strong cost-talent proposition, ability to support multi-functional centers, and strong government support. It even surpasses some of the developed technology markets such as Japan for global technology services delivery.  Multiple players have chosen Poland to set up innovation hubs for complex IT, R&D/engineering services delivery in Tier-1 locations (Krakow, Warsaw, and Wroclaw) because of its access to a large talent market. Tier-2/3 cities such as Katowice, Tri-City, Lodz, Poznan, and Szczecin are also expected to witness increased leverage for select IT services due to their strong talent-cost proposition and higher competitive intensity in Tier-1 cities.

Israel: With a booming technology services industry, immensely robust digital infrastructure, and highly mature startup ecosystem, Israel has become an established technology services location in the EMEA region. Next-generation IT services have boomed, including big data, cybersecurity, cloud, and IoT with a research focus primarily driven by close academia and industry collaboration. Further, it is a leading delivery location for cybersecurity services and houses almost one-third of the world’s cybersecurity unicorns. Going forward, it will be interesting to see how Israel transforms its position for global market players versus solely being desired by startups.

Other prominent locations: Some of the other locations to pay attention to in EMEA include Germany, France, the United Kingdom, Romania, and Ukraine.

The Americas

North America: North America is among the most established geographies for technology services delivery. Most product organizations, technology enterprises, and startups are headquartered in the US. It offers a large talent pool and high collaboration prospects due to the presence of multiple technology startups, global business services centers, and service providers. The region is primarily used more for domestic delivery than global delivery because of high labor and real estate costs.

Latin America: 

In the wake of the pandemic, multiple enterprises are evaluating Latin America for setting up new centers to diversify their risk concentration and take advantage of its proximity to key source/client markets in the US.

Mexico continues to lead in technology services delivery driven by increased delivery activity by companies for analytics, cloud, mobility, big data, IoT, and AI. Further, government initiatives such as creating a digital hub to accelerate the digital journey and enterprise growth have boosted the country’s tech ecosystem. With its strong trade links, nearshore advantage, and growing technology talent pools, Latin America offers a multi-pronged value proposition to enterprises seeking a technology services delivery destination.

Choosing the best-fit technology services delivery location

Analyzing the features of the delivery sites will help enterprises determine the best strategy to take in the particular market, such as expanding and growing, holding, watching and testing, or shrinking and exiting, as detailed below:

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Technology Services Talent Strategies

By assessing each location’s value propositions and trade-offs and considering company-specific requirements, organizations can find the ideal spots to tap the talent they need, making the delivery portfolio puzzle less of a mystery.

Learn more about how to find talent in our webinar, 5 Success-driving Actions: How to Unlock Untapped, Affordable Talent.

To share your comments and questions, please reach out Anish Agarwal or Shivani Singh.

Why Is There a Surge in Companies Building Global Services Centers? | Blog

The business world is changing quickly and affecting decisions as to whether a company brings work back in house that it previously outsourced to third-party service providers, outsources functions that previously were in house, or builds their own Global Business Services (GBS) centers in regions like India, the Philippines, Eastern Europe, and even in US territories such as Puerto Rico. This results in a fast-moving set of changing ecosystems. Why? And how will the increase in GBS centers affect the third-party services model?

Read more in my blog on Forbes

Will India’s Personal Data Protection Bill Act as a Harbinger for a Sovereign Cloud Initiative? | Blog

Pending legislation intended to protect the privacy of India’s citizens could set the stage for a sovereign cloud initiative and new opportunities in the Indian cloud ecosystem. Is India following the same trajectory as Europe toward data sovereignty? And what benefits could it bring to the country and its people? To learn more about the ripple effects passing the Personal Data Protection Bill (PDP) could have on the industry, read on. 

The passage of the PDP Bill would change the data privacy dynamics within India by regulating the use of an individual’s data by the government and private companies. While not expected to come before the Indian Parliament for at least another three months when the winter session starts in November, the long-delayed and highly-debated legislation has larger potential implications.

First brought to the Parliament in 2019, the bill is now with the Joint Parliamentary Committee (JPC) for examination, where five extensions to submit its report on the bill have already been granted.

The most current draft has been criticized by many, including former Justice B.N. Srikrishna, who worked extensively in defining and writing the first draft of the PDP Bill. Justice Srikrishna has highlighted certain provisions in the amended PDP Bill 2019 that he says make it “dangerous” and can turn India into an “Orwellian State.”

The JPC, led by chairperson P.P. Chaudhary, has been tasked with identifying the problems and potential solutions and has held talks so far with Facebook, Twitter, Amazon, Google, Airtel, Jio, Ola, Uber, and Paytm among other major tech giants.

Definitions and points of contention

Among the points of concern are the definitions of the types of data and where each can be stored and processed. PDP Bill 2019 has segregated personal data into the following sub-categories:

  • Sensitive Personal Data – (Chapter 1, Section 3, Sub-Section 36). Defined as any personal data which may reveal, be related to, or constitute financial data, health data, official identifier, sex life, sexual orientation, biometric data, genetic data, transgender status, intersex status, caste or tribe, religious or political belief or affiliation, and any other data categorized as Sensitive Personal Data under section 15
  • Critical Personal Data – The government has been given broad discretion to define this type of data. While not final, it is currently stated as “personal data as may be notified by the Central Government to be the Critical Personal Data”

Unlike the original intent that mandated the storage of all personal data within India’s boundaries, the amended bill states that a copy of Sensitive Personal Data needs to be stored locally and can be sent abroad for data processing, under certain regulations.

The revised bill would require Critical Personal Data to be processed as well as stored within India and only sent outside India under certain conditions (outlined in Chapter VII, Section 34, Sub-Section 2 of the draft).

These data localization amendments have given the tech giants a much-needed respite, especially considering the Competition Commission of India (CCI) has tightened its rope on them over the past two years, with the latest episode being the debate over WhatsApp’s new privacy policy.

What’s the next logical step?

India’s current path draws a parallel with the European Union (EU), where data privacy across all the European member states is regulated under the General Data Protection Regulation (GDPR). If we follow the analogy closely, the next logical step for India would be to launch its sovereign cloud, in line with the new European sovereign cloud initiative named GAIA-X.

If India goes ahead with a sovereign cloud, it would unlock a new dimension, at least for the public sector, to explore and build on. With the strong government push under the ‘Make in India’ and ‘Digital India’ initiatives as well as a strong IT workforce, a sovereign cloud platform would not be a too distant dream.

Some of the benefits to India from a sovereign cloud initiative include:

  • Creating a secure and compliant platform for the public sector: India’s sovereign cloud would provide its public sector a secure, reliable, and compliant platform. Government-backed applications like messaging app Sandes and Twitter’s doppelganger Koo can effectively utilize a sovereign cloud platform. It can further be augmented to develop new applications, especially those designed for the public sector
  • Spurring cross-collaboration across various industries: Having a sovereign cloud platform would enable more vertical industries to securely onboard to the platform. With strong guidelines, anonymized and aggregated data sharing could occur, leading to a collaborative ecosystem of data analytics where citizens reap the benefits
  • Delivering community benefits underpinned by healthcare: A sovereign cloud platform like GAIA-X could augment the healthcare sector’s digitization endeavor and pave a compliant way for Electronic Health Records (EHR) creation and their interoperability. Currently, the Indian government is issuing digital vaccination certificates with QR codes and has plans to issue vaccination certificates that will be valid across the globe. Compliance could be hassle-free if India builds a sovereign cloud platform

The only big challenge that India might face is not having a successful sovereign cloud initiative of this scale to benchmark against. Europe’s GAIA-X will be the closest counterpart for India’s sovereign cloud initiative and that also is in a nascent stage.

Ripple effects on the Indian cloud ecosystem

With some degree of data localization seemingly inevitable, companies have identified a good business opportunity and are racing to get the ‘first-mover’ advantage. Various firms have started the ball rolling – from construction giants like Adani and Hiranandani jumping into the data center business to cloud solution providers like Genesys launching new capabilities with localized data storage and data sovereignty as key factors for its contact center solution.

With the enactment of PDP as law, we expect the proliferation of data centers and an increased cloud hyperscaler presence in India. A new hyperscaler-backed sovereign cloud initiative also could be possible, along with an increased focus by cloud service providers on the legal framework to keep critical data within India’s geographic boundaries.

In the long run, we can see certain service offerings emerging to manage client data, which would be very similar to how the software and services market for GDPR has evolved over the years.

What do you think the next logical steps for the government will be after passing the Personal Data Protection Bill, and how will the law impact the industry? Please share your thoughts with us at [email protected] and [email protected].

Work from Home: 3 Underrated Impacts We Should Be Talking About | Blog

When COVID-19 pushed millions around the world to work from home, little focus was given at the time of urgency to the longer-term impacts if the practice continued post-pandemic. Work from Home (WFH) is here to stay, but what effect is it truly having on the environment, society and families, and individuals? To learn more about the less obvious repercussions of this new work model, read on.

COVID-19 impetus   

COVID-19 accelerated a workplace experiment that had struggled to gain traction before the pandemic. As we emerge from the immediate crisis, global companies are increasingly clarifying their stance on the future of WFH.

Some are more bullish about sustaining a scaled WFH model than others. Many organizations are contemplating hybrid delivery models for the long term. Google CEO Sundar Pichai agrees on the importance of incorporating remote working. But other sectors such as the financial industry have a different take, with Goldman Sachs CEO David Solomon calling WFH “an aberration.”

While some organizations flourished during WFH with reported cost savings and productivity increases, others had issues below the surface as we previously reported in our blog post on Future of Work From Home in GBS Organizations – Separating Hype from Reality.

Impacts to pay attention to

The indelible impact of WFH on the environment, society and families, and individuals cannot be downplayed as it affects not only the current workforce but also future generations. Let’s take a look at how these three critical areas have been altered – both positively and negatively.

  • The environment

Transportation, especially business travel and commuting, plays an oversized role when we talk about the environmental impact of remote working models. The lack of commuting reduces fossil fuel usage, leading to reductions in greenhouse emissions, air pollution, and the Scope 3 carbon footprint. Another positive for the environment is the significant reduction of paper and plastic usage in offices.

On the other hand, as we previously reported, virtual meetings require large amounts of data that need greater power. This puts huge energy demands on data centers that power the internet and could partially offset the positives.

Other aspects are a mixed bag of positive and negative impacts. Before the pandemic, the lighting, cooling, or heating generally ran at all times in an office building. Individuals working at home will likely use less energy as they tend to be responsible about energy usage as the onus of power bills is on them.

However, one can argue that the power used by individual homes could be collectively higher than offices using well-designed zonal heating and cooling. Another impact to consider is that the WFH model could duplicate enabling equipment (such as external monitors, keyboards, and printers, etc.), which could offset the positives to some extent.

  • Society and families

 WFH has opened up employment opportunities for those who have challenges working in traditional environments, directly improving diversity and inclusivity in organizations and potentially reducing social inequalities in the long term.

Remote working, for example, has enabled organizations that have not yet made their workplaces accessible for people with disabilities to hire these individuals. It also has allowed companies to improve inclusivity by providing opportunities for individuals from disadvantaged backgrounds for whom office location and delivery models have been obstacles.

Further, WFH can help organizations retain workers who have young children they are caring for at home, as household responsibilities are more redistributed today and both partners play a greater role in upbringing children. The flexibility of work from home also can benefit employees in single-parent households in juggling competing priorities of work and child care.

WFH has also allowed employees living in expensive tier-1 cities to move to lower-cost areas and return to their hometowns, providing the benefits of more time with family and social circles along with cost savings. With the pandemic impacting older adults more severely, work from home has allowed adult children to provide much needed support.

On the other hand, remote working has led many people, particularly the marginalized, to feel excluded and left out. A majority of women have reported a negative impact of WFH due to increased household responsibilities and disruption of work-life balance attributed to traditional gender roles.

The social aspects of interacting at work with many different individuals also have been diminished, limiting the development of employee’s social skills and organizational culture. The virtual environment has made it more difficult for people from under-represented groups to be visible and have their voices heard.

Online networking in discussion groups and forums has been a positive social outlet but tends to favor employees with digital skills and an existing large network base.

Another challenge is the increasing numbers of individuals hired during the pandemic who have never met their colleagues in person. While companies are taking new initiatives to solidify peer connections and foster team collaboration with remote workforces, this is a difficult road that will need concerted, ongoing efforts.

  • Individuals

Of all the aspects addressed so far, the impact on an individual is, by far, the most understated. While employees found the WFH model flexible and enjoyable during its early days, most of them have now reported fatigue and tiredness with the model.

Employees feel a negative impact of remote working on their physical well-being, including weight gain and musculoskeletal problems. Those who walked or biked to their jobs or during breaks are no longer getting this exercise. Lockdowns also restricted other physical activities they may have done outside work. Using non-ergonomic furniture like sofas and beds to work also has had negative health consequences.

WFH has had a profound impact on the mental well-being of employees who have difficulties separating work-home boundaries and managing their workloads with irregular long hours. Microsoft CEO Satya Nadella has commented that online meetings can make employees tired as well as make the transition from work to private life hard, saying, “Work from home feels like sleeping at work.”

Employees are increasingly complaining of sluggish cognitive performance, commonly dubbed as “pandemic brain,” which arises from long periods in isolation. Increasingly, more employees are facing changes in sleep patterns, difficulty in stopping working, increased distractions, and greater work anxiety.

The negative impact of WFH varies across groups but seems to have disproportionately affected the disadvantaged, although a certain amount of this could be attributed to the pandemic and lockdown isolation.

The ability of each individual to cope with the changes has largely depended on the degree of their social and peer connections and support from their organizations. Employees of proactive organizations who have actively supported their mental health have adapted well to their new WFH environment, with improved performance and productivity.

Future of work  

While WFH has been a big success out of necessity, organizations need to adopt a pragmatic approach as they strategically re-think the future of work. WFH is not going away. We expect companies to use different variations and combinations to create their own version of a WFA – Work from Anywhere model.

By going beyond a mere tactical approach and getting their hybrid model right, organizations will realize the benefits that WFH can bring of higher productivity, optimized costs, a loyal and diversified workforce, and a stronger cultural fabric.

How are you dealing with these softer, yet unignorable, impacts of WFH? Reach out to [email protected], [email protected] or [email protected] to share perspectives.

Surprising Sub-saharan Africa and the Continent’s Growing Relevance for Service Delivery: What You Need to Know to Select Your Next Offshore Location | Blog

Looking at offshore destinations for service delivery, Sub-Saharan Africa – particularly Nigeria – is emerging as a surprising location with the potential for forward-looking providers and customers to seize. But what risks come along with the opportunities for doing business in this part of the world? To learn what you need to know to make the right site selection, read on.   

Africa does not immediately come to mind as an offshore destination for service delivery. In the past, the main destinations for low-cost offshore centers, both in-house and outsourced, have been India (for broad BPS operations including customer-facing CXM) and the Philippines (for CXM), particularly when the operation requires a good level of English language proficiency.

However, in recent years, the level of interest in Africa as a destination has been growing as enterprises look for cost-effective alternatives to traditional locations and to balance their risk from too much activity in one country/region.

Within Africa, South Africa has been strong for several years, especially for CXM. North African locations such as Egypt, Tunisia, and Morocco have also experienced growth for IT, back office, and language support for French and other EMEA languages. Up until now, there has been less activity in Sub-Saharan Africa (outside of South Africa), but this is starting to change.

Advantages of Africa

Enterprises are now starting to seriously look at Africa as a destination for outsourcing for many reasons, including:

  • Population – Its huge and youthful population of 1 billion, with over half of the talent pool projected to be under the age of 25 by 2050, makes it a great resource for BPS activities
  • Government support – In many countries, the government helps to enable global services delivery
  • Market potential – Many of the large service providers are yet to enter the market or have small scale operations supporting the local market
  • Infrastructure – Internet and other capabilities are improving. For example, CSquared (a Google subsidiary) announced a four-way partnership in 2017 to build out the shared fiber networks in sub-Saharan Africa
  • Spending growth – The latest African consumer trends show that consumer spending growth in Africa is projected to rise to $2.1 trillion by 2025 and $2.5 trillion by 2030, according to market forecasts

While interest in the continent is growing, enterprises also should be aware of the following risks:

  • Talent – Companies will need to invest in growing and developing talent locally by training recent graduates, building a recruitment engine from the ground up, and other activities to create an experienced talent pool. The low talent availability, limited language support beyond English, and high premiums commands also are concerns
  • Business environment – In comparison to other nearshore European locations, the quality of infrastructure, digital readiness, and safety and security are among the concerns for East and West African countries
  • Low market congestion – While key players supporting global services in most African countries is currently limited, the entry of a few large companies could easily congest the market and quickly increase costs
  • Delivery enablers – Limitations with utilities, transportation, meals/catering, stationery providers, office infrastructure quality, and poorer connectivity to domestic and international locations all present risks

Location selection is key

If an enterprise can balance the opportunities with the risks, we believe sub-Saharan Africa could be a wise choice. But selecting the right location is key. In our report from 2020 Africa: Emerging IT-BP Delivery Force, we reviewed ten of the most mature locations assessing talent availability with the financial attractiveness.

The key takeaway: Egypt and South Africa, the two most mature markets, scored well in terms of both talent availability and financial attractiveness. But a surprising entrant in the top right of the chart was Nigeria. While still relatively immature when it comes to BPS, Nigeria’s high level of talent availability makes it a financially attractive destination.

As an example of recent investments in the region, Microsoft invested $100 million to open a technology development center with sites in Kenya and Nigeria in 2018. Three years later, it released a joint announcement with the Government of Nigeria, detailing several projects aimed at intensifying the nation’s move to become a more digital economy.

Other locations driving conversations with enterprises are Ghana and Kenya, both presenting a high level of financial attractiveness but scoring lower than the leaders in terms of talent availability.

locations

        1    Reflects market average annual costs for English language delivery for steady state of operations blended across the delivery pyramid and excludes capital expenses related to set-up, transition, expat costs, and of economies of scale for large-scale operations

          2    Represents presence of entry level and experienced resources for specific functions blended in a 60:40 ratio

          3    Combination of maturity for services delivery, presence of global / regional GBS and service providers, scaled operations, and other related aspects

Source:   Country-/city-level investment promotion agencies and global services organizations

All the other locations we assessed, apart from Tunisia and Morocco, rated well in terms of financial attractiveness but were less strong when it comes to talent availability, presenting an issue for any enterprise looking to scale.

Talent forecasts

We believe the level of talent available in Africa, particularly in sub-Saharan Africa, will improve over the next few years as global service providers and enterprises begin operations there, and talent from local operators accelerate their development by working for experienced operators. But it may take several more years to reach similar levels to those seen in North Africa or the country of South Africa.

In summary, sub-Saharan Africa is likely to grow in relevance as an offshoring destination for BPS, and forward-thinking service providers are already investing. As an enterprise, if you are considering the use of sub-Saharan Africa as an offshore delivery location, we would recommend several approaches:

  • Undertake a detailed assessment of the location to better understand talent availability and how it aligns with your future business and talent needs
    • Assess talent scalability as well as the capabilities needed to deliver process or skill-specific requirements
  • Understand how it aligns with your corporate strategy and CSR commitments
    • Africa is the main source of impact sourced workers, a growing area of interest for many enterprises
    • Understand how the potential location aligns to target markets for business development. Consider whether the potential location is a key target to grow your business
  • Conduct a detailed review of the service providers with delivery locations in the region to ensure they meet your requirements, especially in terms of talent and skills availability, cost, and business continuity

For more findings from our recent report, 2020 Africa: Emerging IT-BP Delivery Force, and to discuss Africa as a service delivery destination, please reach out to David Rickard ([email protected]) or Anurag  Srivastava ([email protected]).

Future of Work from Home in GBS Organizations – Separating Hype from Reality | Blog

 

COVID-19 has fundamentally altered the Work From Home (WFH) proposition for global organizations, prompting a shift from opportunistic leverage in 2020 to rapid integration of WFH within the future delivery model strategy. Now that the dust is settling a bit from the global health crisis, WFH strategy design and implementation will be critical to ensuring global business services (GBS) organizations’ future success. And WFH will look far different than it did in 2020.

Key learnings from 2020

Most organizations successfully transitioned to scaled remote delivery models with minimal service delivery disruptions in response to COVID-19. This experience has served as a critical proof of concept, and exposed key learnings and opportunity areas associated with scaled WFH delivery.

Let us take a closer look at several key things we learned while conducting the research for our recently published report, Future of Work-From-Home in GBS – Separating Hype from Reality:

  • Employee preferences have evolved as the pandemic unfolded, from a strong preference for full-time/partial WFH to a choice between WFH/WFO in a hybrid delivery modelPicture1 2
  • Overall productivity has either sustained or increased for most organizations. That said, there are issues building below the surface and concerns around false positives, i.e., increase in productivity driven by higher efficiency or higher throughput
  • WFH can drive the next wave of cost optimization across locations for GBS organizations, though true savings will depend on their ability to exploit underlying levers such as real estate, technology, and talent
  • WFH has opened new opportunity areas, like accessing new talent markets, improving retention, and enhancing the employee experience, for improving the GBS talent model
  • WFH is prompting a shift toward a more holistic hub, spoke, and satellite model to enable hybrid delivery models and enhance employee choice and internal workforce mobility
  • Regulatory environment is still an unknown, though governments are taking a proactive approach to define policies such as taxation and labor laws to enable hybrid delivery going forward
  • The WFH model is lucrative but comes with complexities like employee fatigue, potential loss of productivity, work-life balance, and loss of organizational culture that cannot be downplayed

Our interactions with leading GBS organizations over the last 12 months revealed multiple key themes that will determine the success of a hybrid WFH model going forward:

  • Determining roles adjacency, and how they fit into a hybrid delivery model. This is about understanding implications on office design, real estate right sizing, and the technology interventions needed to enable this shift
  • Training employees, especially front-line managers and new employees, on key aspects of virtual delivery, such as target setting, self-time management, and stress management
  • Clear articulation and understanding of organizational culture, managing the employee experience, and driving collaboration in a virtual environment
  • Managing the contingent/extended workforce, including safeguarding intellectual property, monitoring performance, and sustaining productivity

While many GBS organizations are addressing key WFH-related challenges in an agile manner, they must proactively design their WFH strategy and align it with their parent organization’s needs and objectives.

Building a future proof WFH strategy

As GBS organizations build their future WFH strategy, they need to solve for six key elements.

Picture2 1

  • Work portfolio – GBS organizations must utilize a structured and fact-based approach to identifying the best fit work-types and employees for remote delivery, while ensuring a balance between organizational imperatives and employee choice
  • Talent model – GBS organizations must address multiple talent model changes – including the evolving role of the human workforce, workforce engagement models, talent implications of remote working, and leadership development models – with a focus on adapting the workforce to future delivery models
  • Locations portfolio – As a holistic hub, spoke, and satellite delivery model gains traction, GBS organizations must evaluate the role of nearshore/offshore locations based on feasibility and cost savings offered by the WFH model across locations. As organizations evaluate new markets with attractive talent cost propositions, especially offshore locations, location optimization will likely happen over the next 6 – 12 months
  • Technology and real estate infrastructure – GBS organizations must leverage technology to achieve key organizational objectives, such as enhancing productivity, ensuring security and compliance, and improving the employee experience, and to reimagine the workspace, like floor layout, seat allocation, and office safety equipment, to adapt to the unique demands of a hybrid delivery model
  • Performance management – GBS organizations must identify the right levers and leverage best practices – such as adopting an outcome-driven culture, setting clear goals, and realigning the expectations with remote workers – to drive productivity improvements in a sustained WFH environment
  • Risk management – GBS organizations must proactively identify business, talent, data, and regulatory risks related to the WFH model and mitigate the potential impacts.

The way forward

COVID-19 has presented organizations with a unique opportunity to re-strategize their priorities, optimize their operating models, and develop a robust future-proof WFH strategy. We believe GBS organizations that proactively seize this opportunity will emerge resilient and stronger.

Read our report, Future of Work-From-Home in GBS – Separating Hype from Reality, to gain insights on global organizations’ outlook on the WFH model, the extent of adoption, key design elements and approaches, emerging trends and best practices, and key challenges and success factors to enable a scaled WFH model.

We’d love to hear about your WFH experience and approach to designing a WFH strategy for your GBS organization. Please share with us at: [email protected] or [email protected].

COVID and India’s Viability as a Third-party Services Destination | Blog

India is going through a new COVID-19 wave that is truly horrific. On May 19, India set the world record for the most COVID-19 deaths in a single day (4,529 deaths and 267,334 new cases in the prior 24 hours). In the past month, its COVID-19 fatalities increased by sixfold. A huge percentage of the nation’s workforce is affected (either sick or caring for family who are sick). Businesses in the US and Europe have questions about whether India is still viable as the primary destination for third-party services. Read this blog for my answer.

Read more in my blog on Forbes

High Spike in COVID-19 in India Affecting Workforce for Third-party Services in the US | Blog

India is experiencing a COVID-19 spike that started in April and is worse than the original outbreak months ago. Not only are more people infected, but more are also hospitalized this time. It is particularly difficult because the variant that seems to drive this spike is more infectious and affects young people as well as elderly people. It clearly affects offshore services work performed for US companies.

Read more in my blog on Forbes

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